Recently, PNB Scam erupted and the scamsters left India before the lookout notice by the Government. The enforcement agencies started engaging themselves in the removing dust and collecting the pile of files. Sadly, it’s bizarre repetition of earlier cases where fraudulents left the country after causing a huge financial loss to the public exchequer. The entire corporate melodrama is providing a concrete evidence of thriving vicious cycle to plunder India. In this backdrop, news media unearthed a letter from whistleblower Hari Prasad SV who alerted the Prime Minister’s Office (PMO) of possible PNB scam in 2016. Prasad received an acknowledgment letter from the PMO and he clearly mentioned that how the Registrar of Companies (RoCs) favoured one of the fraudulent in the case. It’s severe allegation which must not be ignored. It is evident that RoC’s role in suspicious in several other cases like Saradha and Sahara Case. As Times of India reported in 2014, the Enforcement Directorate(ED) questioned the RoC over the 160 bogus companies registered by Saradha boss Sudipta Sen. This case rocked the nation and political parties engaged in the mudslinging over massive financial irregularities. At this juncture, Impact News is illustrating the inefficiency of the system, the function of RoCs along with its objectives and design.
Registrar of Companies:
Unlike other government’s official website, if you’ll visit the site of the Registrar of Companies (RoCs), you’ll be confused. There is no considerable information on its site. It’s worthwhile to mention that RoC is an important body under the Ministry of Corporate Affairs. It deals with incorporation. If one is going to start an entity/ company in India, one has to be registered with the RoCs. It requires a set of authentic documents. According to the government sources, “RoC appointed under Section 609 of the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies and LLPs floated in the respective states and the Union Territories and ensuring that such companies and LLPs comply with statutory requirements under the Act.”
The Union Government exercises administrative control over the state-based offices through the respective regional directors. In a written reply to a question in Lok Sabha, P.P. Chaudhary, Minister of State for Corporate Affairs stated that Registrar of Companies removed names of 2,26,166 defunct companies in 2017. In a similar vein, the Government claims that it checked the menace of black money by striking-off more than 2 lakh shell companies from the Register of Companies.
The Company Act 1956 provided the legal framework for the RoCs. Since its inception, the Act has been amended more than 20 times. It was realised that the Act was insufficient to deal with new corporate challenges in the 2000s. Keeping this mind, the policymakers decided to replace the Act with intensifying privatisation. The New Company Act replaced the Company Act 1956 in 2013 while consolidating its number of provisions. In order to give a holistic picture, the state-wise distribution is enunciated in the following exhibit.
State wise List of RoCs
|ANDHRA PRADESH & TELANGANA||RoC Hyderabad|
|ASSAM , MEGHALAYA, MANIPURA, TRIPURA, MIZORAM, NAGALAND & ARUNACHAL PRADESH||RoC Shillong|
|BIHAR & JHARKHAND||RoC cum OL Patna & ROC Ranchi|
|CHATTISGARH||RoC cum OL Bilaspur|
|DELHI & HARYANA||RoC Delhi|
|GOA , DAMAN & DIU||RoC cum OL Goa(Panaji)
|JAMMU AND KASHMIR||RoC cum OL J&K
|MADHYA PRADESH||RoC Gwalior
|MAHARASHTRA||A: RoC Mumbai & B: RoC Pune
|PUNJAB , CHANDIGARH
|RoC Chandigarh & RoC cum OL Himachal Pradesh
|RAJASTHAN||RoC cum OL Jaipur
|TAMIL NADU||A: ROC Chennai & B: RoC Coimbatore
|UTTAR PRADESH & UTTARAKHAND
|RoC Kanpur & Nainital
Source: Ministry of Corporate Affairs
Classification of Companies in India:
The Company Act 1956 classified companies into two categories namely Public and Private Companies. With changing policy stance, a huge commercial opportunity erupted in the era of the post-liberalisation. A wide range of companies ventured into the Indian Market. They started operations in various sectors. A new breed of entrepreneurs emerged with fledgling ideas and they started their business smartly.
In tandem with growing corporate sector, there was a need for the law to take into account the requirement of various kinds of companies in India. The government adopted multiple classifications of companies after extensive deliberations, as elaborated in the Company Act 2013.
- Small Companies
- Private Companies
- One Person Company (OPC)
- Government Companies
- Producer Companies
- Joint Venture/Shareholders Agreements
- Public Financial Institutions (PFIs)
Many entrepreneurs and capitalists identified the loopholes and garnered the available financial opportunities. With help from various kinds of corporate tactics, they tried and still try to influence the institutions to bend the laws which are adequately documented. It intensified the competition where uneven policy arrangements gave imputes to thrive such forces which were not bothered by the enforcement agencies, law and legislation. Simultaneously, a section of people has emerged with disposable income.
Companies in India
|Companies Registered as on 30th November 2017
|Number of Closed Companies||536,505|
|Number of Companies Liquidated/Dissolved||10,464|
|Number of Companies Defunct/ Struck-off (Section 248 of CA, 2013)||494, 226|
|Number of Companies Amalgamated/Merged||20,143|
|Number of Companies Converted to LLP||6,879|
|Number of Companies Converted to LLP and dissolved||4,793|
|Number of Companies lying dormant u/s 455 of Companies Act, 2013||1,149|
|Number of Companies not having filed statutory annual filings consecutively for two years||3|
|Number of Companies under Liquidation||5,958|
|Number of Companies which are under the process of Section 248 of the Companies Act, 2013||31, 633|
|Number of Companies lying AIPG (Active in Progress)||112|
|Number of Active companies||1,136,446|
|Companies Limited by Shares||1,128,637|
|Companies Limited by Guarantees||7,367|
Source: Press Information Bureau (PIB)
The Company Act governs the creation, continuation, the winding up of companies and also the relationships between the shareholders, the company, the public and the government. It was an extremely important piece of legislation in India. The Act gave a lot of responsibility to the Registrar which were elaborated in the Act. According to the government reckoning, the total number of companies registered in the country as on 30th November 2017.
The RoCs play in an important since the incorporation of companies. With increasing focus on initiatives like Make in India and Start-up India, its integrity must be restored to the changing corporate culture. With growing fraudulent practices where the entrepreneurs, financial institutions, and the government are aligned, the more stringent regime of corporate governance is needed otherwise such recurring financial irregularities tarnish the image of New India which is envisioned by Prime Minister Narendra Modi.