The Companies (Amendment) Second Ordinance, 2019 and The Companies (Amendment) Bill, 2019

SHRI AMAR PATNAIK (ODISHA): Sir, the Companies Act, 1956 was amended and a new Act was brought in 2013 after such a long period. Now, these amendments have come in 2019 and in a very short period. Actually, it is commendable in the sense that it is addressing the situations that have arisen during this period in a very proactive manner. Many of the provisions which have been given in the amendment are particularly good and relating to the benefits of dematerialized shares for unlisted companies and relating to powers being taken away from NCLT to the Registrar of Companies or the Central Government as the case may be. Some of the significant provisions relate to shell companies. There are safeguards against shell companies. Under Clause 12(9) of the Bill, the Registrar can order physical verification of the registered address if the Registrar has reasonable cause to believe that the company is not carrying on any business. Many such provisions are there which are particularly good. I would like to point out some cases which I thought could create problems. Relating to shell companies, there could be virtual shell companies. Due diligence is required for the Registrar to follow to detect such shell companies. It is something which could probably have been mentioned if not in the Bill but through an executive order separately For the Corporate Social Responsibility, a list has been given. I am sure it is not exhaustive. It is an illustrative provision. I would suggest that the companies, which come in a particular State, the CSR fund could probably be spent in consultation with the State Government. So, even if it is sent to the CM's Relief Fund or any kind of expenditure to be incurred on that; for example, in Odisha, disaster-related issues are more important. Therefore, disaster-related, damage and restoration works could probably form a part of the CSR. Instead of fixing this list or the Schedule VII only by the Central Government, it could probably be done by the State Government. Now, the most significant part is Section 241 of the principal Act, which is being amended. This particular provision brings in significant deterrent for malpractices, guilty of fraud, malfeasance. Now, the proviso says that the Central Government may initiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case. My question is this. Why only the Central Government? Why could it not be a whistleblower in the company itself? Why could it not be a suo motu somebody, the court itself takes cognizance of a malfeasance that has taken place in a company? Why is it that some other stakeholder, even an employee in the company who would probably make a case for bringing out a case of malfeasance by an officer in the company? Now, the second aspect is this. If it involves fraud, if it involves loss to the company, what is the provision for recovery of the amount? That is not mentioned. The directorship might go. He may not be permitted to continue as a director in any other company for a period of five years. What is the civil action being taken against him to recover the amount? Then, there is the other aspect, that is, taking advantage of this provision, what is the deterrent or what is the provision that the ROC or the ROC officials would not be harassing the company or company's officials? …(Time-bell)… There is another point relating to penalties. The penalties have been proposed to be imposed on officers. For that, the responsibility has to be fixed on officers. We know that in Government and in many places fixing responsibility is not an easy job. Fixing responsibility by a departmental procedure or fixing responsibility by an organization like the SFIO may not also be easy. If it does, if one goes through that process, it might delay the process. Therefore, it is requested that this particular aspect may also be looked into and penalty is not only for commission of offences but omission also should be mentioned. Thank you so much, Sir.