Ch 4 - Inspection, Inquiry and Investigation Flashcards
POWER TO CALL FOR INFORMATION, INSPECT BOOKS AND CONDUCT INQUIRIES (SECTION 206 OF THE COMPANIES ACT, 2013) - what is the duty of the company and it’s officers and also the duty of the past officers of the company?
- *Duty of the company and its officers [Section 206 (2)]**: On the receipt of a notice under sub-section (1) of section 206, it shall be the duty of the company and its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar
- *Duty of past officers of the company:** According to the proviso to sub-section (2) of section 206, where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge.
POWER TO CALL FOR INFORMATION, INSPECT BOOKS AND CONDUCT INQUIRIES (SECTION 206 OF THE COMPANIES ACT, 2013) - Power of Inquiry by the registrar as per section 206(4)?
(a) The Registrar may call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard, if the Registrar is satisfied:
(1) on the basis of information available with or furnished to him; or
(2) on a representation made to him by any a person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act; or
(3) the grievances of investors are not being addressed,
(b) Before calling the company to furnish in writing any information or explanations and carrying out the inquiry, the Registrar has to inform the company of the allegations made against it by a written order.
(c) The Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section.
(d) It is further provided that where the business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447.
POWER TO CALL FOR INFORMATION, INSPECT BOOKS AND CONDUCT INQUIRIES (SECTION 206 OF THE COMPANIES ACT, 2013 - Power of inspection by the central government and penalty for failure to furnish any information or explanation as required under the act?
Inspection by Central Government: The Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose [Section 206 (5)].
(vi) The Central Government may, having regard to the circumstances by general or special order, authorize any statutory authority to carry out the inspection of books of account of a company or class of companies [Section 206 (6)].
(vii) Failure to furnish information: If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to 1 lakh rupees and in the case of a continuing failure, with an additional fine which may extend to 500 rupees for every day after the first during which the failure continues [Section 206 (7)].
Note: The said provisions apply to the foreign company also [section 228 of the Companies Act, 2013].
What is the report on inspection made as per section 208 of the companies act, 2013?
Section 208 of the Companies Act, 2013 provides for the submission of the report on inspection made. According to this section
The Registrar or inspector shall, after the inspection of the books of account or an inquiry under section 206 and other books and papers of the company under section 207, submit a report in writing to the Central Government. The registrar or inspector may recommend in report that there is the need of further investigation. The said recommendation has to be given with reasons in support.
SEARCH AND SEIZURE (SECTION 209 OF THE COMPANIES ACT, 2013) - what is the procedure for application to the special court and power of the special court to search and seize and the time limit to return the seized papers?
- *Application to Special Cour**t: Registrar or inspector on reasonable grounds to believe that books and papers relating to the affairs of the company may be destroyed, mutilated, altered, falsified or secreted, he can make an application to Special Court.
- *Power of special court to search and seize**: The Special Court, may, by order, authorize it, to enter into the places or premises where books and papers are placed, to search the place and to seize the books and papers as necessary, after allowing the company to make copies. Search and seizure must be according to provisions of Code of Criminal Procedure.
- *Return of seized papers**: The seized papers must be returned within 180 days. The Registrar can take copies of any document or place identification marks on them before returning the books and papers. He can ask the papers again, if needed.
SEARCH AND SEIZURE (SECTION 209 OF THE COMPANIES ACT, 2013 - what are the Circumstances for seizure [Sub-section (1)]?
Where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that the books and papers of (a) a company, or relating to
(b) the key managerial personnel or
(c) any director or
(d) auditor or
(e) company secretary in practice (if the company has not appointed a company secretary),
- are likely to be destroyed, mutilated, altered, falsified or secreted, he may, after obtaining an order from the Special Court for the seizure of such books and papers,—
(1) enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
(2) seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.
INVESTIGATION INTO AFFAIRS OF COMPANY (SECTION 210 OF THE COMPANIES ACT, 2013) - When an Investigation will be ordered in the opinion of the central government?
Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company, it may order an investigation into the affairs of the company. Central Government may order to investigate-
Note: The ordering of Investigation by CG into the affairs is discretionary in nature and also do not confuse this investigation into the affairs with Investigation into affairs in other cases wherein there are some No. of Member threshold limits are applicable and has to be dealt with differently.
What is the composition of SFIO as per the provisions of section 211(2) of the act?
INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 212 OF THE COMPANIES ACT, 2013) - What is the summary of the entire process of the investigation in nutshell?
INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 212 OF THE COMPANIES ACT, 2013) - What are the grounds on which Investigation is assigned to SFIO?
According to section 212(1), where the Central Government -
(a) on receipt of a report of the Registrar or inspector under section 208;
(b) on intimation of a special resolution passed by a company that its affairs are required to be investigated;
(c) in the public interest; or
(d) on request from any Department of the Central Government or a State Government,
is of the opinion that it is necessary to investigate into the affairs of a company by the SFIO, the Central Government may, by order, assign the investigation into the affairs of the said company to the SFIO.
On receipt of such order, the Director, SFIO may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.
INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 212 OF THE COMPANIES ACT, 2013) - Whether any other investigation agency of CG/ SG shall proceed with their investigation after the same is assigned to the SFIO?
No other investigating agency of CG/ or any SG shall proceed with investigation where case is assigned to SFIO: Where any case has been assigned by the Central Government to the SFIO for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act. In case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to SFIO [Sub section (2)].
INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 212 OF THE COMPANIES ACT, 2013) - Power to grant bail and Offences cognizable and Non Bailable
Granting of Bail: The limitation on granting of bail specified in sub section (6) above is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail [Sub section (7)].
- *Offences are cognizable and non-Bailable: As per sub-section (6), offences covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless**—
(a) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(b) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.
However, a person, who, is
(a) under the age of sixteen years or
(b) is a woman or
(c) is sick or infirm,
may be released on bail, if the Special Court so directs.
Provided further that the Special Court shall not take cognizance of any offence referred in point (vi) above except upon a complaint in writing made by—
(a) the Director, SFIO; or
(b) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.
INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 212 OF THE COMPANIES ACT, 2013) - power to arrest and forwarding copy of the order to SFIO etc and other miscellaneous powers?
- *Power to arrest**: If any officer not below the rank of Assistant Director1 of SFIO authorized in this behalf by the Central Government** by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, **inform him of the grounds for such arrest. [Sub section (8)]
(ix) Forward copy of order to SFIO: The officer authorized under sub-section (8) shall, immediately after arrest of such person under such sub-section(8)2, forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the SFIO in a sealed envelope, in such manner as may be prescribed and the SFIO shall keep such order and material for such period as may be prescribed. [Sub section (9)]
(x) Presented before Special Court/JM/MM: Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Special Court or Judicial Magistrate,3 or a Metropolitan Magistrate as the case may be, having jurisdiction. The period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Special Court or Magistrate’s court. [Sub section (10)]
Submission of Interim Report to CG: The SFIO shall submit an interim report to the Central Government, if the Central Government so directs [Sub section (11)].
INVESTIGATION INTO COMPANY’S AFFAIRS IN OTHER CASES (SECTION 213 OF THE COMPANIES ACT, 2013) - What is requirement under this provision for carrying out the required investigation accordingly?
SECURITY FOR PAYMENT OF COSTS AND EXPENSES OF INVESTIGATION (SECTION 214 OF THE COMPANIES ACT, 2013) - What is the requisite cost and Expenses to be paid under this section?
Section 214 of the Companies Act, 2013 provides for security for payment of costs and expenses of investigation as under:
Where an investigation is ordered by:
(i) the Central Government in pursuance of clause (b) of sub-section (1) of section 210, or
(ii) made by the Tribunal under section 213,
the Central Government may before appointing an inspector** under sub-section (3) of section 210 or clause (b) of section 213, r_equire the applicant to give such security not exceeding 25,000 rupees as may be prescribed_5, as it may think fit, for payment of the costs and expenses of the investigation.
Such security shall be refunded to the applicant if the investigation results in prosecution.**
PROTECTION OF EMPLOYEES DURING INVESTIGATION (SECTION 218 OF THE COMPANIES ACT, 2013) - What is the action by the employee after application to the tribunal and there is a rejection to the order or the tribunal does not respond within the specified time accordingly?
(2) Action against employee: If the company, other body corporate or person concerned does not receive within thirty days of making of application under sub-section (1), the approval of the Tribunal, then and only then, the company, other body corporate or person concerned may proceed to take against the employee, the action proposed.
(3) Appeal: If the company, other body corporate or person concerned is dissatisfied with the objection raised by the Tribunal, it may, within a period of thirty days of the receipt of the notice of the objection, prefer an appeal to the Appellate Tribunal in such manner and on payment of such fees as may be prescribed.
(4) Final and Binding order: The decision of the Appellate Tribunal on such appeal shall be final and binding on the Tribunal and on the company, other body corporate or person concerned.
What are the powers of Inspector to conduct Investigation into the affairs of the related companies as per section 219 of the act?
What are the provisions of VOLUNTARY WINDING UP OF COMPANY, ETC., NOT TO STOP INVESTIGATION PROCEEDINGS (SECTION 226 OF THE COMPANIES ACT, 2013)?
What is the penalty for PENALTY FOR FURNISHING FALSE STATEMENT, MUTILATION, DESTRUCTION OF DOCUMENTS (SECTION 229 OF THE COMPANIES ACT, 2013)?
The provision will not apply to an employee who is not undergoing any investigation, also when such other person purchases any shares based on false information supplied by such employee on social media is not a valid ground as per this provision to impose any penalty even more so when he is not undergoing any investigation of any kind. It should be responsibility of such other person to conduct due diligence before investing in any share accordingly.
