MCA Order issued to multiply the difficulty & not remove it!!

On February 13, 2015 (a day before Valentines Day) – Ministry of Corporate Affairs – ‘proposed’ to introduce the first Removal of Difficulty Order (‘RoD Order’) of 2015 to give some relief to the corporates.

The RoD Order may have provided ‘relief’ but has definitely raised a fundamental question – Can the MCA interfere in the wordings of Companies Act? Or broadly speaking, can any Ministry / Dept. amend the law without the same being placed & passed by the Parliament? This is a very crucial question that needs to be answered / studied by all - because, we would soon celebrate 1 year birthday of Companies Act, 2013 – and many more RoD Orders, Circulars and Notifications will be issued, which are just creating confusion.

Vide RoD Order dated February 13, 2015, MCA has introduced two amendments: (1) It has clarified the definition of small company, by replacing the word ‘or’ with ‘and’ i.e. to ensure that company is a ‘small company’ and satisfies both conditions – prescribed paid share capital AND turnover (earlier, any one condition was required to be satisfied). Even, before the issue of this RoD Order, some senior professionals were of the firm opinion that both conditions were required to be satisfied. (2) It has introduced an exception to Section 186 of Companies Act, 2013 (relating to ‘Loans and Investments by Co.’). Not just one word is replaced, but a whole sentence is introduced, whereby some companies will be excluded from compliance of Section 186 w.r.t shares acquisition in ordinary course of business.

If the RoD Order (‘amendment introduced’) is read along with Section 186(11), then Section 186(11)(b)(iv) is: “Nothing contained in this section, except sub-section (1), shall apply to any acquisition made by a banking company or an insurance company or a housing finance company, making acquisition of securities in the ordinary course of its business.”

The RoD Order relating to Section 186 ought to have been drafted in following way: “Nothing contained in this section, except sub-section (1), shall apply to any acquisition of securities in the ordinary course of business by a banking company or an insurance company or a housing finance company.”

Firmly believe that removal of difficulty order needs to be renamed as “Multiplying the Difficulty Order”. 

The way things are going for Companies Act, 2013 – I really feel terrible for all the three professions – CS, CA, CWA. Were we all destined for so much confusion and ambiguity after years effort on Companies Act?? It’s really distressing to see professionals fighting on issues like applicability / implementation / procedural / interpretation. Also, we, as professional are not worried about the documentation involved in compliance; but we are worried about the ambiguity in complying in law due to absurd drafting. To top it all, the Amendment Bill, 2014 has virtually done nothing for the corporates at large. Let’s find procedure to bring back Companies Act, 1956. We don’t want small co. / CSR / Independent Directors / onerous Directors Responsibility Statement (which is actually an ‘affidavit’) / class action suits etc. We were happy before!