Page 15 - DCOM106_COMPANY_LAW

Company Law

Notes

Case Study Companies under politics

he Enron Development Corporation of USA, which is one of the largest integrated
natural gas companies in the world, started construction in Maharashtra, in April
T1995, on the 695, MW gas fired plant. But the new government of Maharashtra - the
Shiv Sena - BJP combine ordered a review of the project. The BJP had opposed the deal on
various counts when it was being struck between Enron and then the government of
Maharashtra headed by Congress party. Some of the counts on which the project was
criticised were: (i) the social and environmental aspects of the project, (ii) the alleged
bribes paid by Enron, (iii) the high cost of the project, (iv) the lack of transparency, and
(v) the absence of competitive bidding. The Congress leaders alleged that cancelling the
project was a politically-motivated decision. Also, it is pertinent to refer to the ruling by
the Bombay High Court in 1994, when it threw out a petition filed against the project by
one of the leaders of BJP. In a strongly worded verdict the court had said, “The proposal
was deliberated at length for two and a half years, draft agreements were prepared from
time to time, and it was ultimately the eighth or ninth draft which was finalised. Nothing
was done secretly. There was total transparency at every stage of negotiation. There is
nothing to show that anybody was being favoured for any specific reason.”
Also the Government of India had taken a series of decisions concerning inviting private
sector participation in the power sector and announcing a list of incentives. Firstly, the
first few private sector projects were to be given the status of pioneer projects what later
came to be known as “fast track” ones, and were to be given every facility by the government.
Secondly, for the first few projects, the government would not go in for public tendering.
Naturally, Enron cannot be blamed for government policies.

Question
Describe various reasons behind the increment in cost of Enron plant in Maharashtra.
(Hint: Due to the political reasons)

Self Assessment

State whether the following statements are true or false:

12. SEBI is a regulatory body to regulate the functioning of stock exchanges.
13. Courts have been replaced by Company Law Board under the Companies Act, 1956.
14. The administration of the Companies Act, 1956 is vested in the Company Law Board.
15. Any person aggrieved by the decision or order of the Company Law Board may file an
appeal in the Supreme Court.
16. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any
matter which the Company Law Board is empowered to determine.

1.4 Summary

The Companies Act, 1956, has been in force for the last 55 years.
The Act confers a variety of powers on the Central Government and the Company Law
Board to monitor, regulate and control the affairs of the companies.

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