Economy
Modi govt: Correct the unfinished business, modify and move on
The Narendra Modi government has to undo a lot of mess that is being left behind, correct those that can be mended and introduce those that they promised to perform in their manifestos
 
The unfinished story of a huge burden now shifts to the new Indian government.  The Narendra Modi government has to undo a lot of mess that is being left behind, correct those that can be mended and introduce those that they promised to perform in their manifestos.
 
The formation of a formidable cabinet and actual swearing in ceremony may take place by the end of this week or early next week.
 
To our mind, the biggest problem is that we really do not have a list of problems to surmount and prioritizing this list as to which needs the immediate attention, because everything on that list ought to have been done aeons ago!
 
The issue of one-window clearance has been discussed, debated and has failed. This itself needs to be set right.  But, for the time being, we shall list out the urgent issues that need to be handled simultaneously by competent persons, focusing on the object of getting the job done, leaving aside petty politics of apportioning blame to the former government.  Here they are:
 
a) Agriculture: to ensure farmers get power, water needs, fertilizers, quick transportation of farm produce, banking and credit facilities at the centres of production and elimination of middle men In addition to this, adequate facilities for farmer's children's education and medical needs for the village/town has to be addressed.
 
b) Banking reforms as recommended by the PJ Nayak Panel needs to be implemented by repealing the Bank Nationalization Acts and Reserve Bank of India (RBI) to function in total freedom in the best interest of the country.  It will be their time-bound responsibility of setting up banking facilities where it does not exist now.  They could do this by mergers and take overs, besides issuing new licences
 
c) Black money, both abroad and in India, needs to be collected by any means such as diplomatic efforts abroad, and by amnesty all round to ensure its return back to the country. This untold wealth needs to be systematically directed towards the listed areas of development.  The government must identify the areas, such as infrastructure, road building, irrigational canals, warehousing facilities for food, cold storages, hospitals, schools, old people's homes, sport facilities.  If within the time frame, black money in country is not declared, under the amnesty scheme, it should be confiscated and stringent punishment given to the hoarder
 
d) Currency system is getting stronger and by a great export push, and controlled imports, the Rupee can become an international currency.  Meantime, the RBI needs to appoint an A-Team solely for the purpose of ensuring replacement of paper currency through Polymer notes by taking direct action of negotiating with Australian Government, who are the pioneers in this aspect. Since fake Indian currency has been minted and smuggled into the country by Pakistan, this is the first subject that needs to be tackled with that country. Everything else goes to the back burner. Once the polymer notes are finalized, India must demonetize the Rs500 and Rs1,000 immediately. Such a move will also ensure the black money will surface in the open.
 
e) Defence preparedness has been subject of talk for sometime.  In fact, it is said "to be always prepared for war is the best means to preserve peace". At the same time, this cross-border terrorism, which emnates from Pakistan needs to be stopped and this will only happen when the Army is able to retaliate with force.  It is imperative that this should be the agenda for discussion between the Indian Defense Establishment with the Pakistani counterpart and ISI, as the latter is accepted as the sponsorer of so-called Jehadis who terrorise the innocent civilians In J & K region
 
f) Environmental issues have been the main obstacles in our progress, when it comes to mining activities in any form. Both Ministry of Environment & Forests (MoEF) and its State counterpart are both responsible for inordinate delays in work. Moneylife has raised these issues in great detail in the past and development work comes to a standstill at tremendous loss to the nation. The new government must consider a complete over hauling of this Ministry.
 
g) Foreign Direct Investment has made quite progress in the country and it has still many areas where tremendous scope exists for such investments. It is essential that the Ministry of Coal invites qualified international miners from Australia, UK, US and Poland, and others, to invest and develop Indian coal mines, bringing in their advanced technology, equipment and expertise.
 
h) Government needs to start disposing off its holdings in various industries and institutions like Banks, and in line with the Nayak Panel recommendations, why not reduce the government participation to not more than 26% and leave the rest in public hands?
 
The new government, it is hoped, will now have much closer relations with the federal states of the Union so that all issues are discussed for the benefit of every citizen. Matters such as the inter-connection of Indian rivers to ensure continuous supply of water all the year round is take care of and millions of cusecs of water which is now being discharged into the sea can be stopped to benefit the people.
 
We wish the new team success.  Jai Hind!     
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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MCA silently inserting backdated changes in Rules
How can we rely on a Ministry as arbitrary as MCA, which brings something with a bang and then silently creeps in to correct the same without any indication?
 
The Ministry of Corporate Affairs (MCA) came up with the finalised rules on Companies Act, 2013 after comments from the stakeholders on the draft rules on and from 27 March 2014 without bearing any date or notification number on the same as the same was apparently not published in the Official Gazette. However, all the rules were supposedly effective from 1 April 2014. Subsequently, one by one all the Rules were being notified and by now corporates had started taking action based on the Rules already available on the MCA portal. To the surprise of all—the notified rules contained changes as from the so called final rules earlier available on the MCA portal. Therefore, what appeared before though were final rules, but what appear now in the Gazette are actually the final-final rules!
 
One such recent blunder is the publication of the Companies (Share Capital and Debentures) Rules, 2014 (Rules) in the Official Gazette on 12 May 2014 (Notified rules). Though in disguise the MCA has rectified its mistake, however, the issue is that the so called final-final Rules do not rectify merely a clerical error but are materially and substantially different in terms of the various important provisions dealing with debentures and creation of debenture redemption reserve (DRR). In fact, if one looks at the website of MCA, the date of publication of Rules still appears to be 27 March 2014 and the document appearing on the MCA Portal bears the date as 3 April 2014 (under the Hindi version) and 31 March 2014 (under the English version).  Therefore, what follows is that MCA also indulges in back dating of documents as the Rules are supposedly to be effective from 1 April 2014.
 
The Rules as appearing earlier on the MCA portal along with the single PDF document scanned and put on the website of MCA, which states that such Rules are effective from 1 April 2014 purported to be signed by MCA official cannot be said to have any clerical error and why would one assume such error also. The MCA never admitted or came out with any clarification to at least sound the stakeholders that the notified rules “may” at all be different from the ones uploaded earlier on the its portal. So how do we ascertain which are the final rules and which one to follow? The notified Rules are materially different from what they appeared earlier and thus having significant impact on the corporates and will continue to cause a chaos in reading and re-reading the Rules so as to ascertain where in disguise has MCA posed minor changes and corrections which in effect are substantial.
 
In respect of the Companies (Share Capital and Debentures) Rules, 2014, the rules as appearing earlier required creation of DRR by all the Companies to the extent of 50% and further did not provide any exemption or exception to non-banking financial companies (NBFCs) even in case of privately placed debentures and all India financial institutions (AIFIs) unlike as available to them earlier vide the MCA Circular on 11 February 2013  for creation of DRR by NBFCs.  The final-final rules are a breather to the corporate sector inasmuch as not only is the DRR amount reduced from 50% to 25% but also the exceptions as available to NBFCs earlier has been retained in terms of creation of DRR for privately placed debentures. In other words, the notified Rules bounce back verbatim to the position which existed prior to publication of the rules on 27 March 2014 and thus, the situation remains the same as before.
 
The position that stands now in comparison with the earlier rules after the issue of the Notified rules is:
 
 
Another requirement of the Rules is that in case, where DRR is required to be created, companies were to park 15% of amount of debentures and invest the same in mutual funds, deposits and  government securities by 30 April 2014. Therefore, the problem that now poses is that there may be some NBFCs, which had issued debentures on private placement basis, and thus, no do not require to creation of DRR but which have already issued debentures worth Rs200 crore and therefore gone ahead with parking of funds to the extent of Rs30 crore. How does the company now do away with the action already taken? Though the final-final Rules really are a boon to NBFCs, which are the primary issuers of debentures in the bond market but the issue is not that MCA has gone ahead and corrected merely a mistake—the larger issue is that can Ministry keep on playing with the law as and how it feels like and leaves it to the understanding of all and sundry of its blunders and corrections without a hint of the same. Can MCA act so irresponsibly? 
 
The MCA has already gained powers as an executive to not only make the law but also amend it without any understanding of its impact and this is only going to be prejudicial to the Indian Inc at large as the department goes ahead boldly to commit mistakes and sadly there is no one to put a halt to it. In a very recent ruling in the case of Godrej Industries Ltd, the Bombay High Court has tried to curb the practice by slapping MCA saying that how can the Rules which are not even notified can be said to be effective merely by signing on a piece of paper. How can we rely on a law maker as volatile as MCA, which brings something with a bang and then silently creeps in to correct the same without any indication? On one side where the law makers aim at corporate governance whereas on the other hand with such goof-ups all are we creating a mockery of the Indian legal system to the world at large!
 
(Aditi Jhunjhunwala works as Senior Associate at Vinod Kothari & Co under the Corporate Law Division.)

 

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COMMENTS

Yerram Raju Behara

3 years ago

This is the advantage of a rule-bound Act that the bureaucrat does not want to get rid of. He has scope to change rules with impunity. Governance needs change in this regard. Hope Modi Government promising reforms in Government also seriously looks into this aspect as well.

SuchindranathAiyerS

3 years ago

Merely in the foot steps of India's Social Engineering, retrospectively legislating First Citizen and Parliament.

Gool Daruwalla

3 years ago

Even for transfer of Shares the form 7b is no longer to be used. (The green transfer forms). Form SH4 is to be used. Companies are suppossed to track the transfer using form SH2. Please note that in the mean while RTA's have swung into action and raised objections for the green transfer forms received after 01 Apr 2014, and outright rejecting them. They have asked users to submit forms SH4. RTA;s have sent form SH4 without the date stamp of the ROC on the SH4 form. What is this half baked setting of rules, and issuing orders just for the sake of harrasment!!!! There is no clarity on where the SH4 is going to be available, whether the ROC has to date frank the SH4 form similr to how the form 7B was being date franked. RTA's and other institutions involved should ask the relevant questions before just saying yes sir, yes sir, three bags full and implementing half baked schemes.

REPLY

Gool Daruwalla

In Reply to Gool Daruwalla 3 years ago

Also note that the SH4 was available on the net only after 18Apr2014.
This retrospective enforcement of rules is not in the right perspective. MCA should now give a 3 month leeway, ensure that all things are in place and enforce the rules. Haphazard enforcement causes more problems than solutions. All rules should be the same till end of July 2014, then only should the new rules be implemented

sreenath

3 years ago

sreenath
As rightly mentioned that MCA and sebi nse bse all the rule makers are rule brakers this is happening for past 10 years of UPa govt now the present BJP govt should do justice is humble reques

shivkumar

3 years ago

This was one of the fears expressed when it was realised that a major portion of the new Company Law will be in the rules and the Executive can play merrily with the rules. But it was not expected that the MCA will resort to such a practice of back dating some rules to save its face.

Suresh Kumar Varma

3 years ago

Earlier reported instance in the case of Income tax by me

Income tax e filing conundrums

See how the recent Notification (dt.12.09.2013) for sending ITR –V to CPC Bangalaru extended upto 31-10-2013 for returns filed for A.Y.2011-12 & A.Y.2012-13 is overlooking the base provision of Sec.143(2) proviso “ Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished”

Which means either the said notice issued after 30-09-2013 gets time barred or another year of waiting upto 30-09-2014.

This becomes applicable for scrutiny notice for such revised returns (A.Y.2011-12) and normal return (A.Y.2012-13) cases..

Unintended consequences – Is that so?


Regards,

CA.K. Suresh Kumar Varma
Ernakulam
98 472 27 494

Vinod Kumar Agarwal

3 years ago

Now this is why we have legal cases pending in all courts most of them against the state. So we now need a ministry to interpret the laws for the EXECUTIVE who are supposedly running the democracy. HUM NAHIN SUDHRENGE...!!

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