Before forming of an opinion about the fact that who all are required to file a detailed statement of assets and liabilities before the appropriate authorities as required under Lokpal & Lokayuktas Act, 2013 let us understand the logic behind such requirements. The enactment of Lokpal & Lokayuktas Act,2013 was the outcome of strikes, demonstrations and demand by public at large to create an independent authority/authorities to curb the menace of growing corruption in the country especially in the government sector. Once the Lokpal & Lokayuktas Act 2013 was enacted it was felt to create a data bank having the details of assets and liabilities of public servants thus enabling the authorities to keep tab on the rate at which such assets and liabilities grew on yearly basis in relation with the income during that particular period. It was considered a tool to pick up those cases for further enquiry where it is felt that the growth of assets is disproportionate to the income earned during a particular period.
Let us try to understand and establish who all are required to file a return to disclose the assets and liabilities under section 14(1)(g) &(h) as deemed to be public servants in the case of a charitable company incorporated under the Companies Act, 2013. As per the Lokpal & Lokayuktas Act 2013 since such deemed public servants are not directly or indirectly coming under the control of the government but may fall under Section 2(c)(viii) of The Prevention of Corruption Act, 1988 which reads as under:
(viii) any person who holds an office by virtue of which he is authorized or required to perform any public duty;
From the above it can be construed that any officer in its individual capacity or on behalf of the organization receiving public funds will be treated as public servant as far as the spending of such funds are concerned. Here the funds received are those which are in the nature of aid or grant or financial contribution for executing any job jointly which otherwise is the job assigned to a public servant. But funds received against services provided or against supply or sale of anything cannot be treated as aid, grant or assistance. Example can be funds received against supply of furniture cannot be treated as aid, grant or financial assistance, however, funds received to help in holding a joint event will be treated as aid, grant or financial assistance as the funding agency authorizes someone to spend public funds on behalf of the government. In other words, there is delegation of authority to do an act on behalf of the funding agency. Thus it is expected from both government officers as well as officers/organizations receiving such funds to utilize public money in a transparent and judicious manner without deviating from process and procedures prescribed by the state. On this perception person covered u/s 14(1)(g)&(h) have been declared as public servants to the extent they control and spend the funds received from the government.
While reading section 14(1)(g)&(h) the intention of the legislature is to stop misuse of public funds and make officers with whatever designation answerable to Lokpal and lokayuktas. The said sub sections of 14(1) i.e. (g) & (h) are reproduced here for ready reference:
Section 14(1)(g) &(h) of Lokpal & Lokayuktas Act 2013.
(g) any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not), by whatever name called, wholly or partly financed by the Government and the annual income of which exceeds such amount as the Central Government may, by notification, specify;
(h) any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not) in receipt of any donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of ten lakh rupees in a year or such higher amount as the Central Government may, by notification, specify.
Explanation.: For the purpose of clauses (f) and (g), it is hereby clarified that any entity or institution, by whatever name called, corporate, society, trust, association of persons, partnership, sole proprietorship, limited liability partnership (whether registered under any law for the time being in force or not), shall be the entities covered in those clauses:
Provided that any person referred to in this clause shall be deemed to be a public servant under clause (c) of section 2 of the Prevention of Corruption Act, 1988 and the provisions of that Act shall apply accordingly.”
From the above it seems that all the directors, managers, secretary and officers of a company are required to file declaration of assets with the concerned authorities as required under Lokpal & Lokayuktas Act, 2013. The solution to this answer can be found from the companies act 2013 which defines the word officer under section 2(51) of the companies act 2013. The said Section states as under:
“Key managerial personnel”, in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
Thus the intention of the legislature is simple and clear that for a company the officers in default are Key Managerial Personnel (KMP). The act defines the above KMPs as under:
Section 2(18): CEO
“Chief Executive Officer” means an officer of a company, who has been designated as such by it.
Section 2(19): CFO
“Chief Financial Officer” means a person appointed as the Chief Financial Officer of a company.
Section 2(24): CS
“Company Secretary” or “Secretary” means a company secretary as defined in clause
(c) of subsection (1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act.
Section 2(54): MD
“Managing Director” means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.
Section 2(94): WTD
“Whole Time Director” includes a director in the whole-time employment of the company.
Considering all the Acts together i.e. The Prevention of Corruption Act, 1988, Lokpal & Lokayuktas Act 2013 and the Companies Act, 2013 and after analysis the relevant provisions and the intention of the legislator the following facts emerge.
1. The government wants that public money need not be misused through any corrupt practices.
2. Declare all the officers responsible for spending of public money as public servants.
3. Keep watch on the movement of assets and liabilities of all the officers deemed as public servants under Lokpal and Lokayuktas Act 2013.
4. Direct all public servants to file a statement of assets and liabilities with the concerned authorities giving details of assets and liabilities annually to develop a data bank for comparison to be made between sources of income and subsequent growth in assets and liabilities.
5. Only those public servants are required to file such annual returns which have control on the funds or have been given powers to control day to day activities of a company. Thus only Key Managerial Persons of a charitable company, who are authorized to exercise control on day to day working, will be required to comply with the provisions of Lokpal & Lokayuktas Act 2013.