Inquiry, Inspection & Investigation [section 206 to 229] Flashcards
Which Powers section 206 give to registrar & Central government?
1) It Empowers the registrar to require the information of explanations from the company for scrutiny of documents or return filed by the company by issuing the written notice
2) If no information or explanation is provided or incomplete information or explanation is provided then he may issue another notice.
3) It empowers the CG to direct the registrar or inspector to carry out the inspection or investigation if it is satisfied
What if the registrar finds from the information that the companies affairs are mismanaged or investor grievance is not solved? (section 206)
Then he may
1) demand for further information or
2) He may carry out an inquiry
If he is found guilty of fraudulent mismanagement then punishment would be given as prescribed in Section 447.
What should be the duty of director or officer under section 206 & 207?
The director or officer shall provide information or explanation as required by the registrar under section 206 & 207.
What powers section 207 gives to registrar or inspector?
1) It empowers the them to take the copies of book or papers and place identification marks on them
2) It gives the powers of civil court in discovery, summoning and taking the statements
To whom the inquiry report is to be submitted? (section 208)
CG
When can registrar search and seize the books or papers? For what period of time? (section 209)
When inspection reveals that a company may falsified, secreted or mutilated such books or paper. Thus by taking the approval of special court he may seize it.
Time period of such seize shall not be more than 180 days. It may further extend to more 180 days
When can central government start the investigation? (section 210)
In Following cases:
1) On receipt of a report by the Registrar or inspector u/s 208
2) On intimation by a company of a special resolution passed warranting the same
3) In public interest
4) On order passed by any Court or Tribunal that investigation is warranted
What is SFIO? & when SFIO can start the investigation?
Section 211 & 212
1) SFIO is constituted u/s section 211. It is headed by the director not below the level of joint secretary to the government & consist of experts from various discipline
2) An investigation u/s 210 ordered by the Central Govt. may be handed over to the SFIO.
How an investigation is carried out by the SFIO?
1) Where an investigation by the SFIO is commenced, no other investigation can be commenced against the company and if any investigation is currently on, it shall cease and the papers and other material shall be handed over to the SFIO.
2) The SFIO shall carry out the investigation and submit a report of the same to the Central Govt.
3) Such a report may be sought by any person connected with the company, making an application in that regard to the Court
4) The director may cause the arrest of any person to be made in connection with the investigation, unless it is a person below the age of 16, or is a woman or is a person who is infirm.
5) The person arrested shall not be released on bail unless the public prosecutor has been granted an opportunity to oppose the same
6) The person arrested shall be presented before a magistrate within 24 hours of the arrest
When an Investigating is carried by the Tribunal? (section 213)
1) Where an application is made to the Tribunal by Not less than 100 members or members holding not less than 1/10th of the total voting power in the company, In case of a company having share capital &
1/5th of the total members in case of company not having share capital
2) And the tribunal is of the opinion that
• Business of the company is conducted to defraud creditors, members or others, or in a manner oppressive to the minority, or
• The company is set up for carrying fraudulent objectives, or
• Persons engaged in formation are guilty of fraud or misfeasance
• Vital information about the company is concealed from the members
• It may order an investigation into affairs of the company by an inspector
How much security is needed to be kept by the applicant for investigation by the CG or tribunal for meeting the expenses & cost?
not exceeding 25000
Who cannot be appointed as inspectors? [section 215]
Firm. body corporate, Association or other body
Investigation in to the ownership
Section 216 empowers the Central Govt., the Registrar or the Tribunal to investigate into ownership of a company to identify the true or beneficial owners interested in the success or responsible for failure of the company, or have been able to materially influence the affairs
What if evidence is available in country outside India? [section 217]
In such case Inspector may make application to court & such court may issue letter of request to a court or any respective authority to examine orally, to record his statement or collect any documents if any & submit all the evidence to the court in India.
What if letter of request is received from the foreign country? [section 217]
In such case the CG may forward it to the court concerned which shall thereupon:
a) Summon the person
b) Record his statement
c) collect any documents if any or
d) send letter to investigator
The inspector then investigate in to the affairs of the company & it shall submit such report to the court within the 30 days
How section 218 protects employees during the investigation?
❖ It shall be the duty of the company to obtain approval of the Tribunal or Inspector as the case may be where it proposes to vary terms and conditions or demote or suspend or otherwise remove any employee from employment of the company
❖ Where on seeking approval through an application, the company does not receive any response within 30 days, it may proceed with its proposal
❖ However, where the company objects to any reservations made in this regard, it may appeal to the NCLAT within 30 days of communication of such disapproval or objection
Whose affairs inspector can investigate ? [section 219]
a) Any other body corporate which is, or has at relevant time been the company’s subsidiary company, holding company, or a subsidiary company of its holding company
b) Any other body corporate which is, or has at relevant time been managed by any person as MD or manager who is or was at relevant time the MD or manager of the company
c) Any other body corporate whose BOD comprises nominees of the company or is accustomed to act with the directions or instructions of its company or any of its directors
d) Any person who is or has at relevant time been company’s MD or manager or employee
Approval of CG must be taken before carrying any investigation
When and for what time the books and papers can be seized?
a) If Inspector has reasonable grounds to believe that such books or papers is likely to be destroyed, mutilate, altered, falsified or secreted.
b) Such Books or paper shall be seized for the period not later than the conclusion of investigation
The provision of code of criminal procedure 1973 shall apply
When the assets of company shall be freeze & when restrictions shall impose on the company?
a) When it appears to the tribunal that the removal, transfer or disposal of the funds, assets, properties of the company is likely to take place in a manner that is prejudicial to the interest of the company or shareholders or creditors or public, it may by order direct such transfer, removal or disposal shall not take place for the period not exceeding 3 years
b) When the inspector is of the opinion that such facts cannot be found out unless certain restrictions on the securities of the company, as it may deem fit are imposed the tribunal shall put such restriction for the period not exceeding 3 years
From Whom Expenses of investigation must be recovered? [section 225]
Firstly all the expenses shall be defrayed by the CG and then it shall be reimbursed by
a) Any person against whom prosecution is instituted or who is ordered to pay damages or restore any property in proceedings brought under section 224 to the extent as may be specified by the court
b)
Which Information does legal advisor and Banker shall not disclose? [section 227]
Legal advisor shall not disclose the any privileged communication made to him
Bankers shall not disclose affairs of any of the customers of the company or body corporate
