FINANCIAL MEMORANDUM
Clause 125 provides for establishment of Investor Education and Protection Fund for promotion of investor awareness and protection. To carry out the objectives of the Fund, the Central Government shall constitute an Authority with such members but not exceeding seven, as the Central Government may appoint, to administer the Fund. This clause is similar to section 205C of the Companies Act, 1956 (hereinafter referred to as the existing Act).
Clause 132 provides for constitution of National Financial Reporting Authority (NFRA) to advise the Central Government on matters relating to formulation and laying down of accounting and auditing policies and standards, and monitoring & enforcing compliance with such standards and overseeing the quality of service of the concerned professions. The terms and conditions of appointment of the chairperson, members, secretary and employees of the Authority shall be such as may be prescribed. This clause is broadly similar to section 210A of the existing Act with reference to National Advisory Committee on Accounting Standards (NACAS).
Clause 210 of the Bill empowers the Central Government to appoint inspectors to investigate the affairs of companies. Clause 224 of the Bill empowers the Central Government to prosecute the offenders on the basis of the report of the investigation. The expenses on investigation, under certain circumstances are to be initially defrayed by the Central Government out of the moneys provided by the Parliament and are ultimately recoverable from the persons concerned. Clause 206 empowers the Registrars and the officers/authorities authorised by the Central Government to inspect the books of account of companies. These clauses are similar to the provisions of section 235, 242 and 209A of the existing Act.
Clause 211 provides for establishment of Serious Fraud Investigation Office to investigate frauds relating to a company. Serious Fraud Investigation Office already set up by the Central Government (in terms of the Government of India Resolution No. 45011/16/2003- Adm. I dated 2nd July, 2003) shall deemed to be the Serious Fraud Investigation Office till such time the Serious Fraud Investigation Office under the proposed legislation is established.
Clause 269 empowers the Central Government to appoint an independent administrator to manage the Rehabilitation and Insolvency Fund. This clause is similar to sections 441A to 441D of the Companies Act, 1956 with some modifications.
Clause 359 empowers Central Government to appoint Official liquidators including Joint, Deputy or Assistant Official Liquidators who are to be the whole time officers of the Central Government, i.e., whose salary shall be paid by Central Government. Clause 359 is similar to the provisions of section 448 of the existing Act.
Clause 396 of the Bill empowers the Central Government to establish registration offices to appoint Registrars, Additional, Joint, Deputy and Assistant Registrars and to prescribe terms and conditions of their service. Clause 396 is similar to the provisions of section 609 of the existing Act.
Clauses 408, 410 and 414 of the Bill provide for the constitution of the National Company Law Tribunal and National Company Law Appellate Tribunal respectively. These clauses are similar to sections 10FB to 10 FG and 10FR to 10 FX of the Companies Act, 1956. For establishment of these institutions, the funds are already being provided by the Parliament.
Clause 435 of the Bill empowers the Central Government to establish or designate, by notification, such number of Special Courts as may be necessary for the purpose of providing speedy trial of offences under the proposed legislation. The intention under this clause is to designate specified Judge or Judges from existing judicial set up to try on offences under the proposed Bill.
Clause 443 of the Bill empowers the Central Government to appoint Company Prosecutors for the conduct of prosecutions arising out of the proposed legislation. The Company Prosecutors already appointed under the existing Act will continue to function under the proposed legislation.
Clause 454 of the Bill provides for appointment of adjudicating officers to impose penalties for procedural non-compliance. The officers not below the rank of Registrar shall be notified as 'adjudicating officers'.
The expenditure on an authority to administer Investor Education and Protection Fund, National Financial Reporting Authority, inspecting officers, Serious Fraud Investigation Office, administrator to manage the Rehabilitation and Insolvency Fund, appointment of whole time Official liquidators (including Joint, Deputy or Assistant Official Liquidators), setting up of registration offices, appointment of Registrars, Additional, Joint, Deputy and Assistant Registrars, constitution of National Company Law Tribunal and National Company Law Appellate Tribunal, Special Courts, appointment of Company Prosecutors and appointment of adjudicating officers will be met out of the existing budgetary allocations of the Ministry of Corporate Affairs. The Bill, therefore, will not involve any additional expenditure of recurring or nonrecurring nature.
