Courts, probe agencies can’t proceed against DFI board sans prior govt approval – The Financial Express

Clipped from: https://www.financialexpress.com/industry/courts-probe-agencies-cant-proceed-against-dfi-board-sans-prior-govt-approval/2218082/

The NaBFID Bill tabled by finance minister Nirmala Sitharaman in Parliament on Monday makes it incumbent on courts get prior approval of the central government before taking congizance of an offence alleged to have been committed by the chairperson and other board members of the body corporate.

In the case of NABFID’s other officers are employees, the courts will have to wait for the approval of its managing director.

The professional board as well as officers and employees of the proposed National Bank for Financing Infrastructure and Development (NaBFID) will enjoy a great degree of protection from judicial actions as well as probes and prosecutions by the likes of the Police, CBI, SFIO and Enforcement Directorate, in so far as these pertain to their professional recommendations and financial decisions. The idea is to ensure that bona fide decisions taken in good faith are insulated from the tentacles of the agencies.

The NaBFID Bill tabled by finance minister Nirmala Sitharaman in Parliament on Monday makes it incumbent on courts get prior approval of the central government before taking congizance of an offence alleged to have been committed by the chairperson and other board members of the body corporate. In the case of NABFID’s other officers are employees, the courts will have to wait for the approval of its managing director.

Similarly, the assorted investigation agencies – the Bill names the aforesaid agencies but keeps it open-ended to potentially include others like CVC and CAG – will have to obtain prior approval of the central government before proceeding against the chairperson and other board members of the institution, including the managing director. In the case of other officers and employess, no action is possible by them without the approval of the managing director.

Furthermore, even though the Centre or the NABFID MD, as the case may be, are required to convey their decisions to the probe agency/court within three months from being intimated by the agencies of their intent to start probe or prosecution against the personnel of the body corporate, failure to do so won’t be considered as deemed approval for the initiation of prosecution.

Of course, no such prior “approval shall be necessary for cases involving arrest of a person on the spot on the charge of accepting or attempting to accept any undue advantage for himself (the director/officer concerned) or for any other person”.

NaBFID, a development financial institution, is designed to develop long-term non-recourse infrastructure financing in the country, and as means to this, also bolster the domestic bonds and derivatives markets. Its mandate to create an enabling eco-system to draw patient capital, besides funding long-term infrastructure projects.

An audit committee approved by the RBI will oversee the board and its functions. Apart from the chairperson and the MD, NaBFID will have a board consisting of not more than three deputy MDs and a wide array of professionals on its roll.

The government expects the DFI to raise as much as `3 lakh crore over the next few years, leveraging the proposed initial capital of `20,000 crore. Initially, the government will fully own the DFI but, as more investors join in, it is willing to dilute its equity to 26%.

Its chairman is likely to be an eminent professional and at least half of the board will comprise non-official directors. Its board (and not the government) will have powers to even remove whole-time directors.

Two directors will be nominated by the Centre, not more than three directors be elected by shareholders and not more than three independent directors or one-third of the total number of directors, whichever is higher, be appointed by the Board.

The chairperson and directors will be appointed for 5 years and eligible for reappointment subject to overall term of 10 years.

The government will give a grant of `5,000 crore to the institution in the first year. The corpus will be used to refund taxes to subscribers of bonds issued by the DFI and to help it meet costs of hedging or commission if it raises funds from overseas, among others. Also, the Reserve Bank of India will take a call on allowing the DFI to issue bonds that would qualify for SLR (statutory liquidity ratio) investment by banks, said one of the sources. Any such move will make the DFI bonds very attractive.

To ensure that the DFI has truly a professional board (with about a dozen members), the government will have only two nominees and at least half directors will be independent ones.

In a major legislative step that could allow bankers and public servants to unburden themselves of the fear of the four Cs — courts, CBI, CVC and CAG — as they take bona fide decisions in good faith, Parliament had approved a clutch of amendments to the three-decade-old Prevention of Corruption Act in August 2018. The law which dates to the pre-liberalisation era had put officials at the risk of being charged with corruption, possibly overlooking their bona fide intent.

The NaBFID Bill provides for the authorised share capital of the institution to be `1 lakh crore divided into ten thousand crores of fully paid-up shares of ten rupees each. It further provides that shares of the institution may be held only by the central government, multilateral institutions, sovereign wealth funds, pension funds, insurers, financial institutions, banks, etc.

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