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Anil C

"Substantially Financed....Private Limited Company

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Anil C

Greetings To All

 

1. Can the private limited company example given bellow called a "Substantially Financed" Non Government Organization.

 

As an Example I quote the information.

 

Company Name: XXXX XXXX India Pvt LTD

Company Category: Company Limited By Shares

Class Of Company: Private

Authorized Capital: 50cr (what the promoters can bring in from their sources or share holders)

Paid Up Capital: 27cr (what the promoters have bought in)

Charges Raised: 149cr (Loans raised by the company, point to note, all lenders are nationalized bank's, all loans raised in year 2012)

 

Below i quote few orders I have found on this site.

It seems I am missing something.

 

Non-Government organizations under

the Right to Information Act

and

the Central Information Commission's 28.5.2007

DECISION NOTICE

- Srinivas Madhav

Background

The Right to Information Act 2005,section 2(h)(d)(ii) defines "public authority":

"public authority" means any authority or body or institution of self- government

established or constituted—

(a) by or under the Constitution;

(b) by any other law made by Parliament;

© by any other law made by State Legislature;

(d) by notification issued or order made by the appropriate Government, and

includes any—

(i) body owned, controlled or substantially financed;

(ii) non-Government organization substantially financed, directly or indirectly

by funds provided by the appropriate Government;

The Act does not define the phrase 'substantially financed'. For the last two years

There was no guidance from any quarter on this issue. As there was no clarity,

many non-Government organizations( N.G.O.s) ignored their obligations under

the Act.

Second Administrative Reforms Commission

Second Administrative Reforms Commission(Government of India) in its first

report,' RIGHT TO INFORMATION Master Key to Good Governance' (Para

6.6.5) attempted to address this issue:

"In the wake of outsourcing of functions which traditionally were performed by

government agencies, it is desirable that institutions that enjoy a natural

monopoly, or whose functions impinge on citizens’ lives substantially, must come

under the provisions of the RTI Act. Also it may be desirable to define what

‘substantially financed’ would mean, otherwise different authorities may interpret

this in different ways."

It made the following recommendations (Para 6.6.6):

• Organizations which perform functions of a public nature that are

ordinarily performed by government or its agencies, and those which

enjoy natural monopoly may be brought within the purview of the Act.

• Norms should be laid down that any institution or body that has received

50% of its annual operating costs, or a sum equal to or greater than Rs.1

crore during any of the preceding 3 years should be understood to have

obtained ‘substantial funding’ from the government for the period and

purpose of such funding.

• Any information which, if it were held by the government, would be

subject to disclosure under the law, must remain subject to such

disclosure even when it is transferred to a non-government body or

institution.

• This could be achieved by way of removal of difficulties under section 30

of the Act.

Goa SIC Decision

Goa SIC made the following Decision on 22 June,2006 stating that there was no

need of any government notification:

"NGO's substantially financed by the appropriate Government are covered even

if no specific notification is issued by the appropriate Government. There is no

need of separate notification or order listing all NGOs to be covered under the

Act. s.2(h)(d) mentions two separate categories, one of which is notified the

Government and others which are mentioned in the inclusive definition. Both the

categories are separated by a comma and the conjunction "and"."

[Goa SIC Decision dt. -22 June,2006]

Central Information Commission's 28.5.2007 DECISION NOTICE

In a complaint, Pradeep Gupta has requested CIC as follows:

“It is brought to your kind notice that there is a society named

“Servants of the People Society” … are receiving and

spending Government money but still they do not have Public

Information Officer. Please look into the matter and please arrange

to ensure the conformity.”

[Decision dt.28.5.2007 and 1.5.2007 in Complaint No.CIC/WB/C/2006/00157

(Complainant - Pradeep Gupta and Respondent - Servants of the People

Society)]

CIC directed the Assistant Registrar to visit the Servants of the Peoples Society

and enquire into the matter. A report has been received from Astt. Registrar after

his enquiry … in which he has given details of the gross receipts of the Society…

Pradeep Gupta, complainant, argued that the Society falls under the

definition of public authority since it receives ‘Substantial Finance’ as defined in

Chapter IX Grants in Aids and Loans of General Financial Rules, 2005, Govt. of

India, Ministry of Finance, Department of Expenditure. Therefore, he claimed that

the accounts of the Society were audited by the Comptroller & Auditor General.

"Mrs. Mamta Kundra, Principal Director and CPIO of the C&AG in her letter

of 18-5-07 has presented details of prescribed duties and powers of CAG in

relation to audit of accounts of Union/State/autonomous

body/Corporations/Government companies.

Sections 14, 15 and 20 of the Act [THE COMPTROLLER AND AUDITORGENERAL'S

(DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT,

1971]deal specifically with audit of accounts of autonomous bodies provided the

Government meets 75% of the expenditure or a minimum of Rs.25.00 lakhs.

On the question of whether an organization/Institute is auditable or not,

Section 14 (1) of the CAG’s Act 1971 refers:

[Audit of receipts and expenditure of bodies or authorities substantially financed

from Union or State Revenues]

Where any body or authority is substantially financed by grants or loans from the

Consolidated Fund of India or of any State or of any Union territory having a

Legislative Assembly, the Comptroller and Auditor-General shall, subject to the

provisions of any law for the time being in, force applicable to the body or

authority, as the case may be, audit all receipts and expenditure of that body or

authority and to report on the receipts and expenditure audited by him.

Explanation: Where the grant or loan to a body or authority from the

Consolidated Fund of India or of any State or of any Union territory having a

Legislative Assembly in a financial year is not less than rupees twenty-five lakhs

and the amount of such grant or loan is not less than seventy-five percent of the

total expenditure of that body or authority, such body or authority shall be,

deemed, for the purposes of this sub-section, to be substantially financed by

such grants or loans as the case may be

Factors for deciding whether the NGO is eligible for audit by the CAG

CIC held that the NGO-which is eligible for audit by CAG - is indeed a public

authority because it is substantially financed by Government and will, therefore,

fall within the definition of public authority under Section 2 (h) (d) (ii).

Section 14 (2) of the CAG’s Act 1971

THE COMPTROLLER AND AUDITOR-GENERAL'S (DUTIES, POWERS AND

CONDITIONS OF SERVICE) ACT, 1971 states:

Notwithstanding anything contained in sub-section (1) the Comptroller and

Auditor-General may with the previous approval of the President or the Governor

of a State or the Administrator of a Union territory having a Legislative Assembly,

as the case may be, audit all receipts and expenditure of any body or authority

where the grants or loans to such body or authority from the Consolidated Fund

of India or of any State or of any Union territory having a Legislative Assembly,

as the case may be in a financial year is not less than rupees one crore.

Hence,an N.G.O. is a public authority under the RTI Act if :

grant or loan from the Consolidated Fund of India or of any State or of any Union

territory having a Legislative Assembly in a financial year

• is not less than rupees one crore OR

• is not less than rupees twenty-five lakhs and the amount of such grant or

loan is not less than seventy-five percent of the total expenditure of that

body or authority,

It is immaterial whether CAG actually audits the accounts of NGO or not. It is

sufficient if it is eligible for audit by CAG.

The issue of funding of NGOs and the aspect of external audit came up for

discussion at the biennial conference of the States Accountants General held in

the capital[2005]. There have been demands that NGOs getting Government

grants should come under statutory audit and that the books of accounts of such

voluntary organisations should be completely opened up to CAG audit. The Lok

Sabha Speaker, Mr Somnath Chatterjee, too had supported CAG audit for those

NGOs that receive Central aid. It has been estimated that there are more than

eight lakh NGOs functioning in the country.The Comptroller and Auditor General

made it clear that CAG was not averse to devising a broad system that would

help ascertain whether the Central grants to NGOs have been used for the

purpose for which they were

sanctioned.[http://www.thehindubusinessline.com/2005/09/27/stories/200509270

3870300.htm]

Interestingly,Consultation Paper on EFFICACY OF PUBLIC AUDIT SYSTEM IN

INDIA: C & AG – REFORMING THE INSTITUTION prepared by the NATIONAL

COMMISSION TO REVIEW THE WORKING OF THE CONSTITUTION

observed :

"A large number of autonomous bodies, NGOs and public funded institutions

which receive substantial government grants escape C&AG's audit jurisdiction

due to complex financing arrangements. It is for consideration that a

Constitutional provision be made that all bodies which are publicly funded fall

within the ambit of Comptroller and Auditor General's audit and any stipulation

which ousts his jurisdiction would be ultra-vires . (Refer Section 3.2)"

[ This article reflects the law as at 28 May,2007 ]

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Sunil Ahya

Interesting query - whether 'substantial loans' given by a lending public authority, amount to being 'substantially financed' as defined under section 2(h) of the RTI Act ?

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harinder dhingra

To me, It is a valid argument that loans given by PSU Banks (Other Public authorities as per Section 2 of RTI ACt 2005) are also part of funding and thus qualifies to be "substantially funded" as required under Section 2(h)(d)(i) of RTI Act 2005 to be declared as "public authority under RTI Act 2005.

You may try this argument and I am sure it will work to produce desired results.

 

harinder dhingra

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karira

The Delhi HC has ruled that funding by a public authority to a private entity does not make that entity a public authority also - although I do not agree with that interpretation.

 

This issue has been discussed several times on the portal.

 

Please look at some of the threads in the following search results:

 

http://www.rtiindia.org/forum/google.php?cx=partner-pub-3082882621726443%3A2136075824&cof=FORID%3A9&ie=ISO-8859-1&q=direct+indirect+funding+public+authority&sa.x=-790&sa.y=-72&siteurl=www.rtiindia.org%2Fforum%2Fforum.php&ref=www.rtiindia.org%2Fforum%2F111390-rti-question-substantially-financed-private-limited-company.html&ss=7323j1813479j40

 

(NOTE: there are many pages of search results !)

 

Specially read:

 

https://www.google.com/url?q=http://www.rtiindia.org/forum/63277-india-sme-asset-reconstruction-company-ltd-isarc-not-public-authority.html&sa=U&ei=y6dfUdPgB4fxiwLV_oHAAQ&ved=0CAcQFjAA&client=internal-uds-cse&usg=AFQjCNGBMmpjrBGEUby3NbkOxK9Bq3zXCw

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Anil C

Look into the unfortunate building collapse incident in Thane, Mumbai that happened yesterday....It takes two to tango.....When most of us are taking about corruption/nepotism in the government sector....the biggest culprits are the huge corporates & private sectors in general.....agreed & accepted, essence of business is profits....when a government servant can be held liable for his omissions.....why spare an individual in private sector????

 

Lack of knowledge of other powerful laws & rules are clearly on display.....Police & other agencies are running behind the elusive builder!!!! but where are the architects & structural engineers????

 

Please look into this unprofessional writeup http://www.rtiindia.org/forum/111187-national-building-codes-india-2005-potent-weapon-rti-activists-part-1-a.html

 

I would like to follow up on a "Substantially Financed" Pvt Ltd Company who if unchecked would contribute to one more Thane type incident, Please help me with more inputs on the subject line.

 

Could senior members follow the link below & interpret the same for the example quoted above.

http://www.rtigateway.org.in/Documents/Articles/NGOs%20under%20the%20RTI%20Act.pdf

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dr.s.malhotra

A loan is not an assistance by any stretch of imagination .

You take loan from me @10% PA interest and repay the same . Does it entitle me to stake claim on your property which you purchased using loan amount ?

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karira
A loan is not an assistance by any stretch of imagination .

You take loan from me @10% PA interest and repay the same . Does it entitle me to stake claim on your property which you purchased using loan amount ?

 

dr.s.malhotra,

 

That is a valid point !

For academic interest......pls give your views on:

 

What about if a loan is taken from a public sector bank and never repaid - ie becomes a NPA.

In that case, what is the position ? Will the private entity be a PA or not ?

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Sunil Ahya

I think, whatever rights are possessed by a Lender on a Borrower by virtue of a loan, the same rights are acquired by the citizens from and through the lending institution on the borrower, by virtue of the RTI Act.

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dr.s.malhotra
What about if a loan is taken from a public sector bank and never repaid - ie becomes a NPA.

In that case, what is the position ? Will the private entity be a PA or not ?

Once declared NPA , it ceases to be private information for purpose of RTI Act .

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Anil C

Spoke To A Knowledgeable Gentleman From The Banking Industry who is also a CPIO......In his opinion loans lent to companies cant be considered as PA....Dr. Sab is correct....

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