Double Removal of Difficulties Orders

In a rare gesture, Ministry of Corporate Affairs notified two orders for Removal of Difficulty on same date.  I have no legal understanding for the requirement of two separate orders, except little drafting hurdle of combined order for its statement of reason or preamble.

Now, we will discuss both orders here.

These removals of difficulty orders are issued as post facto correction to give legality to the issuance of the Companies (Auditor’s Report) Order, 2015 and the Companies (Indian Accounting Standards) Rules, 2015. This blog earlier raised some doubt about the Companies (Auditor’s Report) Order, 2015 earlier here:

This time these removals of difficult orders came at the time of issuance of the Companies (Auditor’s Report) Order, 2016, the Companies (Accounting Standards) Amendment Rules, 2016, and the Companies (Indian Accounting Standards) Amendment Rules, 2016.

The Companies (Removal of Difficulties) Order, 2016

The Companies (Removal of Difficulties) Order 2016 aims to provide legal backing to the Companies (Auditor’s Report) Order 2015.

Presently, Section 143(11) of the Companies Act, 2013 read as under:

The Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor’s report shall also include a statement on such matters as may be specified therein.

This order read as under:

In the Companies Act, 2013, in section 143, in sub-section (ii), the following proviso shall be inserted, namely:-

“Provided that until the National Financial Reporting Authority is constituted under section 132, the Central Government may hold consultation required under this sub-section with the Committee chaired by an officer of the rank of Joint Secretary or equivalent in the Ministry of Corporate Affairs and the Committee shall have the representatives from the Institute of Chartered Accountants of India and Industry Chambers and also special invitees from the National Advisory Committee on Accounting Standards and the office of the Comptroller and Auditor-General”.

In Companies (Removal of Difficulties) Order, 2016, please read sub – section as (11) not as (ii), which may have been mentioned as such due to typographical error.

This order shows increased power of Indian bureaucracy to hold implementation of law to its own benefit. I also see absence of representative from other ministry particularly ministry of finance as open ego issue in Indian bureaucracy.

The Companies (Removal of Difficulties) Order 2016 shall come into force from the 10th April, 2015 making it a post facto amendment. Now, the preamble of this order became tool for legal facts for court room. Following clauses in the preamble of this order are relevant to understand the legality of the Companies (Auditor’s Report) Order, 2015:

“And, whereas, the Central Government constituted a Committee chaired by the Joint Secretary or Regional Director, Ministry of Corporate Affairs and representatives from the Institute of Chartered Accountants of India and Industry Chambers and National Advisory Committee on Accounting Standards, Chairman and representative from the Office of the Comptroller and Auditor-General, as special invitees to hold consultation required under sub-section (11) of section 143 of the Companies Act, 2013;

And, whereas, the Central Government, on the basis of recommendations of the said Committee, has issued the Companies (Auditor’s Report) Order, 2015 on 10th April, 2015 for financial year 2015-16 vide notification number S.O.990 (E) dated the 10th April, 2015 published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) and proposes to issue similar Order to be applicable from the financial year 2015-16 onwards;”

The Companies (Removal of Difficulties) Second Order, 2016

The Companies (Removal of Difficulties) Second Order 2016 aims to provide legal backing to the Companies (Indian Accounting Standards) Rules, 2015.

Presently, Section 133 of the Companies Act, 2013 read as under:

The Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority.

This order read as under:

“In section 133 of the Companies Act, 2013 (herein after referred to as the said Act), the following proviso shall be inserted, namely:-

“Provided that until the National Financial Reporting Authority is constituted under section 132 of the Companies Act, 2013 (18 of 2013), the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of the recommendations made by National Advisory Committee on Accounting Standards constituted under section 210 A of the Companies Act, 1956”.

The Companies (Removal of Difficulties) Second Order 2016 shall come into force from the 1^st April, 2015 making it a post facto amendment. Now, the preamble of this order became tool for legal facts for court room. Following clauses in the preamble of this order are relevant to understand the legality of Companies (Indian Accounting Standards) Rules, 2015:

“And, whereas, sub-section (3C) of section 211 of the Companies Act, 1956 (1 of 1956) which corresponds to section 133 of the Companies Act, 2013 (18 of 2013) provides that the expression “accounting standards” means the standards of accounting recommended by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949 (38 of 1949), as may be prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards established under sub-section (1) of section 210A;

And, whereas, difficulties have arisen regarding compliance with the provisions of section 133 in so far as they relate to consultation with National Financial Reporting Authority till the period it is duly constituted under section 132 of the said Act;

And, whereas, on the basis of the recommendations of the National Advisory Committee on Accounting Standards, the Central Government issued the Companies (Indian Accounting Standards) Rules, 2015 with effect from 1st April, 2015 vide notification number G.S.R. 111(E) dated the 16th February, 2015 published in the Gazette in India, Extraordinary, Part-II, Section 3, Sub-section (i) dated the 19th February, 2015;”

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.