A parliamentary panel has recommended that the ministry of corporate affairs (MCA) define the concept of private placement in the proposed Companies Bill.

The ministry has refrained from defining the term as it believes that the concept of public offer is already provided for in the law. However, in wake of the Sahara Group case, wherein two Sahara Group firms allegedly raised funds from the public through OFCD scheme without conforming to prudent disclosure and other investor protection norms, the recommendations holds ground.

After Sebi’s finding in November last year that two Sahara Group companies had violated norms, the Securities Appellate Tribunal had on October 18 asked the firms to return the money to investors within six weeks. The entities had raised nearly Rs 24,029 crore through the scheme.

The Group contested Sebi’s authority to look into the issue in the Supreme Court arguing that it was a privately held company and not a public one. Therefore, it was under the jurisdiction of the ministry of corporate affairs.

“The committee would recommend that as the Bill seeks to regulate a new and widely adopted method of raising capital, it would be fair and useful that private placement is properly defined in the statute,” the panel has said in its report which is yet to be submitted to the speaker.

With the standing committee adopting the Bill, it is set to be tabled in Parliament during the monsoon session. The ministry is likely to agree to most of the recommendations, sources said.

The House panel has also suggested the rate of interest on inter-corporate loans be linked to the yield on government-dated securities instead of bank rate. The panel has argued that when bank rate was prescribed as a benchmark for inter-corporate loans, it was the major policy rate at that time and market-related benchmarks had not stabilised then. Now, the panel said, G-sec market is well developed with enough liquidity so it can easily replace the bank rate. (Indian Express)