Title: Statutory resolution regarding Disapproval of Companies (Amendment) Ordinance, 2001 (resolution withdrawn) and Companies (Third Amendment) Bill, 2001 (Bill Passed.).
(BHILWARA): Sir, I stand to support the Companies (Third Amendment) Bill, 2001.
Sir, the Members from the Opposition Benches have raised a few questions, namely, why this Bill was brought in firstly and what was the hurry in bringing an Ordinance when Parliament was to meet in another couple of weeks. Sir, the market sentiment has been weak.
Even before the September 11th terrorist attack, the capital market was sliding down. After the September 11th the share prices of companies which have a very good track record, companies which are doing very good, have come down to such a bearish level that they started getting worried. They could go, have a general meeting, have a resolution passed in that meeting. But all that takes time. Naturally that worry creeps into the company because they had such a good NAV, they had such a good management, and the slide is so much. That is the only reason why an Ordinance was promulgated and this Companies (Third Amendment) Bill has been introduced.
I would like to say that another point which has been mentioned here is that this Bill is not investor-friendly; and the small investors will be ruined. I would like to say that it is just the opposite in the sense that this Bill gives the option to a small investor that if the slide is so much, the company is ready to buy it back. Let us say, a share of Philips or HLL which are doing very good slides down so low that the investor gets worried and wants to sell it, which makes it even more bearish, these companies can step in. If these companies are having a slide of shares and the investor’s confidence in the company is getting eroded, that is the time this Bill comes into play so that the company can give confidence to the investor saying that it is ready to buy it at a particular rate and that will bring the share prices back. That is the main reason for promulgating this Ordinance and introducing this Bill.
Actually what happens is that there is a floating stock of a company. It can be reduced by the company buy back. When they feel that the share prices have gone up again, they can reissue that share. That is the only reason for bringing this Bill.
I will give you another example. There are two ways of how an investor gets benefited from buying share in the capital market. Firstly, the prices of shares go up. Secondly, he gets a bonus and a dividend. There are companies like Microsoft which never gives either bonus or dividend. But the share prices have gone so many times higher than the issue price. This Bill is only to get the confidence back to the company so that the company feels that the investor is not let down. That is why it has been introduced and that is how the market is looking up.
One of the things that this Bill has also done is to look into the sentiments of the market. That is why even after the share prices, sensex, volume and liquidity were really down, it has managed to recover and now it is looking up. This is exactly what happened after the September 11th terrorist attack in America. Even in America they put a lot of money to see that the sentiment, the liquidity and the volumes are not decimated in the American NYSE, NASDAQ.
This is one of the Bills which has been introduced to get the sentiments back and win the confidence of the investors.
(CONTAI): Sir, I thank you very much for giving me this opportunity.
I rise in support of this Bill which is really a part of the on-going exercise that has been going on for sometime to modernise the Companies Act, 1956 which, in many respects, has become rather antiquated and antediluvian and not taking into account the realities of the present day situation.
I think some of my friends are unnecessarily seeing the ghost in multinational corporations. They seem to have the tendency to see a ghost that does not exist. The way I look at the provisions of the Act is that it does not make any distinction between the multinational or domestic investors. As I see it, originally the Companies Act, 1956 did not provide for a company holding its shares. But that was on the basis of a provision in the then British Companies Act which did not provide for a company holding its shares. But subsequently, with the changes in the situation, the English Company Law was changed and rather, our Company Law was falling behind for a very long time. I think, about two years ago, a salutary attempt was made to enable the company to hold its own shares. I have been a strong votary of the provision or the principle of allowing a company to buy back shares. In fact, I had written articles in The Economic Times at least four to five years ago. Now, what is the present position?
SHRI RASHID ALVI (AMROHA): Sir, I am on a point of order. There is no quorum in the House now…… (Interruptions)
डॉ. नीतीश सेनगुप्ता :जब शुरू हुआ था तब कोरम था। एक बार शुरू हो गया तो ठीक है।…( व्यवधान)
MR. CHAIRMAN : When the debate started, there was quorum.
SHRI RASHID ALVI : Sir, but there is no quorum now. And how can you continue with the business of the House when there is no quorum?
MR. CHAIRMAN: The bell is being rung-
Now, there is quorum. The hon. Member, Dr. Nitish Sengupta may continue.
DR. NITISH SENGUPTA: Sir, there are two or three very big reasons as to why I strongly support this Bill.
First of all, what has been the general plight of the ordinary shareholder in our whole system? Normally, if those company managers who have the controlling block are good managers, they do well but there are quite a number of unscrupulous people who exploit the shareholders. They never give back what they actually deserve. They run their company, milk as much as they can and deprive the normal shareholders of their share. Now, this Bill gives the common shareholders an opportunity to sell their shares to the company management. And to that extend, I do not think it will be correct to say that it is not investor-friendly. In fact, I make bold to say that it is investor-friendly.
Mr. Chairman, with the liberalisation of the economy and the on-going deregulation, sometimes the managements of companies are feeling threatened with raiders and unscrupulous operators who are trying to corner shares in the market, displace the existing management from the companies. Therefore, legitimate managements of companies are naturally looking for their opportunity to strengthen the shareholding base so that they can beat back these raiders and interlopers. So, this is a very salutary provision which will enable these company managements to beat back these raiders and strengthen their hold over the companies.
Thirdly, we can see the result after the introduction of this Bill. Actually, the share market position is improving. Our share markets were doing very well since and I make bold to say this, the anti-national Tehelka conspiracy started the process of total decline of the economy. I do not know who planned this Tehelka but those who did it, did a very antinational act to the extent that it is from that time that the current dismal state of the Indian economy started. To that extent, in the last few weeks, if you see some encouraging signs of recovery, I think this introduction of this Bill will have some role to play. So, I support the Bill because it is an attempt to modernise our Company Law. The time limit has been changed from the Ordinance. But that is because, the idea is that where a major block is being bought back, then the shareholders will have the right to know and to that extent, anything higher than 10 per cent of buying and all that will require the approval of the shareholders in general. Otherwise, the company management and the Board of Directors can take a decision to buy the shares, make an offer to the shareholders and buy back some shares. They need not wait for all the paraphernalia of holding a general meeting to get it approved there but if it is much larger than 10 per cent, then certainly, it will need the shareholders’ approval.
To sum up, I strongly support this Bill as an attempt to modernise the Companies Law, as an attempt to bring our Companies Law in line with the Companies Law of other advanced countries of the world, as an attempt to provide certain security to managements wherever they are performing well and wherever they would like to buy some shares, strengthen their position and wherever common shareholders will be willing to sell them. It is because they will get a good price. Lastly, it will provide an opportunity to common shareholders, whose voice nobody has heard so far, to make their presence felt and to book their profit and then get out of the company, if necessary. Therefore, I strongly support the Bill.
(जयपुर) : सभापति महोदय, कम्पनियों की शिकायतें दूर करने और समय की बचत करने के लिए यह बिल माननीय मंत्री जी द्वारा सदन में विचार करने के लिए प्रस्तुत किया गया है जिसके लिए माननीय मंत्री जी और सरकार धन्यवाद की पात्र है।
महोदय, कम्पनीज एक्ट, १९५६ और अन्य जो कानून हैं, अन्तरराष्ट्रीय आधार पर यह जरूरी हो गया था कि जो कम्पनियां ठीक प्रकार से काम नहीं कर रही हैं या जिन कम्पनियों को पुनर्जीवित किया जा सकता है, उन सब कम्पनियों के बारे में विचार करने के लिए यह बिल सरकार के द्वारा लाया गया है।