MODI AND POLL PROMISES:
The Manifesto of BJP in 2014 general election was aimed to give direction to the all-round progress of the country.
Modi’s excellent oratory skills was successful in sending a clear message to the people that they shall vote for change for salvation of the country.
The slogan ‘Achche din aayenge’ created euphoria and enthusiasm in the youth.
Development and good governance shall encompass all strata of people- he pledged.
The focal point of all speeches of Modi used to be an oath to rage a war against corruption and black money.
THE PRIME MINISTER MODI:
In a highly charged atmosphere, buoyed by thumping victory, Mr. Narendra Modi took the oath as the Prime Minister of India on 26th May 2014.
All his moves from the first day was closely monitored and reported as expectations were running very high.
The nation which had come to a standstill during the previous regime, started moving ahead.
During 2014-2018 period of governance, many major policies changes and strong actions took place.
Mr. Modi had been very categorical and vocal about his fight against corruption and black money. Tackling them had been his first priority.
Divya Gupta (Market Analyst, MUDS Management Pvt. Ltd)
CRACKING THE WHIP ON CORRUPT AND FRAUD:
Mr. Modi while addressing the people of India on live television on 8th November 2016, announced the demonetization of high currency notes of 500 & 1000 denomination.
The Govt. wanted to-
- To convey a strong message
- To flush out black money from the system
- To limit the cash circulation
- To remove fake currency
- To eliminate dodgy funds
- To identify shell companies
In furtherance to this act, the govt. and its various agencies started collecting and collating data on rogue companies in full earnestness.
These efforts of the MCA led to unearthing more than 2 lakh companies which were defaulters, dormant/non-functional, hibernating or shell.
Thus, in mid-2017, another stringent action in the form of deregistering 2.2 lakh companies and removal of over 3 lakh directors was announced.
The reasons for this action was-
- To restrict black money flow: to counter shadow economy, which is a hurdle in development of the nation.
- To identify dormant, fraudulent, shell, fake companies and then bar them from the space.
- To ensure compliance and due-diligence by the Companies and their Directors.
- To penalize those who did huge transactions during Demonetization.
- To prove to the people its sincere efforts to improve the image of the country globally.
- To convey the ease of doing business- straight and fair.
- To prioritize ethical working.
CONSEQUENCES OF STRIKE-OFF:
- The companies were de-registered, and their Directors disqualified from the date of the concerned Notice, creating insurmountable problems.
- All disqualified Directors were barred for 5 years from the date of issuance of the Notice.
- The removal of Directors impacted other companies as they were removed from the Board of Directors of those companies too.
- All bank accounts were frozen.
- Fines and penalties were imposed on the company as well as the disqualified Directors as per the provisions in the Companies Act, 2013.
- The dues and liabilities continued to be in the company’s and its directors name, thus multiplying the trouble.
- In addition to these, restriction had put on transfer and sale of movable and immovable properties of such companies.
- The state govts. were alerted and requested to ensure that registration of such properties shall not be done.
THE AFTERMATH AND REACTIONS:
- The stern action elicited a positive response from the people at large. The public perception of the govt’s image improved.
- Govt. touted it as a victory claiming to have unearthed huge amount of black money.
- The international image of the country improved impacting the sentiments of the foreign investors positively.
- Media applauded and gave good coverage stating it was a bold move in the right direction.
- It sounded a warning bell for all.
- A shockwave spread in the Industry and lot of hue and cry was made. The affected companies and disqualified Directors cried foul as they claimed they were not served any notice and hence, no chance to explain their stand.
- The Directors, who were not full-time directors, showed their grievance towards such harsh treatment.
- The removal of Directors impacted other companies also which were doing legitimate businesses. In this way it had a far reaching negative effect.
- The Industry came out in full support of the struck companies and disqualified Directors and put pressure on the Govt. to work out a solution for revival of struck off companies and removal of Directors disqualification
- The demand of the companies at large was for the govt. to work out a course of action through which genuine businesses may get reprieve at the earliest.
THE PROCESS OF STRIKE-OFF:
STEP1#: Rule 3(2) specified that the RoC (Registrar of Companies) sent a Notice of proposed action of strike-off stating the reason in it (if a company was non-operative for long time).
The Notice was sent to the Company and all its Directors by Registered post.
The company had 30 days’ time to represent their stand.
STEP 2#: Under section 248(1), Rule 7, the RoC had sent a pre-strike off Notice, form STK-5.
It was sent to the Company and all its Directors.
As per section 248(4) it shall also be put on official gazette.
Shall be put on the MCA website as well.
Shall be published in Newspaper- once in English daily and second time in a vernacular daily.
The Roc was required to inform the concerned regulatory and tax authorities.
A 30-day period was granted for objections, if any.
STEP 3#: After expiry of thirty days, Roc shall once again put the Notice in official gazette, under section 248(5), Rule 9, Form STK-7.
This strike-off notice shall be on the MCA website as well.
STEP 4#: After this, the company can be officially dissolved.
SEEKING RELIEF: THE PROVISIONS AVAILABLE
ü Can appeal to The Tribunal u/s 252(3) of the Companies Act 2013.
ü Apply to The National Company Law Tribunal, under rule 27(A), 2017.
The legal option of filing a Writ Petition in the concerned court was always open. In fact, the mass removal of Directors had seen a spate of petitions in various courts seeking immediate relief.
In the wake of this stern action, a great uproar was created by the industry. The pressure was created to provide a quick solution to this mammoth problem. Thus, the Central Govt. took a step utilizing its powers under sections 403, 459 and 460 and introduced the Condonation of Delay scheme (CODS), 2018.
The best and easiest way out was applying for Condonation of Delay,2018.
The realization by the govt. about lack of awareness and misinterpretation of the provisions of Companies Act, 2013, led to the introduction of CODS,2018.
Isha Malik (Company Secretary, MUDS Management Pvt Ltd)
BENEFITS OF CODS,2018:
1#: It came as a much-needed relief for those impacted.
2#: The scheme was seen as an instant relief for the disqualified Directors for immediate restoration of DIN (although temporarily).
3#: The companies applauded this scheme as it gave a window of opportunity to rectify their fault.
4#: The industry viewed this as a justified act by the Govt.
5#: The scheme through its circulars spread awareness about the Companies laws and provisions.
6#: The provisions of the scheme had kept straight and simple; sending a strong message that the govt. did not want to harass the genuine businesses.
7#: The Directors were jolted to the core; now they understand that their role as a guardian and guide was pivotal for the company’s progress.
8#: If not for the timely announcement of the scheme, there were a flood of writ petitions in all the courts of India.
ACTIONPLAN POST MID 2018:
GOVT’S ACTION PLAN: The govt. and its agencies were working relentlessly towards continuing with the cleaning up act.
PLAN #1: A Special Task Force(STF) had been constituted by the Prime Minister’s Office, with joint Chairmanship of Secretary, Revenue and Secretary, Corporate Affairs. Along with other agencies, this Task Force was enforced action against erring companies.
PLAN #2: The Serious Fraud Investigation Office (SFIO) was empowered to such criminal offences and can even arrest the guilty.
PLAN #3: A National Financial Reporting Authority(NFRA), an independent body was set-up to keep tab on financial statements and accounts of companies.
PLAN #4: Another initiative which was by mid 2018 was underway was development of a state-of-the-art software application which had a feature of ‘Early Warning System’(EWS).
PLAN #5: All the ambiguities in the Companies law were dealt with and there were clear cut provisions and penalties for every default.
PLAN #6: Some Directors were working in as many as 20 companies that goes to show they had mala fide intentions, a strict criminality procedure was started against them.
PLAN #7: ‘Dummy Directors’ was another major concern for the govt. To counter this menace, the MCA had plans to seed DIN with PAN and Aadhaar at the time of application for DIN.
These steps lead us to a conclusive evidence that Modi Govt. kept the heat on and tried to fulfill its poll promise.
BETTER TO BE SAFE THAN SORRY: COMPANIES
The writing on the wall was quite clear; companies either mend their ways or perish. The Industries image as a whole suffers when negative news of such huge proportions come to limelight. The sheer number of defaulters was an evidence that something was amiss in the Industry.
To overcome such situations in the future:
1#: The Companies need to treat the rule book like the Bible.
#2: Ethical and straightforward approach will keep them safe.
#3: Self-regulation shall be implemented in full sincerity.
#4: Accounts and fund flows shall have transparency and clarity.
#5: Due diligence and compliance shall be ensured at all times.
#6: Directors shall be conversant with the rules, laws and amendments of the Companies Act.
#7: Directors shall take up the role of custodian and guardian in full earnestness.
#8: Checks and balances shall be in place so as to red flag any irregularity well on time.
#9: Management shall be able to take preemptive measures, overcome and solve all problems as and when they arise.
THE BEGINNING NOT THE END:
Once Mr. Modi in an interview stated that all the steps taken by his govt. shall be treated as ‘the beginning and not the end’ hinting that things shall go forward as planned. The four years of Modi rule cannot be termed as ‘stunningly bright’ as was initially expected, but it can surely be called ‘sunny’ with some ‘clouds’ here and there. Therefore, it’s very understandable that the opposition called ‘Demonetization’ as the biggest mistake of Modi’s govt. that crippled the economy.
The debates did continue as the next General Election nears, but one thing was very obvious that India made substantial progress in between 2014-2018. The development and progress might not have touched all fields as was expected, but then fulfilling all expectations shall be a miracle; which rarely happens.
The govt. had a vision, an aspiration to achieve it, so slowly but surely, we are climbing the ladder. In this journey everyone needs to contribute their bit; the big businesses, the small traders, the poor farmer, the educated professional, the young and the old alike.
With the actions of the govt. on errant and rogue companies the space has opened up for genuine players; giving hopes of a better future.
Shweta Gupta (Founder and CEO, MUDS)
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