The new Companies Bill that rewrites the 56-year old law incorporating social responsibility obligations on corporates and recasts the SFIO with powers of prosecution and arrest may see the light of the day in the coming Monsoon Session of Parliament.
However, the government is not in favour of making the CSR obligations mandatory against the backdrop of stiff resistance from the corporates.
The Companies Bill that seeks to keep pace with the changing modern industrial climate is in the last stages of considerations before the Parliamentary Standing Committee and government hopes that its recommendations will be placed in parliament shortly.
"I was told that the Parliamentary Commitee had its last meeting on June 5. They will formulate recommendations and send it to us. If they send it to us in time, we can move it.
"If there are substantial changes, then we will send it to the Cabinet before taking it for passing in Parliament," corporate affairs minister M Veerapa Moily told PTI in an interview.
Under the provisions of the bill, the recast Serious Fraud Investigation Office (SFIO) will have powers to arrest and prosecute cases of corporate crime. A completely new provision will be that SFIO will have powers to issue Letters Rogatory to foreign jurisdictions in cases where people involved are located outside the country.
Also, for the first time in the world, there will be a law which incorporates the corporate social responsibility (CSR) obligations provisions.
"First time CSR is included in any enactment, company law anywhere in the world. We have made reporting mandatory and they will have to explain if they cannot perform. That is the provided in the bill," he said.
Moily said this would give social sanction and create some kind of pressure on corporates.
"For the present, this is enough. Making it mandatory will create a lot of problem for the corporates," he said indicating that there would be a step-by-step progress on the issue.
The obligations involving spending of 2% of net profit on CSR activities has already created quite a storm with India Inc bitterly opposed to it. The corporates say they already perform a lot of social responsibility and would not like a police raj if such obligations are made mandatory.
As per the Bill, every company with a networth of Rs. 500 crore or more, or turnover of Rs. 1,000 crore or more, or net profit of Rs. 5 crore and above in a fiscal will have to form a CSR Committee, consisting of three or more directors, of which at least one director should be an independent director.
Introduced in the wake of the Rs. 14,000-crore Satyam fraud, the fresh bill proposes to enhance the accountability of companies, seeking greater disclosure and protection of investors and minority shareholders.