Hit by the Rs 7,000 crore corporate scandal in Satyam Computers, the Indian government has stated that it will come down heavily on erring companies.
Prem Chand Gupta , minister for corporate affairs, while replying to question raised by member of parliament Rajeev Chandrasekhar on Tuesday said that under the framework provided by the Companies Act of 1956, all companies are required to make statutory disclosures that reflect true and fair view of the state of affairs of the company.
He added that to facilitate such disclosures by companies and for easy viewing of the same by the stakeholders, general public and the regulatory authorities, the government has set up an electronic registry with round-the-clock access through internet. Legal action would be taken against companies which fail to adhere to this regulation.
The minister further added that this Act provides for appointment of independent, statutory auditors to audit the accounts of the company and report to the stakeholders. Such audited history would also be displayed at the electronic registry for viewing. While the reporting requirements are regulated under the Companies Act , 1956, the conduct of auditors are regulated by the Chartered Accountants Act of 1949.
In addition to the above, he said that the listed companies’ compliance with these statutory requirements is required to be certified by a company secretary in practice, who in turn is regulated by the Company Secretary Act , 1980. The minister also added that the Act also provides powers to the government to undertake inspectionôinvestigation of companies and for prosecution of false statements relating to the company in the prospectus, the final statement or otherwise.
He added that subject to approval by the Company Law Board, the government can also take action against mismanagement and oppression in companies by effecting changes in the management. The government and the various regulatory agencies take appropriate action under the Companies Act, 1956 and other laws, as warranted, to detect and deal with the cases of falsehood and corporate fraud, as the case may be, through the application of the existing statutory framework.