Chief justice says new companies Bill could have nixed conduit firms & scams

During the Vodafone tax case proceedings in the Supreme Court late last week, Chief Justice Sarosh H Kapadia asked Vodafone’s counsel Abhishek Manu Singhvi about the status of the new Companies Bill.

Singhvi is also the chairman of the Parliamentary standing committee on law and justice.

Kapadia observed that many of the scams would have been avoided but for certain hazy definitions in the extant Companies Act.

When Singhvi told the court that the Bill would be presented in the winter session of Parliament, Kapadia retorted: “For several years we have been hearing this.”

He further observed that conduit companies are being used to pay bribes since there is no definition of ‘associated company’ in the current Companies Act.

“Many sections do not apply to private limited companies ... these loopholes need to be plugged,” the chief justice commented.
He added that hybrid securities and unlisted companies were main areas of concerns.

“We are telling you, Singhvi, since you have a role to play,” the court observed.

The extant Companies Act was enacted in 1956 and much water has flown under the bridge since both in terms of the socio-economic structure of the country as well as its politics.

Work on the new companies Bill began seven years back and its final version was expected to be tabled in the monsoon session of the Parliament. However, that was not to be due to some last-minute alterations following representations from various bodies and ministries.

The final draft of the Bill was sent to the Cabinet in the first week of September. The Cabinet is expected to take a decision on it over the course of the next few weeks, sources said, after which, it will be tabled in the winter session of the Parliament following which it will be made into an Act.