 bill  no  iv of  2008 the public financial institutions (conversion of loans to companies into equity share capital) bill, 2008 a billto provide for conversion of the entire loan amount given by the public financial institutions to the companies into equity share capital to give powers to the financial institutions to exercise control over the companies taking loan from them and matters connected therewithbe it enacted by parliament in the fifty-ninth year of the republic of india as follows:—short title and commencement1  (1) this act may be called the public financial institutions (conversion of  loansto companies into equity share capital) act, 2008(2) it shall come into force at once5definitions2 in this act, unless the context otherwise requires,—(b) "public financial institutions" means the financial institutions specified in section 4a of the companies act, 19561 of 195653  notwithstanding anything contained in the companies act or in any other law for the time being in force, the entire amount of loan given by any public financial institution to any company shall be deemed to have been converted into equity share capital of the company if the loan so advanced exceeds fifty per cent of the total equity capital of the companyconversion of loan amount of companies into equity share capital in certain cases savings4 the provisions of this act shall be in addition to and not in derogation of the provisions of the companies act, 1956 statement  of  objects  and  reasonsin our country almost all the companies, big or small, mainly exist on loans taken from the public financial institutions such as the industrial credit and investment corporation of india, industrial finance corporation of india, industrial development bank of india, life insurance corporation of india and unit trust of india apart from taking loans from the public financial institutions the companies particularly owned by big industrial houses take huge loans from the banking sector also in most of the cases the loan amount exceeds more than fifty per cent of the total capital of the companies thus the moneys are de facto invested in such companies by the public financial institutions and banks but all the benefits derived therefrom accrue to the owners of these companies and industrial houses as a result, the industrialists and business houses in our country are prospering on the money of public financial institutions and banks it has also been the practice with the industrial sector that after taking huge loans the companies do not bother to return the money and the interest accrued thereon and often resort to creating legal hurdles deliberately in the recovery process initiated by such public financial institutions as a result, huge public funds are lying blocked with the companies in the private sector sometimes it happens with the connivance of the greedy elements in the public financial institutions but in most of the cases the companies default deliberately it has also been noticed that after taking, loans the companies declare themselves sick and force the government to take them over and the government has to write-off the loans and also pay compensation to the owners of the companies such cases are clear instances of frauds committed by the owners of the companies but, unfortunately, these frauds are legalised in one way or the otherif it is made mandatory that where the loan amount is more than 50 per cent of the total equity capital of company, the entire loan should be converted into equity share capital of the company held by the public financial institution advancing the loan to the company so that the institution can have a strong say in the affairs of the company for taking due care of the repayment of loans with interest in the national interest moreover, in such circumstances, the owners will also not be in position to cripple the company deliberately and declare it sick it will put a check on the financial management of the companythis bill seeks to achieve the above objectss s ahluwalia———— a billto provide for conversion of the entire loan amount given by the public financial institutionsto the companies into equity share capital to give powers to the financial institutions to exercise control over the companies taking loan from them and matters connected therewith————(shri  s s ahluwalia, mp)gmgipmrnd—4739rs(s-5)—29-12-2008