For the UPA government, which on Wednesday withdrew the pension Bill from the agenda of the current session of Parliament under pressure from recalcitrant ally Trinamool Congress, the forced withdrawal of the rather non-controversial Companies Bill came as a bolt from the blue.
Government sources said the error has occurred in the Statement of Objects and Reasons (SOR) of the Bill which essentially etches out the reasons for replacing an existing Act with a new one.
The SOR of the Companies Bill 2011 states that the new legislation has been drawn up not only based on the recommendations of the parliamentary standing committee but also on the suggestions received by it from various stakeholders.
Usually an important Bill would merely state that the recommendations of the standing committee formed a part of the Bill. Owing to the atmosphere of distrust between the government and the Opposition, the apparently inadvertent error has snowballed into a major issue with the BJP getting the better of the government and forcing the Bills recall.
The said clause states, The government has
accepted in general the recommendations of the standing committee and also considered the suggestions received by it from various stakeholders.
Its a mistake that has been made and it requires further approval by the parliamentary standing committee now, a source told FE. The carelessness has cost the government dear and the Bill could now be delayed by at least another three months. The Bill would be re-tabled in the Budget Session in February.
Chairman of the parliamentary standing committee on finance, Yashwant Sinha, confirmed the development to FE. He said the government should have kept the standing committee fully abreast of the changes in the Companies Bill once it had already been vetted by them. We have only opposed the Bill because Parliamentary practice has not been followed in this case, Sinha said.
Sources said the mention of various stakeholders suggestions also being included in the Bill has angered the BJP as they feel certain provisions could have some vested corporate interests.
A source said: Though the government is well within its rights to overlook proposals of the standing committee in the context of the current political climate, the mistake should not have been made in the first place.
Though the new Bill has some provisions which seek to create transparency in the operations of corporate houses, certain provisions that had been made by the standing committee in August 2010 have not found any mention in the final Bill.
For instance, the standing committee had proposed capping of layered/stepdown subsidiaries to just one, but in the new Bill there is no such cap though it provides that a restriction can be imposed if companies are found misusing that route. For now, the government has capped the number of layered subsidiaries at two only for the investment companies.
Similarly, the Sinha-led panel had also proposed that 2% of the average profits of a company that has a net worth of R500 crore or turnover of R1,000 crore or a net profit of R5 crore or more should be set aside for corporate social responsibility.
Owing to hectic industry lobbying, the new Bill has made the contentious clause only voluntary in nature but has mandated in the new law that the said companies should clearly state how much they have invested in philanthropic activities.
The Bill is very clear. It has very stringent clauses for companies... its such a shame that it has once again been delayed, an industry leader told FE.