NGOs to get aid to fight corp excesses

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Oct 31 2011, 05:37am hrs
In a move which has few parallels in the world, the ministry of corporate affairs is set to provide financial assistance to consumer groups and non- governmental organisations fighting big corporates going delinquent. The move is aimed at strengthening and institutionalising a mechanism of checks and balances for India Inc and encouraging external consumer forums to keep tabs on corporate corruption and malfeasance.

The development comes less than a week after Prime Minister Manmohan Singh voiced concern over the growing incidence of private sector corruption.

A proposal to this effect will find mention in the new Companies Bill which goes to the Cabinet next week, corporate affairs minister Veerappa Moily told FE.

Ultimately, consumers are very important. They are the ones who are at the bottom line. They need to be helped in every regard, Moily said.

MCA sources said the proposal was incorporated since it was felt the government must encourage the evolution of an ecosystem in which external consumer agencies become the third layer of vigilance for the corporate sector after sectoral regulators and shareholders.

The idea is to make consumer forums active with financial assistance to fight expensive lawsuits, a source said. He said that funds would be allocated from the Investor Education and Protection Fund.

Consumer forums have brought several such cases to the government's notice, which were subsequently investigated. Consumer forums ought to be given some incentive. And thats the whole idea behind the move, the source added.

Moily added: Corporate governance issues will be addressed in the new Companies bill. We will give the legal status to the Serious Fraud Investigation Office; they will have the power to arrest as well. They can also independently charge-sheet and a special court will try such cases.