Arjan Kumar Sikri, Supre Court Judge says, "Here is a case where from 99 we are struggling to bring out a new law and so much exercise done but ultimately what is the product. When we get it, it is labelled, and rightly so, that there is no thinking behind it. See after 14 years this is where we have landed."
The companies act has received flak from India Inc and others for its lack of clarity. The new government is in the process of amending the rules and now a sitting Supreme Court judge has slammed the legislation--- speaking at event in Delhi, Justice Sikri said the act was drafted in haste without any thinking--- he also slammed the parliament saying it exposes their lack of legislative competency and warned that it could lead to further litigation. M Damodaran the former chairman of SEBI also hit out at the companies act saying its an excellent example of a badly drafted legislation.
Arjan Kumar Sikri, Supre Court Judge says, "Here is a case where from 99 we are struggling to bring out a new law and so much exercise done but ultimately what is the product. When we get it, it is labelled, and rightly so, that there is no thinking behind it. See after 14 years this is where we have landed."
Some very stinging remarks coming from a sitting judge who importantly is handling massive important cases such as the Sahara matter. Of course, with respect of the companies act, he was very critical of the government. He said that the parliament is shirking responsibilities by shifting legislative authority on to bureaucrats who are now in effect writing the laws by way of notifying various rules. So that has been the bone of contention.
Again, he said that the law had been very poorly drafted that the intent is not very clear when one reads the companies act. He also went on to warn that unless remedial measures are taken promptly by the government, it could result in what could potentially be termed as a tsunami of litigation where the courts would then have to give clarity on the various aspects where there are various ambiguity.
Now this is the question of ambiguity that had also been red flagged by M Damodaran, the former chairman of Securities and exchange board of India (SEBI). He said that there are various loopholes as far as the companies act is concerned. There are issues in terms of related party transactions are concerned. He said that it is critical to define how to compute the arms length pricing. There is no such mechanism that has been provided in the companies act. He also said that the related party transactions, this term has been defined very broadly and in fact, was very critical of the ad hoc decisions that are taken in terms of daily circulars that are issued by the Ministry of Corporate Affairs (MCA) to give more clarity in an attempt to bring some solace to the industry.
So in effect, some very scathing remarks coming in as far as the companies act is concerned with the essence being that it is very poorly drafted and that more needs to be done to bring more clarity unless to avoid what could potentially be called a tsunami of litigations which could flood the various courts.
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