Powerless Circulars

In an interesting read Pratik Datta point out working of MCA under the Companies Act 2013. Please read:

Within the Central Government, the administration of the Companies Act, 1956, had been entrusted with the MCA through the Government of India (Allocation of Business) Rules, 1961. Interestingly, these Rules have not yet been updated to include administration of Companies Act, 2013 under the purview of MCA.

 Section 642 allowed the MCA to only make rules, but such rules needed to be laid before each House of Parliament.

The Companies Act, 2013, gives MCA the power to make rules (s. 469) but does not specifically empower MCA to issue circulars.

 In many instances, the MCA argued that clarificatory issues can be addressed by draft clause 470 (removal of difficulty clause) which appeared in the Bill. The details can be found in the Standing Committee Report (2011-12).

The Supreme Court has time and again held thatwhat cannot be done directly, cannot be done indirectly. The MCA cannot directly notify an order. Such an order must be laid before the Parliament. But a circular, being beyond the scope of the Act, is not bound by any such constraints.

Note that this act on the part of MCA is not an `administrative decision’ in personam. It is a legislative act in rem.

For Full post is click here.


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