NEW DELHI, May 26: Finance Minister P Chidambaram on Monday said the surest way to make companies the engine of growth is by having stringent compliance and disclosure norms.

In his inaugural address at a national seminar on company law organised by the Confederation of Indian Industry (CII), Chidambaram said most companies fail to adhere to compliance and disclosure norms. Not only are the norms weak, the enforcer is also weak, ineffective and toothless, he said.

The finance minister said many attempts have been made to amend the Companies Act, last amended in 1956, but no attempts have been made to modernise it. ``The amendments were for exercising more control on the corporates,'' he said. This time, the effort has been to not only amend but also modernise the Act, he said.

The finance minister said of the total 4.60 lakh companies registered with the registrar of companies, about 88 % are private limited companies. About 40 % of the total companies have the privilege of not filing any income tax return, he said. ``So much for corporate governance,'' said Chidambaram, adding, ``the corporate sector is not in a postion to preach to others''.

``What is required is a mixture of statutory provisions and self-regulation. But one cannot be at the expense of the other,'' he added.

Chidambaram said the draft companies bill will be tabled in Parliament in July or August and Parliament will get six months to discuss the issue and pass the law.

``No part of the draft bill is unamendable but certain fundamentals must be kept in mind,'' he said. Firstly, the issue of degree of responsibility of companies private as well as public has to be addressed. ``The companies will have to undertake greater responsibility,'' he added.

Chidambaram said ways should also be found to enhance corporate democracy and its quality. ``There must be a code on corporate governance. Should the government impose this code or will companies impose it on their own ?'' he asked.

He said one comes across many cases where doctors or lawyers are punished for professional misconduct. ``But how many company secretaries or chartered accountants are punished for corporate misgovernance?'' he asked.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.