The Union Cabinet yesterday approved buyback of shares, fresh amendments to inter-corporate investment norms, creation of an investor protection fund and new accounting standards.
The Cabinet also accepted the finance ministry's viewpoint and rejected the proposal to grant quasi-judicial powers to the Department of Company Affairs (DCA). It also allowed issue of sweat equity to boost venture capital enterprises in all sectors, against the initial proposal to restrict the issue of sweat equity to the software sector.
The amendments to the inter-corporate investment norms would imply the deletion of Sections 370 and 372 of the Companies Act, which restrict inter-corporate investments to 30 per cent of net worth.
Government officials said an ordinance to amend the Companies Act, 1956, will be sent to the President for clearance today. The Bill incorporating the amendments will be introduced in the winter session of Parliament, slated to begin on November 30.
Officials also revealed that the proposal to allow foreign investment in insurance and amendment to the Urban Land Ceiling Regulation Act was not on the agenda of the cabinet. "The matter would be taken up very soon by the cabinet," they added.
They explained that the plan to create a Cabinet committee on disinvestment was at the proposal stage. A final decision on it was possible only after another meeting of the group of ministers on disinvestment, they added.
A government spokesperson later said the modalities of implementing the decision on allowing companies to buy back their shares would be worked out and issued by the Securities and Exchange Board of India.
The decision to allow share buyback follows an announcement to this effect by Prime Minister Atal Behari Vajpayee at a function of the Federation of Indian Chambers of Commerce and Industry on Saturday.
The Cabinet also approved the Notaries (amendment) Bill 1997 which seeks to rationalisethe procedure for renewal of certificate of practise and to empower notaries to act as protem judge or magistrate in the absence of a sitting judge or magistrate on being directed by the court.
The Bill, which will be introduced in Parliament in the winter session, also seeks to empower notaries to act as a commissioner to record evidence in any civil or criminal trail or act as arbitrator, mediator or councillor on being directed by the court.
The planned investor protection fund is proposed to be created by earmarking part of the turnover fees collected by brokers. The initial seed capital (estimated at between Rs 200 crore and Rs 500 crore) will be provided by the government.
Company law experts said the move to remove the ceiling on inter-corporate investments would benefit cash-rich group companies in funding infrastructure ventures. "Cash surpluses can be transferred through these investments to infrastructure ventures, which are starved of bank funds at the moment," they said.
The government had earlier decided to withdraw the draft Companies Bill 1997, which contained the buyback provision, and had asked the DCA to work on an alternative short bill, also with the buyback facility, to be introduced in the winter session.
The DCA circulated the draft Cabinet note on buyback and other provisions in July 1998 to obtain suggestions of other ministries.
In the draft note, Union minister for law, justice and company affairs M Thambidurai had made prior DCA approval mandatory for buyback, which was objected to by the finance ministry. The Prime Minister's Office, however, spiked Thambidurai's proposal.
The government also restricted exports of potatoes in all forms till December 31 to check rising prices and ensure adequate availability in the domestic market. The government had earlier restricted export of onions by Nafed, the sole canalising agency, by two months.
The Cabinet also decided to enhance the pension benefits of government employees who retired before the implementation of th ly pension, the enhancement will be 30 per cent of the minimum of revised pay.
The Cabinet also approved a proposal by the Union ministry of human resource development to extend the revised pay scales of university and college teachers with effect from January 1,1996.
