'Dilute penalty relating clauses in draft Companies Bill'

NEW DELHI: Industry body Assocham has asked the government to "drastically dilute" certain clauses in the draft Companies Bill 2004 to soften stiff penalties posed on corporates as it may harm the interest of the Indian industry.

"The clauses incorporated in the Chapter XXIV need to be drastically diluted... These clauses will facilitate the imposition of heavy penalties which can be disproportionate to the gravity of offences that the corporates might unintentionally commit during their transactions," an Assocham statement said here on Sunday.

Citing an example, the industry body said that Section 33 (6) prescribes imprisonment of two years and a fine of up to Rs 10 lakh if a corporate accepts public deposits in excess of limits and contravention of rules.

"Such a penalty would discourage public and private limited companies and erode their liquidity base," it said.

Similarly, another penalty in case a company fails to make repayment in accordance with the section of the rules to the parties concerned is a fine of Rs 10 lakh along with two years'' imprisonment.

The Chamber has also suggested that there should be one extensive regulation to help industry and the government go hand in hand.