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Relevant Extract from Unedited Speech of Minister of
Corporate Affar Shri Arun Jaitley given in Lok Sabha on 17.12.2014 I would
request any hon. Member, if he has a copy, to pick up section 212(6) of this
Act. I am referring to an extraneous fact when in 2004 the UPA came to power,
there was a law which the NDA had enacted called the Prevention of Terrorism
Act (POTA). The UPA’s main criticism of POTA was that some of the provisions
are very repressive and so they repealed POTA. When they repealed the anti-terrorism
law, they incorporated most of the provisions under the Unlawful Activities
Prevention Act. But one provision the UPA said that they would not agree to put
in the Unlawful Activities Prevention Act was regarding a harsh bail provision.
The POTA said that any person arrested for terrorism will not get bail till
either the Public Prosecutor consents to the bail or the court gives a finding
that the person is innocent on the face of it. Now finding of innocence is not
possible till the trial is held. So, the UPA’s own case was that this is not a
provision we can agree with and, therefore, they removed that provision from
the anti-terrorism law. Having removed it from there, they brought in the POTA
bail provision under Section 212 (6) of the Companies Act, which says:
“Notwithstanding anything contained in the Code of Criminal Procedure… .the
following offences which attract the punishment for fraud as provided in….to a
person accused of those offences…no person shall be released on bail unless the
prosecutor has been given notice where the prosecutor opposes it, the court is
satisfied that reasonable grounds for believing that the person is not guilty
of the offences.” Verbatim, full stop for full stop, comma for comma, they
incorporated the POTA provision into the bail provision of this Act. Now this
language exists in the narcotics law. When we invite the rest of the world to
come to India, form a company, do business and invest in India, are we trying
to say that in case you commit any of these offences you will never get bail or
you will indefinitely never get bail? Therefore, most companies said that it is
safer for them to switch over to a limited liability partnership than continue
to do business. Now, if you look at the other provisions of the Act, all
offences under grievous laws relating to terrorism, narcotics, sedition,
prevention of corruption etc., they say that ordinary courts will not try these
cases and there will be special courts. So, all offences against a company will
go to a Special Court. The ordinary Magistrate’s jurisdiction is taken away.
Are we trying to induce investors to come and invest in India or are we trying
to scare them away from the country? We have, therefore, brought in an
amendment that extremely harsh offences will be before a Special Court and the
rest will be before the normal courts of the land. If a man wants to wind up a
company, there has to be a provision in law. The case relating to winding up
these days normally goes to a single judge of the High Court as one judge in
every High Court is a company law judge. If somebody says that there is a
commercial insolvency or any other reasoning or the company itself wants to be
wound up, it goes to a single judge, there is a procedure to be followed and it
gets wound up. This Bill says that simple company matters and other matters go
to a single judge, appeals go to a Division Bench and some extraordinary
matters also go to a Division Bench. A company to be wound up has to go to a
full Bench of three judges. What is the rationale? That is why I said either
some of the provisions are oppressive or some of the provisions like having one
judge or two judges or three judges could have even come by an oversight. Now,
let me give you another oversight provision. There are offences companies
commit. If there is a company which does not follow the procedure and starts
collecting deposits, it is a punishable offence. In the Act, we forgot to make
it an offence. So it is the case of an oversight. If I run through each of
these 14, the first two, requirement of capital and seal, the international
standard practice now in corporate laws across the world is that you have done
away with these requirements. So, here it has been brought at parity with
international laws. The next provision, section 76 says, we forgot to provide
for an offence where somebody collects deposits in violation of law. We did not
make it an offence under the Companies Act; so it has been made an offence.
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