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Saturday, April 27, 2013

Retrospective cloud over investor bill Drafting challenge poses risks

Retrospective cloud over investor bill 
Drafting challenge poses risks

Calcutta, April 26: Mamata Banerjee's attempts to bring to book the Saradha Group for running sham deposit companies with a new bill can face a legal challenge as the government has apparently decided to implement the law with retrospective effect.

Experts said the government could have easily avoided getting enmeshed in legal tangles had it taken the initiative to get presidential nod for the West Bengal Protection of Interests of Depositors in Financial Institutions Bill, 2009, which was passed in the Assembly by the erstwhile Left Front government.

Mamata, who has been insisting on a new bill with more teeth, dropped hints about what the government planned to do.

"We will confiscate the properties of those who have left the common people in real trouble. Through this process (bringing in the new bill), we will be able to return money," the chief minister said at Town Hall after a review meeting with ministers, secretaries of various departments and district magistrates.

Government officials said Mamata had hinted at giving retrospective effect to the new bill to fulfil her commitment to the depositors cheated by the Saradha Group.

The bill, to be circulated in the House on Saturday, will come up for discussions on Tuesday during a special Assembly session.

Senior state government officials told The Telegraph that the new bill, drafted last night, would allow the state to "seize, search and confiscate" properties of sham deposit companies.

"There are provisions to get the bill passed, but it has to be drafted properly. Otherwise, it will face a legal challenge," a lawyer said.

The bill, which will include penal provisions against the owners of deposit mobilising companies if they default, could face another problem.

Legal experts said the new bill, which the chief minister said governor M.K. Narayanan approved this afternoon, could be challenged in court as "an activity cannot be made cognisable retrospectively".

Former Speaker Hashim Abdul Halim said: "For a crime committed two years ago, punishment cannot be given by bringing in a new legislation with retrospective effect."

Senior Calcutta High Court lawyer Bikash Ranjan Bhattacharyya said such a bill could be challenged in court. "The government cannot give retrospective effect to all laws. While dealing with criminal laws, retrospective effect cannot be given. If somebody feels his rights were infringed, he can move court against such a bill," he said.

A senior lawyer on the state panel, however, differed with Bhattacharyya. "The government can give retrospective effect to any law as long as there is no specific court order on the issue," he said.

The state government could have avoided these possible legal hassles by first getting the President's nod for the 2009 bill and then making amendments to incorporate its preferred clauses.

The Opposition Left and Congress made such a demand during an all-party meeting held today at Speaker Biman Banerjee's chamber in the Assembly.

"Since the (old) bill was passed by the Assembly in 2009, the provisions would have been valid from the day it was passed and there would have been be no need for a retrospective effect," a senior government official said.

At the Town Hall meeting, Mamata asked the district magistrates to keep a watch on "chit funds" operating in the towns and villages.

The chief minister has announced a Rs 500-crore relief fund for depositors cheated by the Saradha Group. Today, she demanded that the Centre, too, provide financial assistance to the depositors as Sebi and the Reserve Bank of India, which monitor such companies, are under the central government.

Centre probe

The Centre has asked the Serious Fraud Investigation Office (SFIO) to appoint inspectors to probe the operations of 49 Bengal-based companies, including several owned by the Saradha Group and Rose Valley.

The companies, spread across four groups, have allegedly raised huge sums of money from the public. The registrar of companies in Bengal had forwarded complaints against the 49 firms.

The Union ministry of corporate affairs, under which the SFIO works, wants these companies — among them 13 owned by Sharada and 18 by Rose Valley — to be inspected under Section 235 of the Companies Act, 1956.

The section allows inspectors appointed by the government to conduct forensic audit of companies facing allegations of wrongdoing.

Market regulator Sebi has received complaints against the 49 companies. But they managed to evade action by not submitting records sought or furnishing wrong papers or by obtaining stay from courts.

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