Sir, thank you for giving me the opportunity to speak on the Companies (Amendment) Bill. Sir, this House and the other House passed the Companies (Amendment) Act, 2013 after an exercise of more than a decade. The Companies Act, 1956 was replaced by the Companies Act, 2013 after a prolonged discussion, deliberations with the industry, chambers and all the stakeholders. After several recommendations by the Standing Committee – it went twice to the Standing Committee – only in 2013, the 1956 Act was replaced by Companies Act, 2013. Now, the Act was notified only partially in 2013, and from 1st April, 2014 the Act was implemented. Within a period of six months, the Government has come up with several amendments to the Act and there are nearly fourteen Sections, which have been amended. I do not see any reason for amendment of some of the provisions like removing the threshold limit for minimum capital requirement for private companies and public companies. The previous Act clearly says that the private companies should have a minimum capital of one lakh and the public companies should have a minimum capital of five lakh. This was a provision introduced to curb the shell companies and to put restrictions while incorporating the companies. This has been removed and then there is no capital requirement envisaged in the present amendment for incorporating a company. Then, the next amendment is not making the common seal mandatory. The common seal is a seal which authenticates all documents of a company and that is a seal which is required to be authenticated and that has been made optional. I do not see any reason for this change. Then, I welcome that Section 76A has been added to protect the depositors and to make the offence a cognizable offence under Section 447. We have to protect the depositors. Of course, the original section, which is section 76, has the provision to protect them but now more transparency has been brought in. I welcome it. As far as section 188 is concerned, where an agreement to be filed, in certain cases ‘special resolution’ was necessary which was very important. That has been removed. If these provisions can be passed with an ordinary resolution, I feel that this amendment is not necessary. Sir, an important amendment has been brought in to section 143 of the Companies Act. The present Act, before amendment, has made it mandatory for the auditors to report all frauds to the Central Government. Through this amendment, a threshold limit has been laid. Now, fraud up to a certain threshold limit only will be informed by the auditors to the Central Government and frauds below the threshold limit will be reported to the company by the auditors and to the audit committee. Sir, I welcome the proposed amendment, but with a rider, because reporting of frauds, irrespective of the amount involved, to the Central Government would not serve any meaningful purpose. However, some aspects need to be looked into. One, reporting of frauds where key management personnel are involved is, by very nature, a serious thing and therefore should be reported to the Central Government irrespective of the amount involved. Two, the objective behind the provision could not be achieved unless an effective mechanism is evolved at the Central Government level to deal with the information on fraud received from the auditors of various companies. What is happening now and even earlier is this. As far as audit reports and CAG comments are concerned, the Central Government or the concerned Ministry has to go through it and file their comments and lay them before both the Houses. But I can say this from my experience that the Central Government is not looking into the various comments of the CAG and the auditors. By bringing this reporting provision, you should strengthen the mechanism to go through fraud and take action within the Central Government. The proposed amendment should also require to disclose details of frauds reported to the Government that are more serious in the Board’s Report. The Board Report should also contain whatever the auditor reported. Sir, the entire responsibility of detecting fraud has been given to the auditors. Auditing of a company is not a fraud detecting job. Now, in this Bill, the entire responsibility of detecting the fraud or the major responsibility of detecting the fraud has been put on the auditors. The company management should also have this responsibility and they must be liable to improve their internal control system. (800)
