DCA spurns Sebi demand for more powers

DCA spurns Sebi demand for more powers
EEB & AGENCIES

NEW DELHI, JULY 18: The Department of Company Affairs (DCA) today spurned the Securities and Exchange Board of India (Sebi)'s demand for more powers saying that the regulator had enough powers to effectively handle erring companies to protect investors.

"As per the Sebi request, we had given Sebi the powers under Section 62, 63, 68 and 108 of the Companies Act, and they have been barking up the wrong tree," DCA secretary P L Sanjeeva Reddy told reporters here.

Sebi has been asking for more powers from the government saying it did not have enough powers under the existing legislations to punish companies for misuse of funds mobilised from the public.

Sebi chairman D R Mehta had earlier said that regulator could at best delist erring companies from the stock markets, but this was not a sufficient deterrent against malpractices and for protecting investors.

The DCA officials said the Sebi can also take stern measures against merchant banks, which act as advisors for companies coming out with public issues.

Meanwhile, DCA has warned companies that have not filed balance sheets, annual returns and other documents under the Company Law Settlement Scheme 2000, with the registrars of companies, of stiff monetary penalty and prosecution if they did not do so before August 31 - the closing date.

"It is a one-time opportunity for a life-time of peace," Reddy said at a press conference. Companies which comply with the requirements will get immunity from prosecution by making a one-time small payment to regularise their affairs.

On the other hand, defaulter companies which do not avail of immunity under the scheme will be liable to pay a fine of 10 times the present amount and will also be liable for prosecution after August 31. The DCA also plans to make their names public and put them on a Website.

Reddy said DCA was keen to introduce the Competition Bill in the monsoon session of the Parliament. "We have set a deadline to finalise the Bill by the end of this month," he said. The department proposes to make defaults in repayment of deposits a cognizable offence.

The department has already despatched three lakh notices to defaulting companies while another 1.25 lakh notices to directors are in the process of being issued.

Reddy said the department had activated professional bodies such as the Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) to convey to companies the benefits of availing immunity under the Company Law Settlement Scheme (CLSS). Reddy has written to the chief secretaries of all state governments to help trace the defaulting companies through the respective district collectors.

The department has also approached financial institutions such as IDBI, ICICI, IFCI and nationalised banks to help bring the errant companies to book. Reddy clarified that companies which have downed shutters are also required to file the balance sheets, annual returns and certain other documents with the respective RoCs.

Reddy said the Competition Law would not restrict, but encourage competition. Mergers and acquisitions of over Rs 500 crore would come under the purview of the proposed Competition Commission of India.

Reddy said though there is some awareness of investor education in some areas such as mutual funds and secondary markets, there has never been a focussed effort to protect all investors from other different investment options. DCA has constituted a committee to set up and administer Investor Education and Protection Fund.

The department is contemplating asking entrepreneurs setting up new companies to give the numbers of their passport, photographs and at least two references to ensure that they do not disappear. With the introduction of the Information Technology Bill, the government is also considering acceptance of annual accounts and other documents in floppies/tapes.

Reddy said the department would encourage setting up of a national academy for corporate governance and centre for corporate excellence on the lines of such bodies in developed countries.