MRTP Act may be reviewed soon

MUMBAI, February 5: Monopolies & Restrictive Trade Practices Act (MRTPA) and a couple of other laws will be reviewed shortly after th...

MUMBAI, February 5: Monopolies & Restrictive Trade Practices Act (MRTPA) and a couple of other laws will be reviewed shortly after the enactment of the Companies (Amendment) Ordinance, 1999. The proposals to give more teeth to the Company Law Tribunal will also be taken up, Krishnamurthy said on Friday.

Even some of the amendments proposed in the Companies Act, 1956, may be reviewed later if the situation so warrants, Krishnamurthy said at an interactive session with the city-based industrialists, which was organised by the Indian Chamber of Commerce (ICC) here.

Krishnamurthy told ICC members that there has been no serious criticism of the proposed amendments to the Companies Act, 1956. "At the back of our minds we want to protect the common investor," he said.

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In reply to a question from noted chartered accountant P Narielvala, Krishnamurthy said the Indian investor is "gullible and ill-informed". The rationale behind the framing of these amendments is to protect him.

The confidence of the investoris at the lowest ebb because of vanishing of companies, he said and added that the Union government would not allow companies to take investors for a ride.

Krishnamurthy agreed with the ICC members that generalisations should not be made by imposing blanket restrictions on industry. However, he pointed out that although 70 per cent of the companies are complying with the norms, the rest — a significant 30 per cent — has "flagrantly misused" the provisions, which is unfair to the shareholders.

He dismissed claims by ICC members that the restriction of the debt-equity ratio at 2:1 is unfair after a buyback is made. "Our main concern is that growth should not open the gateway to disaster," he said.

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On the issue of capping of loans and advances to subsidiaries under the newly incorporated Section 372A of the Companies Act, he said this has been proposed to stop fund diversion.

He felt the proposed buyback of shares — a new phenomenon to Indian corporates — is not intended for use by all companies. Henoted that after the announcement of buyback numerous companies opted for it without understanding its implications.

In fact, about 40 per cent of the mergers and acquisitions made by various companies have not been successful.