TEXT :
20.05 hrs.
MR. SPEAKER: Please understand the request of the Minister.
SHRI RUPCHAND PAL (HOOGLY): Sir, let him introduce it tomorrow... (Interruptions)
MR. SPEAKER: It has already been introduced.
... (Interruptions)
THE MINISTER OF LAW, JUSTICE AND COMPANY AFFAIRS AND MINISTER OF SURFACE TRANSPORT (DR. M. THAMBI DURAI): Sir, tomorrow, this Bill has to go Rajya Sabha, that is why we are requesting it to be taken up now... (Interruptions)
SHRI RUPCHAND PAL : We must be given an opportunity to give our arguments about the legislative competence and all these things... (Interruptions)
MR. SPEAKER: If the House agrees, I can call the names of those Members who have given the Statutory Resolution.
... (Interruptions)
SHRI RUPCHAND PAL: That is different. That can come after the introduction of the Bill. It can be introduced tomorrow... (Interruptions)
MR. SPEAKER: It has already been introduced. Now, it is for consideration and passing only.
... (Interruptions)
MR. SPEAKER: Prof. Saifuddin Soz - absent.
Shri Chinta Mohan - absent.
Shrimati Geeta Mukherjee - absent.
Dr. T. Subbarami Reddy - absent.
Dr. Subramanian Swamy - absent.
Shri Ram Narain Meena, please.
SHRI RUPCHAND PAL : Sir, what will happen to those who do not know about this. They have given notices. Just now, we got this revised List of Business. It can be taken up tomorrow and we can complete it as early as possible so that it can go to Rajya Sabha... (Interruptions)
SHRI SATYA PAL JAIN (CHANDIGARH): The Members are supposed to be present in the House... (Interruptions)
MR. SPEAKER: Tomorrow, we have a hectic schedule.
... (Interruptions)
SHRI RUPCHAND PAL: We will extend full cooperation tomorrow. Even within that stipulated time, it can be taken up so that very briefly Members can give their views... (Interruptions)
SHRI SATYA PAL JAIN : Sir, from the Statutory Resolution, only one Member is allowed to speak and he is present in the House... (Interruptions)
MR. SPEAKER: Shri Pal, please cooperate.
Sir, I beg to move:
"That this House disapproves of the Companies (Amendment) Ordinance 1998 (No.19 of 1998) promulgated by the President on 31 October, 1998."
"That the Bill further to amend the Companies Act, 1956, be taken into consideration."
I rise to request the House to take for consideration the Companies (Amendment) Bill, 1998 which has been introduced to give effect to the provisions of the Companies (Amendment) Ordinance promulgated by the President on 31st October, 1998, as Parliament was not in Session.
The Companies Act, 1956 has been in operation for more than 40 years. During this period, a lot of changes have taken place, nationally as well as internationally in the economic scenario. It has, therefore, been felt that the Companies Act, 1956 required extensive changes in order to bring it in tune with the Government's current policies of liberalisation and de-regularisation. Accordingly, the Government had introduced a comprehensive Companies Bill, 1997 in the Rajya Sabha on 14.8.1997 to replace the Companies Act, 1956. This Bill has been presently referred to the Standing Committee on Home Affairs.
The Corporate Sector is going through a difficult time and the capital market is at low ebb. This situation requires an effort on the part of the Government to give a fillip both to capital market and to promote investor's confidence. The economy also needs certain impetus for promoting inter-corporate investments considering slow in-flow of funds by way of new capital issues. In view of the necessity to overcome the situation, the Government felt an urgent need to make immediately few important changes in the Companies Act, 1956 and accordingly the President was pleased to promulgate the Companies (Amendment) Ordinance, 1998 (No. 19 of 1998) on 31st October, 1998, as the Parliament was not in Session at that time.
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* Moved with the Recommendation of President
The Ordinance seeks to promote investors' confidence in capital market and to encourage corporate investments. It also seeks to allow the companies to buy-back their own shares for enabling them to restructure their capital and to allow them to make investments or give loans without prior approval of the Central Government. It also provides to nominate person who will hold shares or debentures in the event of death of the holders of shares and debentures and to make a provision in law for establishment of an Investors Education and Protection Fund.
I now move for leave for consideration and passing the Companies (Amendment) Bill, 1998 to replace with appropriate modifications the Companies (Amendment) Ordinance, 1998 (No. 19 of 1998) issued on 31st October, 1998.
MR. SPEAKER: Motions moved:
"That this House disapproves of the Companies (Amendment) Ordinance, 1998 (No. 19 of 1998) promulgated by the President on 31 October, 1998."
"That the Bill further to amend the Companies Act, 1956, be taken into consideration."
What we had said at that time was that the phasing and sequencing and the direction of the reforms should be such that for a large country like India with such a vast market, with a self-reliant public sector base we must appropriately direct the liberalisation. We are not against reforms. But the reforms must be brought out where they are needed most. But we see and in the direction itself there is a distortion and currently more people, the corporate sector, have been demanding certain things. Now it has come to be a part of these things of corporate investment and shares. I will come to that later on.
The same people I had occasion, in connection with a Committeem meeting when I had gone, to meet the captains of industry at Mumbai. And they were asked a pointed question about the slow down of the industry, how far this Government's policy was responsible for all this chaos and downward trend in the industrial production, or is it more so about their corporate governance, lack of transparency and lack of accountability. We have not learnt any lessons.
Serious developments had taken place in the banking sector, in the corporate sector and in the share market. We had passed laws. The small investors who had come to the capital market were robbed of their money and now new Bills are coming to protect the offenders only, money exporters. The subsidy has been given to the exporters, they had exported and through invoice irregularities amassed wealth and now they are being regularised.
In Florida two research workers who are eminent economists, have come out with the conclusion that the Indian money to the tune of eight billion dollars has been amassed in the United States alone within a short period through irregular invoices only.
Now I come to buy back of shares. What will happen? I have seen a section of the corporate sector which had also expressed reservations about this buy back thing. It needs to be studied in depth on the basis of the experience of the corporate sector. Money has been taken from the bank and the bank siphoned it off. The investors have been robbed. The shares have been rigged in the market and as a result of the rigging and the expots inspired drain and many more things we have reached such a stage in the capital market and the corporate sector that there is no transparency of planning today. We are globalising. The Chartered Accountants, Cost Accountants in an unsigned statement have been saying that we must change our accounting system. But still if we look for the BIFR Reports coming, up to 80 per cent - 80 per cent! -- of the industries are referred to the BIFR as sick industries. It was as a result of the siphoning off of the money.
So, I have serious objections to many of the provisions here. I am not against infrastructure funds. I am not against it. Infrastructure needs a priority and what the hon. Prime Minister stated on many occasions about the need of our infrastructure and how should it be achieved. I may have serious differences on this point or that. But what is being sought to be done by radical changes in the Companies Act?
They say that it is to bring in tune with the changes in the industrial laws, in our industrial policy and in our liberalisation policy. Will it help? I do not think so because there is a serious reservation among the economists, among the political leaders and even among a section of the corporate sector about what is being proposed now. So, I think this Bill should rather be sent to the Standing Committee for a detailed study. I am not objecting to this promulgation of Ordinance some time back. This Bill needs to be sent to the Rajya Sabha.
SHRI MUKUL WASNIK (BULDANA): The Bill is already with the Standing Committee. The report is awaited. No report has come.
SHRI RUPCHAND PAL : Maybe, there are many more new things. So, its implication should be adequately, properly and deeply studied. I do not object only because that BJP has brought it. If it had served the national economy, I would have been the first person to support it. But going through the several changes that are being brought about, I have my reservation. They are the same people. I have seen them. I have asked some of them. You are the same people who submitted a memorandum in 1991. They were welcoming the changes. How is it that you are submitting another memorandum considering the level playing field and all these things? You are the same people. Who is to account for the slowing down in the economy, chaos in the corporate sector and share markets? If we go through the records of several big companies of India, this is the picture. We talk of dismantling and disinvesting the public sector. How many private companies in India have become sick as a result of siphoning off money and all these things? So, my plea is that such radical and momentous changes
should not be brought about. It will have an adverse effect on the prestige and image of this Parliament also. At the fag end, you are giving us a revised Supplementary List of Business and we have been asked to pass it within a few minutes. I, as a Member of this Parliament, cannot agree to it. We have our responsibility to the nation. I object to it. At best, I can suggest that it should be referred to the Standing Committee for proper study. Thank you.
The purpose of this Bill is to replace the Ordinance. It is very clear. But we are living in an age of highly sophisticated capitalism and the market economy is the main feature of this capitalism. In this market economy area, we have to be careful about the role to be played by the corporate sector and the companies. This Companies (Amendment) Bill is a highly significant Bill. I will draw your kind attention to one line at page 12 of the Statement of Objects and Reasons. "The Companies Bill, 1997 stands referred to the Departmentally related Standing Committee on Home Affairs and the Report of the Standing Committee is awaited." Unless we can review the report of the Standing Committee, what suggestions can we give to this in respect of the passage of this Bill? So, I would appeal to you to give us sufficient time or the Bill be sent to the Standing Committee again for sending their recommendations and findings. Let us have the findings of the Standing Committee on this matter and then we can come to the conclusion about the passage of this Bill.
Secondly, even the Statutory Resolution was circulated just about 15 or 20 minutes back when almost all the Members in whose name the Statutory Resolution was listed, had left the House. The Companies (Amendment) Bill, 1997 has been referred to the Standing Committee and the report is still awaited. We are not aware as to why the report has still not been tabled in the House. The Committee could have been asked to expedite it and submit the report as soon as possible. The Ordinance was promulgated on 31st October, 1998. Normally whenever Ordinances are issued, it is an effort undertaken by the Ministry of Parliamentary Affairs that the Ordinances are listed first in the Business of the House so that they are taken up and passed as soon as the House commences. But this has not been done. It is coming to the Lok Sabha on the penultimate day. Tomorrow the House will be adjourned and we are being asked that this Bill should be taken up now at such a late hour because it has to go to the Rajya Sabha. This is not an ordinary legislation. This has a far-reaching effect. This is a comprehensive legislation and we would not like to get identified ourselves in the manner in which the Bill is taken up for consideration and for passing. This I particularly wanted to point out and I would like to urge the Government that they can ask the Standing Committee to expedite their proceedings and to submit the report to the House as soon as possible. But this is not the manner in which we should take up such a far-reaching legislation.
THE MINISTER OF LAW, JUSTICE AND COMPANY AFFAIRS AND MINISTER OF SURFACE TRANSPORT (DR. M. THAMBI DURAI): Mr. Speaker, Sir, many hon. Members have expressed their concern about this Bill. They have said that the Companies (Amendment) Bill is still pending before the Standing Committee. We are aware of that. We have also requested the Standing Committee to take up that Bill early and try to see that whatever changes they want to be made in that Bill, those can be incorporated in the Comprehensive Bill.
As regards the urgency for having brought this Bill, in the Statement of Objects and Reasons, I have clearly explained everything as to why we had to promulgate the Ordinance. Even if the House passes this Bill now, if the Standing Committee wants to change it, they have every right to do so. Nobody can stop them from doing that. Therefore, we are not, in any way, bypassing the Standing Committee and it is not our intention to do that. When the country is facing such kind of an economic problem, we want to solve it. That is why the Cabinet also discussed this. The Bill actually aims at creating some kind of confidence amongst the investors to invest in the capital market. This Bill seeks to give freedom to companies to restructure their capital through buy-back of shares. Secondly, it gives them freedom to take decisions to make investment or grant loans to companies, with the approval of the shareholders, if surplus funds are available with them. The Bill also seeks to give to the investors the facility of nominating their successors in the event of their death, in respect of shares and deposit receipts held by the companies. I want to make it very clear that this Bill is, in no way, going to affect the companies or those which will be coming up afterwards. We are doing this only to create confidence amongst the investors. The industries are suffering and they need capital. There is some kind of an atmosphere prevailing in the economy now as depression is coming and inflation is developing. Not only in India but throughout the world they are facing such kind of problems. Therefore, we have to tackle this problem in some way to create some kind of confidence amongst the investors, and for that only we have done all this. Buy-back is an experiment that we are doing in India. This concept has not been introduced by this Government, this was introduced by the United Front Government when they were in power. They only brought all these amendments and referred them to the Standing Committee. It is not as if this Government is bringing them and thrusting them on the Parliament. This is not our idea. This buy-back concept, amendment of Section 370 and all that, were actually brought by the previous Government. The Congress also supported it at that time.