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Richa Mishra

NEW DELHI, Dec. 22

THE Department of Company Affairs (DCA) will consider the suggestions and recommendations made by the Joint Parliamentary Committee (JPC) on the stock scam with all "sincerity" including the call for further investigations in regard to transfer of funds by six corporate groups to Ketan Parekh.

"The recommendations cannot be ignored," a senior DCA official told Business Line. On the weakness in the system of inspection pointed out by JPC, the official said that the department was aware of the lacunae and steps had already been taken to plug in the loopholes.

The JPC had said that, "the quality of inspection leaves much to be desired. It is a matter of serious concern that the DCA inspectors are untrained and unable to cope with the quality of inspection." The committee had hoped that the weakness in the system of inspection would be looked into and remedial action taken without delay in order to have an effective inspection mechanism.

"Various committees have been set up by the department to examine the existing provisions under the Companies Act, 1956. Issues like rationalisation of penalties, putting a cap on the number of investment companies that any individual can float, and prescribing a limit on lending and borrowing by companies, are also being examined," the official said.

The JPC in its report had noted that 45 out of 58 prosecutions for major offences launched or ordered by the DCA against the companies involved in the present scam relate to diversion of funds. The JPC had hoped that DCA would bring forth suitable amendments to the Companies Act to check such violations.

Further, the JPC had also expressed that the issue of auditor-management relationship needed to be addressed with a view to ensuring a healthy professional relationship between them. This could be achieved through rotation of auditors, restriction on non-audit fee, it said. The panel had urged the Naresh Chandra Committee set up by the department, examining the issues of auditor company relationship to complete its work within a time-frame.

On whether the Naresh Chandra Committee was likely to suggest rotation of auditors, sources said, "it is just a suggestion from JPC." Some of the suggestions include further strengthening of the disciplinary committee of the Institute of Chartered Accountants of India (ICAI) including participation of external members in the disciplinary committee, sources said.

Without going into the specifics, sources said that committee report would suggest recommendations to amend the Companies Act and Chartered Accountant Act.

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