The Hindu Business Line : Corporate Affairs Ministry reaching out to aam aadmi

Cleaning up (the corporate sector) is fine, but we don’t want to be sanitary inspectors…. We will then trust the shareholders to take decisions that ultimately impact their interests.—

Salman Khurshid, Minister for Corporate Affairs

Arun S.

New Delhi, Aug. 16 Ever since the Satyam scam broke out, the Ministry of Corporate Affairs has been under pressure to prevent similar incidents. Mr Salman Khurshid, holding independent charge of the Ministry, told Business Line in an interview that while on one hand he does not want the Ministry to be seen as harassing companies, the purposeful pursuit of effective prosecution of defaulters in the Satyam case will show that the Government means business. He said the Ministry is working on a near-foolproof early warning system to send alerts on any wrongdoings by companies.

What are the current priorities of your ministry?

My priority is to demystify the Corporate Affairs Ministry. It is explaining to the aam aadmi what corporate affairs is all about and how it concerns him or her as much as agriculture does.

We are now in the process of completing what we have begun in the 100-day plan. We have to fast-track the Companies Bill. It will go to the Standing Committee soon. The committees have not been announced as yet. On the last day of the Parliament session, I was told that it would take another two to three days. But I haven’t heard about it since then. As soon as they are announced we will start the work.

What are your plans on cleaning up the corporate sector?

Cleaning up is fine, but we don’t want to be sanitary inspectors. The idea is to ensure disclosure of all relevant information to the shareholders. Accountabilities for incorrect disclosure or failure to disclose will be made clear. We will make a clear dividing line between compoundable offences and offences that cannot be compounded. We will then trust the shareholders to take decisions that ultimately impact their interests.

We do not want to be paternalistic and take their interests into our hands. The kind of transparent disclosure system we have put in place, including MCA21, eliminates discretion and individual subjective assessments. In the next few months, we can show purposeful pursuit of effective prosecution of defaulters in the Satyam case. It will send a clear message that we mean business.

The Satyam scam will become a case study for crisis management and how the industry and the Government saved Satyam together. It will also hopefully become an example of how effectively our legal system treats defaulters.

Have you received any new complaints regarding company malpractices similar to Satyam scam?

Nothing of the nature of Satyam has come to my notice. My instructions to the RoC (Registrar of Companies) are that we should not be seen as harassing or making life unnecessarily difficult for companies. If there is some shortcoming they should be compounded, put together. If it has to necessarily go to investigation, then certainly we should proceed.

Can you give details about the ‘early warning system’ aimed at preventing a repeat of incidents like the Satyam scam?

There are always indications if a company that is functioning normally suddenly goes off track and there is an unexplained pulse that indicates that something is changing. It may or may not be so, but it certainly calls for attention at that time. I am waiting for the report on how people would want this. I hope at least a near-foolproof system can be brought in.

What is the status of the Institute of Chartered Accountants of India (ICAI) report on auditors’ role in the wake of Satyam scam?

It hasn’t come to me yet. Whether they (ICAI) should have more teeth or someone else should have more teeth is a decision we have to take. But what they (ICAI) think is something I would like to know before I make up my mind.

What are the main amendments proposed in the new Companies Bill?

The Bill reflects the theme of not becoming paternalistic. We have tried to simplify the law and make it user-friendly. In order to make it compact, we are now down to about 400 provisions from 700 provisions. If it can be reduced further, I will be very happy. Many changes, like allowing merger of Indian companies with foreign ones, will be there. It is done even now, but they have to come to the Government for approvals. There will now be more automatic approvals. Ultimately, they (promoters) have to get their approvals from their shareholders.

When do you think the National Company Law Tribunal will start operation?

There is nothing we can do now. We are waiting for the Supreme Court to decide.

Will the Serious Fraud Investigation Office get more teeth?

The teeth that they need will be given to them in the new Act. Basically what they need is search and seizure powers. Those will be given to them.

Over 2 lakh companies had failed to file balance sheets and annual returns in the last five years. Is it because people are either ignorant or unafraid of the law?

It is not a question of people being unafraid of the law. In some cases there are genuine difficulties. If you don’t comply, you should not feel that you can get away by apologising or get away because the judge is too overburdened with prosecution.

Everything shouldn’t have to go to the court, in the first place. Many of these things can be set right by imposing fines or sanctions within the system. That is what the new Companies Bill is trying to do, to rationalize things.