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TUESDAY, NOVEMBER 24, 2009

New Delhi: Terming the nearly Rs10,000 crore scam in Satyam Computers as an aberration, the government today said the proposed new Companies Bill provides more stringent provisions to avoid such frauds in the future.

“Government proposes to introduce the Companies Bill, 2008 as the Companies Bill, 2009, which seeks to have more stringent provisions in case of frauds by companies, their directors and auditors,” minister of corporate affairs Salman Khurshid said in Lok Sabha during the Question Hour.

On the timing of introduction of new bill, he said the government intends to introduce it in the current session of Parliament.

The report of investigation into the affairs of Satyam has been received from the Serious Fraud Investigation Office (SFIO), he said adding the CBI has also conducted its probe into the criminal liability arising from the events relating to the scam.

“All the concerned persons have been arrested except one and prosecution has begun against the guilty,” Khurshid said.

Satyam scam involved forgery and manipulation of computer programmes, he said adding that the new Bill seeks to address all such issues.

“Satyam scam is an aberration and the events are specific to the company in question. No other scam of this nature has come to notice since then,” he added.

Replying to a supplementary, Khurshid said action was being taken to prosecute those found involved on the basis of the investigations, along with action by various other regulatory bodies or agencies.

He also assured the House that an elaborate regulatory framework is in place to deal with incidents of fraud. The framework provides for statutory disclosures to stakeholders about the affairs of companies under the Companies Act.

In another written reply, Khurshid said the role of an independent director may also come up, inter alia, for deliberations during the scrutiny of the new companies bill by the Parliamentary Standing Committee on Finance.

The government has also amended the Chartered Accountants Act and the Company Secretaries Act to provide for a more effective disciplinary mechanism to deal with cases of misconduct by CAs and CSs respectively, he added.

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Pushkar Said:


EMPOWERMENT OF INDEPENDENT DIRECTORS It is heartening to know that the government has taken an initiative to provide protection to Independent Director’s by coming up with amendment to the companies act. The ID’s in the present scenario of corporate governance in India are being appointed by the promoters/ CEOs, who are very powerful in the corporate world and thus the likelihood of theirs (ID’s) being independence is very unlikely. The protection as being suggested will be very short lived and will not provide a long term solution to the problem. We have to look for an holistic solution to these issue and the IDs need to be “empowered” rather than being protected. I would call it as bill for “EMPOWEREMENT OF IDs” . IDs need to be empowered or their roles well redefined to have a say in the CEOs succession, rather than CEOs appointing the IDs. It is also pertinent to note here that many of the IDs (high official from government/ public sector) are being appointed by many companies immediately just after they retire from the active service, which also raises questions on IDs independence. It is a fact , the service rules of government provides for a “cool off period” for these high profile government employees, but hardly being implemented. One of the criterion for rejection for an IDs from this category should also form part of the qualification of the IDs for appointment. Beside, the above it is a well known fact that Indian shareholders are not proactive and are not able to assert themselves in discharging their role. It these category of people who are the most sufferer, when the company like Satyam or their CEOs indulge in unlawful activities. Shareholder activism is hardly heard off in India, but for recent few cases. It is essential that Indian shareholder also need to be empowered to discharge their role in tandem so as to bring about good corporate governancein the country. Furthermore, "Whistle Blowing Act" need to be strengthened.

Posted On 7/10/2009 8:33:26 AM