This article has been written by Ishika rawat , a student studying LLB from Asian law college , Noida. The author is 1st year law student.

INTRODUCTION

 Section 217 of the companies act 2013 provide us with the procedure and power of the inspector .

PROCEDURE, POWERS, ETC., OF INSPECTORS 

 (1) It shall be the duty of all officers and other 

employees and agents including the former officers, employees and agents of a company which is under investigation in accordance with the provisions contained in this Chapter, and where the affairs of any  other body corporate or a person are investigated under section 219, of all officers and other employees and agents including former officers, employees and agents of such body corporate or a person :- 

(a) to preserve and to produce to an inspector or any person authorised by him in this behalf all  books and papers of, or relating to, the company or, as the case may be, relating to the other body corporate or the person, which are in their custody or power; and 

(b) otherwise to give to the inspector all assistance in connection with the investigation which 

they are reasonably able to give. 

1. The inspector may require any body corporate, other than a body corporate referred to in subsection (1), to furnish such information to, or produce such books and papers before him or any person authorised by him in this behalf as he may consider necessary, if the furnishing of such information or the 

production of such books and papers is relevant or necessary for the purposes of his investigation. 

1. The inspector shall not keep in his custody any books and papers produced under sub-section (1) or sub-section (2) for more than one hundred and eighty days and return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers were produced :- 

Provided that the books and papers may be called for by the inspector if they are needed again for a  further period of one hundred and eighty days by an order in writing. 

(4) An inspector may examine on oath— 

(a) any of the persons referred to in sub-section (1); and 

(b) with the prior approval of the Central Government, any other person, in relation to the affairs  of the company, or other body corporate or person, as the case may be, and for that purpose may  require any of those persons to appear before him personally 

Provided that in case of an investigation under section 212, the prior approval of Director, Serious  Fraud Investigation Office shall be sufficient under clause (b).

 

(5) Notwithstanding anything contained in any other law for the time being in force or in any contract  to the contrary, the inspector, being an officer of the Central Government, making an investigation under  this Chapter shall have all the powers as are vested in a civil court under the Code of Civil Procedure,  1908 (5 of 1908), while trying a suit in respect of the following matters, namely :- 

(a) the discovery and production of books of account and other documents, at such place and time 

as may be specified by such person; 

(b) summoning and enforcing the attendance of persons and examining them on oath; and 

(c) inspection of any books, registers and other documents of the company at any place.

 

(6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the  inspector under this section, the director or the officer shall be punishable with imprisonment which may extend to one year and with fine which shall not be less than twenty-five thousand rupees but which may  extend to one lakh rupees. 

(ii) If a director or an officer of the company has been convicted of an offence under this section, the  director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated  his office as such and on such vacation of office, shall be disqualified from holding an office in any  company.

 

1. The notes of any examination under sub-section (4) shall be taken down in writing and shall be  read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against  him.

 

(8) If any person fails without reasonable cause or refuses— 

(a) to produce to an inspector or any person authorised by him in this behalf any book or paper  which is his duty under sub-section (1) or sub-section (2) to produce; 

(b) to furnish any information which is his duty under sub-section (2) to furnish; 

(c) to appear before the inspector personally when required to do so under subsection (4) or to 

answer any question which is put to him by the inspector in pursuance of that sub-section; or 

(d) to sign the notes of any examination referred to in sub-section (7),  he shall be punishable with imprisonment for a term which may extend to six months and with fine which  shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, and also with  a further fine which may extend to two thousand rupees for every day after the first during which the  failure or refusal continues.  

 

(9) The officers of the Central Government, State Government, police or statutory authority shall  provide assistance to the inspector for the purpose of inspection, inquiry or investigation, which the  inspector may, with the prior approval of the Central Government, require.

 

The Central Government may enter into an agreement with the Government of a foreign State for  reciprocal arrangements to assist in any inspection, inquiry or investigation under this Act or under the  corresponding law in force in that State and may, by notification, render the application of this Chapter in  relation to a foreign State with which reciprocal arrangements have been made subject to such  modifications, exceptions, conditions and qualifications as may be deemed expedient for implementing  the agreement with that State.

 Notwithstanding anything contained in this Act or in the Code of Criminal Procedure, 1973 (2 of  1974) if, in the course of an investigation into the affairs of the company, an application is made to the  competent court in India by the inspector stating that evidence is, or may be, available in a country or  place outside India, such court may issue a letter of request to a court or an authority in such country or  place, competent to deal with such request, to examine orally, or otherwise, any person, supposed to be  acquainted with the facts and circumstances of the case, to record his statement made in the course of  such examination and also to require such person or any other person to produce any document or thing,  which may be in his possession pertaining to the case, and to forward all the evidence so taken or  collected or the authenticated copies thereof or the things so collected to the court in India which had  issued such letter of request :-  Provided that the letter of request shall be transmitted in such manner as the Central Government may  specify in this behalf :-   Provided further that every statement recorded or document or thing received under this sub-section  shall be deemed to be the evidence collected during the course of investigation.

 

(12) Upon receipt of a letter of request from a court or an authority in a country or place outside India,  competent to issue such letter in that country or place for the examination of any person or production of  any document or thing in relation to affairs of a company under investigation in that country or place, the  Central Government may, if it thinks fit, forward such letter of request to the court concerned, which shall  There upon summon the person before it and record his statement or cause any document or thing to be  produced, or send the letter to any inspector for investigation, who shall thereupon investigate into the  affairs of company in the same manner as the affairs of a company are investigated under this Act and the  inspector shall submit the report to such court within thirty days or such extended time as the court may allow for further action :-  Provided that the evidence taken or collected under this sub-section or authenticated copies thereof or  the things so collected shall be forwarded by the court, to the Central Government for transmission, in  such manner as the Central Government may deem fit, to the court or the authority in country or place  outside India which had issued the letter of request.

 LEGISLATIVE HISTORY

This clause corresponds to section 240 of the companies act and seeks to provide that it shall be the duty of all officer and employees of the company which is under investigation to produce books and papers and give all assistance to the inspector . This clause provides for the powers of the inspectors . The inspectors may examine any person on oath and notes of such examination shall be taken in writings . Further the inspector shall have the power of the civil court in respect of discovery and a production of documents , summoning and enforcing the attendance of person , examining of person on oath , inspection of books and register. In case of a failure to furnish the information or to appear for examination on oath , the offence is punishable with imprisonment and fine .

In case of default in meeting the requirement of this section , the company and officer shall be punishable with fine and imprisonment . Further in case of conviction under this section , a director or officer shall be deemed to vacate his office from the date of conviction and shall also be disqualified from holding office in any company . Also a court in India may also issue a letter of request to a court in a country outside India to record a statement of person who is supposed to be acquainted with the case and also to direct him to produce a document or thing in his possession pertaining to the case .

ANALYSIS OF THE PROVISION

Section 217 of the 2013 act corresponds to section 240 of the 1956 act . The scope of section 240 appears to have been clarified with certain additional points being added specifically keeping in view the growing nature of international trade and the fact that very often cross border examination of the company’s affairs is necessary a specific provision has been inserted i.e the central government to seek assistance from foreign agencies and for a reciprocal scheme of assistance , the foreign agencies which require information or assistance in India .

Section 217 of the companies act 2013 imposes a duty on all the officer , employees and agents of a company , both past and present to assist and co-operate with any investigation undertaken . Specifically the duties include preservation and provision of all books or paper relating to the company and also relating to any other body corporate or person when such documents or paper in their custody or power . All assistance is expected to be given to the inspector in connection with the investigation which a person is reasonably able to give . 

EXPLANATION OF SUB – SECTION (2)

Sub section (2) empowers the inspector to require any body corporate other than body corporate being investigated to furnish such information or produce such books or paper as such inspector may consider necessary .

The requirement under this provision is relatable to furnishing of information or production of books and papers as may be relevant or necessary for the purpose of investigation.

EXPLANATION OF SUB – SECTION (3)

Sub section (3) gives the inspector the power to retain the documents and papers for 180 days in the first instance and for such amount of extended period , the inspector so thinks it necessary . This seeks to bring the power in section 209 of the companies act 2013 and other provisions .

EXPLANATION OF SUB – SECTION (4)

Sub section (4) empowers an inspectors to examine on oath any person who is or was an employees , officers or agent of the company . It also empowers him to examine any other person with the prior approval of the central government.

Under this section an investigating officer is not the court . In a criminal proceeding , even a statement recorded under section 313 of the criminal procedure code is not under oath as is evident from section 313(2).

EXPLANATION OF SUB – SECTION (5)

Under sub section 5 , the powers granted to the investigating officer make the situation event even less clear . Provision of sub section 5 confer upon the inspector the power of the civil court including for discovery and production of document and books of account , summoning and enforcing attendance of person and examining of oath and inspection of books and other documents .

When the purport of the chapter is to inspect , investigate and identify any anomalies and also to look at potential criminal offence it appear to be a try and form an amalgam between the provision under the civil procedure code and criminal procedure code leads something to be desired.

EXPLANATION OF SUB – SECTION (6)

This situation is compounded by the provisions of sub section (6) which contemplated imprisonment or a fine for disobedience of a direction issued by the registrar or inspector under this section . The protection afforded under article 20 (3) of the constitution of India and provision of criminal procedure code may well be tested in the enforcement of this provision . In case of a conviction under section 217 (6) (I) of the 2013 act , the director or officer shall be deemed to have vacated his office and shall be disqualified from holding any office in any company .

EXPLANATION OF SUB SECTION (7)

The provision of sub section (4) of section 217 of the 2013 act need to be read with sub section (7) of the 217 of the 213 act . It appear to be an attempt to codify the reading of rights of an accused under the Miranda principle that is followed in the USA into a procedure  to be followed for investigation .

 

In Miranda v. state of Arizona , the USA supreme court laid down norms relating to the caution to be given to the accused before he is arrested or detained and statement which recorded during investigation are not under oath . Some of the principle laid down in Miranda do find a place in the criminal procedure code . However section 217 of the 2013 act appears to be an attempt to amalgamate facets of the criminal procedure and civil procedure and also other principle  that are sought to be imported .

EXPLANATION OF SUB SECTION (8)

Again sub section (8) empowers imprisonments or penalties for : –

1. Failure without reasonable cause 
2. Refusal to 
3. Produce documents of papers sought for 
4. Furnish information sought  for 
5. Appear and answer questions put to such person 
6. To sign the notes provided by the constitution and criminal procedure code .

This position certainly require re examination on the part of the legislature .

EXPLANATION OF SUB – SECTION (9)

Sub section (9) allows for the assistance by officers of the central government . State government , police or any other statutory authorities to provide assistance to the inspector with the prior approval of the central government .

EXPLANATION OF SUB – SECTION (10)  AND SUB – SECTION (10)

Sub section (10) and (11) are interesting insertions to try and keep up with the recent trends in business . very often corporate have interests or holding overseas and also foreign entities who have interests and holding in India . The insertion of the sub section (10) and (11) empowers the central government to enter into the arrangement with the government of all foreign states for reciprocal arrangement for assistance in any inspection , inquiry or certain a welcome move to try and plug the loophole of the of corporate using the overseas investments arms to try and avoid compliance with Indian laws .

 

Similarly by approaching the competent court in India where evidence is or may be available in the country outside India , the investigator could seek a suitable letter of request from such court to the concerned court or authority outside India to examine orally any person to record his statement during the course of examination and by requiring him to produce such documents as may be in possession as also to forward all evidence so taken or collected with authenticated copies therefore . 

 

The second provision make it clear that any statements recorded or documents received under this sub section shall be deemed evidence collected during the course of evidence . A reciprocal provision has also been inserted to enable accommodation of requests from foreign courts for investigation into the affairs of the company in that country . 

 

This is certainly a welcome provision and would address a lacuna in many investigation on account of complexities involved in approaching the foreign courts or authorities for assistance .

 

BIBLIOGRAPHY 

1} The companies act 2013

2} Company law and practice by Dr. G.K. Kapoor and Dr. Sanjay Dhamija

3} Company law by Avtaar Singh

4} Company law by C R Datta 

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