Date:22/01/2005 URL: http://www.thehindubusinessline.com/2005/01/22/stories/2005012200861000.htm

Back Minister not in favour of taxing industry for reviving sick firms

Our Bureau

New Delhi , Jan. 21

INDIA Inc seems to have found an ally in the Minister for State (Independent Charge) for Company Affairs, Mr Prem Chand Gupta.

Responding to the corporate sectors' demand to reconsider the proposal of levying cess on them for revival of sick units, the Minister said that he personally was not in favour of the cess on the industry.

Addressing the captains of Indian industry at a seminar organised by the PHD Chamber of Commerce and Industry (PHDCCI), the Minister promised to take up the matter with the Finance Minister, Mr P. Chidambaram.

"I personally feel why should a healthy company pay for an ailing one. We will see what can be done about this," he said.

Mr Gupta said he would highlight the issue when it comes up in the Cabinet.

The Concept Paper for a new Companies Act proposes to levy a cess of at least 0.005 per cent and up to 0.1 per cent of turnover or gross receipts of companies, to be credited to the Consolidated Fund of India. The proposal has received flak from the apex industry bodies.

Advocating for scrapping of the proposal, PHDCCI has said: "While there is no penalty for the failure of the management in a sick company, well-managed companies are proposed to be made liable to pay for the same. It amounts to a situation where the efficient companies are ultimately paying for the inefficient ones."

Regarding the existing penalty provisions, the Minister said the Government proposes stringent action against erring companies and the penalties must commensurate with the level of offence.

The Ministry was examining if legally a scheme could be introduced whereby a company pays penalty for its lapse and the Government would then withdraw the case against the company.

On yet another contentious issue of independent directors, Mr Gupta stated that it should be left to the stakeholders including the shareholders, financial institutions, government agencies and lenders of the company. The Ministry has an open mind on this issue and once the report of Expert Committee examining the recommendations to the Concept Paper is received, a view would be taken on this.

Responding to the issue of overlap between the Securities and Exchange Board of India and the Ministry, which administers the Companies Act, he said, it would be resolved soon.