Terming the new companies act as "badly drafted legislation", capital markets regulator Sebi's former chairman M Damodaran today said the government needs to rewrite various provisions of this law and violations till that time should not attract any penalties.
"This (Companies Act) is an excellent example of badly drafted law," Damodaran said at an event here.
"The intention is honourable but the manner in which those intentions have been converted into law leaves a lot to be desired," he added.
Adding that the "law is a knee-jerk reaction to certain episodes in corporate India", Damodaran emphasised that the nation needs to have enforcement of the regulations that exist rather than bringing in more norms.
Damodaran was speaking at launch of a book 'Companies Act 2013 - Impact Assessment' authored by Vaish Associates Advocates, Partner, Satwinder Singh.
According to Damodaran, various provisions in the Companies Act 2013 require more consistency and clarity especially those related to CSR norms and role of independent directors, among others.
"Penal provision for non-compliance with CSR norms is that one has to comply and explain to shareholders in the annual general meeting...Those of you who have attended AGMs would know what kind of explanation management gives to unsuspecting shareholders," the former Sebi chief said.
He also said that while provisions under the norms require independent directors to report fraud, there is not mention of whom should the fraud be reported to.
"I have made request to Ministry of Corporate Affairs to hold any kind of penal action till April 1, 2015," he said.
"Then consult the stakeholders and rewrite all the provisions of the act in manner that provides for internal consistency, clarity, continuity and orderly conduct...else it could have an adverse impact on business in India," he added.
Supreme Court Judge A K Sikri, who was also present at the event, said the new companies law was in works since 1999.
The new companies norms which have come into force from April 1, 2014, has bought in sweeping changes in the way firms operate. The law makes it mandatory for companies to spend on social welfare, empowers investors against frauds committed by promoters, encourages companies to have women directors, among others.