Changes in Companies Act to help deal with Ponzi menace

Against the backdrop of Saradha scam, Corporate Affairs Minister Arun Jaitley today pushed for changes in the Companies Act as he piloted in the Lok Sabha a Bill which provides for severe punishment for those raising illegal deposits from the public.

Congress, on the other hand, wanted the bill to be referred to the Standing Committee for closer scrutiny.

The amendments to the law seek to ensure severe punishment for those raising illegal deposits from the public, a move that comes in the backdrop of Saradha scam in which those running chit funds duped lakhs of small investors.

"Most of them (amendments) are intended for one purpose, that is, for the ease of doing business," said Jaitley, who also is the Finance Minister, while moving the The Companies Act (Amendment) Bill, 2014, for consideration and passage.

This would be among the first major initiatives by the government to make changes in the country's regulatory framework to improve its global ranking for ease of doing business, where India has been ranked very low at 142nd position in the latest World Bank report.

The 14 proposed amendments include provision to ensure that frauds beyond a certain threshold would need to be mandatorily reported by the auditors to the government.

To address concerns raised by the corporates, the government has also agreed to relax a number of norms including those pertaining to related party transactions, while resolutions passed by the companies' boards would not be subjected to public inspection.

The new Companies Act, which came into force with effect from April 1 with some provisions yet to become operational, has faced stiff criticism for many provisions.

Arguing for the need for amendments, Jaitley said, "Now, after the provisions were implemented, while enforcing the provision, we found that there were certain difficulties with regard to the enforcement of certain provisions or certain errors, while drafting had taken place."

Participating in the debate, Veerappa Moily (Cong) said that Bill should be referred to the Standing Committee to re-examine it before the amendments are brought out.