<b>XI LOK SABHA DEBATES, <i> Session IV (Budget) </i> </b> XI LOK SABHA DEBATES, Session IV (Budget) Wednesday, March 05, 1997 / Phalguna 14, 1918 (Saka)
Type of Debate: GOVERNMENT BILLS
Title: Depositories Related Laws (Amendment) Bill. Motion for Consideration TEXT : 1726 hoursTHE MINISTER OF FINANCE AND MINISTER OF COMPANY AFFAIRS (SHRI P. CHIDAMBARAM): Mr. Deputy-Speaker, Sir, I beg to move :
"That the Bill further to amend the Indian Stamp Act, 1899, the State Bank of India Act, 1955, the Companies Act, 1956, the State Bank of India (Subsidiary Banks) Act, 1959, the Industrial Development Bank of India Act, 1964, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and the Depositories Act, 1996, be taken into consideration."
Sir, we remember that the Depositories Bill was passed by this House and the National Securities Depository Limited, the first depository came into being on the 8th of November, 1996. After the depository was commenced, we discovered that there were some operational difficulties and these are sought to be removed by this amending Bill.
In fact, one difficulty was pointed out even during the debate, on the last occasion, by an hon. Member of the Rajya Sabha. When he pointed out that as worded, Section 9(2) had a lacuna and that lacuna be corrected, I told him that it appeared to me that there was a lacuna, but asked him to allow me to pass that Bill so that the depository might come into being and I would amend it at the first opportunity. One of the amendments I am bringing is to correct a lacuna which was pointed out to me by an hon. Member of the Rajya Sabha.
Secondly, as a result of the amendments made to the Companies Act and the Depositories Act, the shares are now freely transferable. But then, it was brought to our notice that as the section stands, if a company perversely refuses to transfer and pass an order, there is no remedy to the investor. Therefore, it is necessary to provide a remedy to the investor against the company which refuses to pass an order on transfer when an application for transfer is made. Now, that is also being provided.
Then Sir, the Stamp Act does not apply to shares of companies dealt with by the depositories. The reasons are obvious. The depository deals with dematerialised shares. There is no scrip. The question of the Stamp Act does not arise as the Act only refers to shares of companies. Now UTI, SBI, subsidiaries of SBI and public sector banks want to join the depository. In their case, since the word `company' does not include statutory corporations, it is pointed out to us that the exemption from the Stamp Act would not apply and unless an amendment is made exempting their scrips also from the Stamp Act, the Stamp Act will be attracted. So, the provisions that I am making today in the amending Bill are purely consequential amending provisions in order to remove some anomalies in the Act and to make the working of the depository more efficient and effective. There is no substantive change in the law. As a result of experience gained in the last three or four months, after the depository came into being, we think that these amendments are necessary. The Ministry of Law has looked into it and is satisfied that these amendments are necessary.
I would request the hon. Members to cooperate and pass this Bill. The Ordinance was passed because the depository had already come into being and we could not allow these anomalies to remain on the Statute Book. Therefore, the Ordinance was passed. We are coming here at the first opportunity to replace this Ordinance. Thank you.
(ends)
MR. DEPUTY-SPEAKER: Motions moved :
"That this House disapproves of the Depositories Related Laws (Amendment) Ordinance, 1997 (No. 5 of 1997) promulgated by the President on January 15, 1997."
"That the Bill further to amend the Indian Stamp Act, 1899, the State Bank of India Act, 1955, the Companies Act, 1956, the State Bank of India (Subsidiary Banks) Act, 1959, the Industrial Development Bank of India Act, 1964, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and the Depositories Act, 1996, be taken into consideration."
MR. DEPUTY-SPEAKER: Prof. Rasa Singh Rawat.
SHRI P. CHIDAMBARAM: Prof. Rasa Singh Rawat cannot have any objection to this Bill.
17.30 ¤ÉVÉä
PROF. RASA SINGH RAWAT (AJMER):
|ÉÉä.®úɺÉÉ ÊºÉƽþ ®úÉ´ÉiÉ (+VɨÉä®ú) : ¨ÉÉxªÉ´É®ú ={ÉÉvªÉIÉ VÉÒ, ¨ÉèÆ <ºÉ Ê¤É±É EòÉ º´ÉÉMÉiÉ Eò®úxÉä Eòä ʱÉB JÉc÷É ½þÖ+É ½þÚÆ* +¦ÉÒ Ê´ÉiiÉ ¨ÉÆjÉÒ VÉÒ uÉ®úÉ ÊxÉIÉä{ÉÉMÉÉ®ú ºÉƤÉÆÊvÉiÉ Ê´ÉÊvÉ (ºÉƶÉÉävÉxÉ) Ê´ÉvÉäªÉEò, 1997 |ɺiÉÖiÉ ÊEòªÉÉ MɪÉÉ ½þè* ªÉ½þ Ê´ÉvÉäªÉEò <x´Éèº]õºÉÇ, Eò¨{ÉxÉÒWÉ iÉlÉÉ ¶ÉäªÉ®ú ½þÉä±b÷ºÉÇ ´ÉMÉè®ú½þ EòÒ ºÉÖ®úIÉÉ Eòä ʱÉB iÉÉä lÉÉ ½þÒ, ±ÉäÊEòxÉ =ºÉ¨ÉäÆ VÉÉä EòÉxÉÚxÉÒ EòʨɪÉÉÆ ®ú½þ MÉ<Ç lÉÒÆ, ´Éä EòʨɪÉÉÆ ¦ÉÒ <ºÉʱÉB ®ú½þ MÉ<Ç lÉÒÆ ÊEò "
Haste makes waste", "Late but not the late"
nùä®ú +ɪÉnù, nùÖ¯ûºiÉ +ɪÉnù +Éè®ú VɱnùÒ EòÉ EòÉ¨É ¶ÉèiÉÉxÉ EòÉ ½þÉäiÉÉ ½þè, ʽþxnùÒ Eòä +xnù®ú ªÉ½þ BEò Eò½þÉ´ÉiÉ ½þè* =ºÉ ºÉ¨ÉªÉ VÉ¤É ªÉ½þ Ê¤É±É ±ÉɪÉÉ MɪÉÉ lÉÉ, ªÉ½þ ºÉ®úEòÉ®ú ¤ÉxÉÒ lÉÒ, =ºÉ ºÉ¨ÉªÉ ¦ÉÒ {ɽþ±Éä ½þ¨ÉxÉä ªÉ½þ Eò½þÉ lÉÉ ÊEò ÊxÉIÉä{ÉÉMÉÉ®ú +ÊvÉÊxɪɨÉ
... (´ªÉ´ÉvÉÉxÉ)
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PROF. RASA SINGH RAWAT (AJMER):
|ÉÉä.®úɺÉÉ ÊºÉƽþ ®úÉ´ÉiÉ (+VɨÉä®ú) : ´É½þ Eò½þÉ´ÉiÉ ½þè, =iÉɴɱÉÉ ºÉÉä ¤ÉɴɱÉÉ* "
Look before you leap"
EòÚnùxÉä ºÉä {ɽþ±Éä, +ÉMÉä ¤ÉgøxÉä ºÉä {ɽþ±Éä =ºÉEòÉ ÊSÉxiÉxÉ Eò®ú ±ÉäxÉÉ SÉÉʽþB* ½þ¨ÉxÉä =ºÉ ºÉ¨ÉªÉ ¦ÉÒ ªÉ½þ +xÉÖ®úÉävÉ ÊEòªÉÉ lÉÉ ÊEò +MÉ®ú <ºÉEòÉä º]õäÆÊb÷ÆMÉ Eò¨Éä]õÒ Eòä {ÉÉºÉ ¨ÉäÆ {ɽþ±Éä ¦ÉäVÉ ÊnùªÉÉ VÉɪÉä* VÉ¤É ªÉ½þ Ê¤É±É ¨ÉÚ±É °ü{É ºÉä 1996 Eòä +xnù®ú ±ÉɪÉÉ MɪÉÉ lÉÉ +Éè®ú VÉ¤É Ê½þxnùÖºiÉÉxÉ EòÒ ºÉ¤ÉºÉä {ɽþ±ÉÒ Êb÷{ÉÉìÊVÉ]õ®úÒ xÉä¶ÉxÉ±É ÊºÉEªÉÉäÊ®ú]õÒ Êb÷{ÉÉìÊVÉ]õ®úÒ Ê±ÉʨÉ]õäb÷, BxÉ.BºÉ.b÷Ò.B±É., 1996
came into existance,
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"In order to remove certain legal lacunae, it was proposed to amend the Depositories Act, 1996, the Companies Act, 1956, the Industrial Development Bank of India Act, 1964..."
+¦ÉÒ-+¦ÉÒ ½þ¨ÉxÉä <ºÉºÉä {ɽþ±Éä <Æb÷ºÊ]ÅªÉ±É b÷´É±É{ɨÉäÆ]õ ¤ÉèÆEò +Éì¡ò <ÆÊb÷ªÉÉ EòÉ ºÉƶÉÉävÉxÉ ÊEòªÉÉ ½þè +Éè®ú +¦ÉÒ =ºÉEòÉ xÉÉ¨É Eò¨{ÉxÉÒ ¨ÉäÆ ½þÉä MɪÉÉ, EªÉÉ ªÉ½þ EòÉxÉÚxÉÒ Eò¨ÉÒ xɽþÒÆ ®ú½þäMÉÒ, EªÉÉ ±ÉÒMÉ±É ±ÉèEòÖxÉÉ Ê¡ò®ú xɽþÒÆ ®ú½þäMÉÉ?
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(<ÊiÉ)
SHRI SHAFIQUR RAHMAN BARQ (MORADABAD):
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KUMARI MAMATA BANERJEE (CALCUTTA SOUTH): Sir, yesterday, of course, I opposed the Ordinance because when Parliament is in session, Ordinances should not be issued. So, I am not going to repeat the same thing today.
This Bill was passed earlier in the year 1996 but it could not be passed in the Rajya Sabha. That is why, this Bill has been brought to the Lok Sabha. I do not think there are too many lacunae here. So, I rise to support this Bill. I think the Government's intention is to increase the share market and capital market as also to invest more money especially through depositories and through securities. They are going to register their names, their particulars, their company's name and everything through this Bill.
This is the good side of this Bill. But there are some lacunae in clause 9 of the Bill. What Shri Chidambaram said was that after section 82 of the Companies Act, a new section 83 shall be inserted, according to which, each share in a company having a share capital shall be distinguished by its appropriate number. I do not know, what is the meaning of this `appropriate number'.
I only want to say two or three things here. Now-a-days, a parallel economy is going on in our country. Even from the Vohra Report, you will find that one section of Mafia gangsters, one section of politicians and one section of the administration are running a parallel economy in our country. In order to control and check this parallel economy, the Government has to be assertive.
There are some chit companies which are committing frauds. They should not take advantage of this Bill. Taking advantage of this Bill, they will register under different names. I have seen one man having ten or fifteen companies. They are either doing the promoting work or contracting work or they have set up some tourism industry. That way, one man is having ten or fifteen companies. This type of men may misuse the law.
When you are going to pass this law -- it is a good law -- you have to take some precautions so that people should not deposit money under benami names. I am specially interested in the individuals because these individuals keep their money in the custody of Government agencies like the UTI, Life Insurance Corporation, State Bank and others. They should not be harassed and their money should be protected properly.
My request to the Government is that they must monitor and see whether the work is going on properly or not. The Government has to ensure that the Register is maintained properly at the central headquarters of the bank. They must see whether that Register is being maintained properly or not. The common people should not be harassed in respect of their hard-earned money.
I welcome this Bill and I support this Bill. At the same time, I request the Government to stop this parallel economy. The parallel economy may destroy the economy of the country. It may not harm any individual but it will harm the country. We want that our country should be developed through these types of laws.
(ends)
SHRI BALAI CHANDRA RAY (BURDWAN): Mr. Deputy-Speaker, Sir, I rise to support this Bill with certain reservations and definite anguish. The anguish is because in the original Depositories Bill, section 8 (A) of the Stamp Act was introduced, and section 8 (A) of the Stamp Act provides that no stamp duty shall be leviable for certain types of transfers contained in clauses a and b. Those transfers are through the depositories. If `beneficial owners', which is a phrase used for the first time in this Act, means nothing more than the holder of the scrip, transfer his shares to another beneficial owner, which was an ordinary transaction in the capital market, the stamp duty that has to be paid was on the basis of ad valorem rate of purchase price. It has now been totally abolished if the transfer takes place through the depository.
Now, in case of a transaction between the depository and the issuer, which means the company or the statutory corporation or a mutual fund, the only duty that will be assessable, and how it has not been mentioned, is on the value of the transfer the issuer makes.
It means the face value of the shares. It is well known that the transactions that take place in the secondary market, the value of the shares are sometimes 400 times more than the face value and the stamp duty that was realised which went as a revenue to the State Governments, was to the extent of the purchase price of that transaction. Now, only on the face value, the issuer will give stamp duty and we do not know what duty because it has not been mentioned how the duty will be assessed, whether it is ad valorem or what is the rate of the duty. The loss to the State Government on this account will be tremendous. Nowhere is it mentioned and it is possibly unlikely to be mentioned in a Bill of this nature, how the distribution of the duty that will be realised will be made. The result is that first of all we do not demand from the purchasers of valuable securities any stamp duty or any duty, while on ordinary transactions in land of small amount, duties have to be paid. Even a farmer has to pay stamp duty for transfer and in the share market in the transfer of shares, stamp duty was introduced with that view that crores of rupees transactions take place daily. If it can be taxed by way of duty or in any other form even, a fringe benefit can be bestowed to the State Governments by way of additional collection of revenue. It has been obliterated in the types of transfers in Clauses `e' and `d'. And in Clauses `a' and `b', only a small quantum of duty has been fixed.
This is ununderstandable. If one adds to the depositories, transfer of shares is not liable to pay at all. For beneficial owner, a transfer is not liable in any way to be charged with duty, call it stamp duty or any other duty. But if one is outside the depository, a beneficial owner, at that time he will be only the owner of the share and if he transfers the share from `a' to `b', stamp duty has to be paid. This may be an encouragement to the depositories to come and operate in the capital market. But it is too early to assess subjectively how the depositories will ultimately be able to function. In anticipation that the depositories will function in such a way that it will encourage quick transfer of shares, the entire duty has been abolished in all types of transfer from beneficial owner to beneficial owner via the depository. This will harm the State revenue and this will only encourage the depositories and new corporates in the name of depositories will come now.
Secondly, it has to be noticed that the amendment, not only as Prof. Rasa Singh Rawat has said, is incomplete, but far less is taken care of what is expected of the Government to take note of.
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