This article has been written by Ms.Taranjot Kaur, a 1st year law student of Panjab University,Chandigarh.
Introduction –
The power of inspector to conduct investigations into affairs of the company is vested in Section 219.Section 210 to 229 of the Companies Act contains provisions relation to investigation of the affairs of the company.The main objective of investigation is to collect evidence and to see if any illegal acts or offences are disclosed and then decide the action to be taken.The appointment of inspectors is done under section 210(3) in which central government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct.
Section 219 – Powers of Inspector to conduct investigation into affairs of related companies,etc.
Section 219 of the Act provides for power of inspector to conduct investigation into affairs of related companies,etc as under :
Investigation into affairs of related companies – If an inspector appointed under Section 210 or Section 212 or Section 213 to investigate into the affairs of the company considers it necessary for the purpose of the investigation,can also investigate the affairs of :
Any other body corporate which is,or has at any relevant time been the company’s subsidiary company or holding company,or a subsidiary company of its holding company.
Any other body corporate which is,or has at any relevant time been managed by any person as managing director or as manager,who is ,or was,at the relevant time,the managing director or the manager of the company.
Any other body corporate whose Board of Directors comprises nominees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors,or
Any person who is or has at any relevant time been the company’s managing director or manager or employee.
Report of Inspector – The Inspector,shall subject to the prior approval of the central government,investigate into and report on the affairs of the other body corporate or of the managing director or manager,in so far as he considers that the results of his investigation are relevant to the investigation of the affairs of the company for which he is appointed.
Section 220 – Seizure of documents by inspector
Section 220 of the act provides for the seizure of the documents by inspector as under :
220 (1) – Seizure of books and papers – Where in the course of investigation,the inspector has reasonable grounds to believe that the books and papers of ,or relating to any company or other body corporate or managing director or manager of such company are likely to be destroyed,mutilated,altered or secreted,the inspector may :
Enter,with such assistance as may be required,the place or places where such books and papers are kept in such manner as may be required,and
Seize books and papers as he considers necessary after allowing the company to take copies of,or extracts from,such books and papers at its cost for the purposes of his investigation.
Section 220 (2) – Time period for keeping books and papers
The inspector shall keep in his custody the books and papers seized under this section for such a period not later than the conclusion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate,or,as the case may be,to the managing director or the manager or any other person from whose custody or power they were seized.
Section 223 – Inspector’s report
Section 223 lays emphasis on the following provisions in respect of the inspector’s report on investigation conducted under the chapter XIV :
Section 223 (1)- Submission of interim report and final report
An Inspector appointed under the chapter may,and if so directed by the central government shall,submit interim reports to that government ,and on the conclusion of the investigation,shall submit a final report to the central government.
Section 223 (2)- Every report made under (1),shall be in writing or printed as the central government may direct.
Section223 (3) – Obtaining copy of report –
A copy of the above report may be obtained by making an application in this regard to the central government.
Section 223 (4) – Authentication of report
The report of any inspector appointed under this chapter shall be authenticated either –
By the seal ,if any, of the company whose affairs have been investigated ; or
By a certificate of a public officer having custody of the report,as provided under section 76 of the Indian Evidence Act 1872 and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report.
Section 224 – Actions to be taken in pursuance of inspector’s report
Section 224 of the act provides the following provisions in respect of the actions to be taken in pursuance of inspector’s report –
If,from an inspector’s report ,made under section 223 ,it appears to the central government that any person has ,in relation to the company or in relation to any other body corporate or other person whose affairs have been investigated under this chapter been guilty of any offence for which he is criminally liable ,the central government may prosecute such person for the offence and it shall be the duty of all officers and other employees of the company or body corporate to give the central government the necessary assistance in connection with the prosecution.
Section 224 (3),if for any such report as afore said,it appears to the central government that proceedings ought,in the public interest,to be brought by the company or anybody corporate whose affairs have been investigated under this chapter :
For the recovery of damages in respect of any fraud or misconduct in connection with promotion or formation ,or the management of the affairs ,of such company or body corporate,or
For the recovery of any property of such company or body corporate which has been misapplied or wrongfully retained ,the central government may itself bring proceedings for winding up in the name of such company or body corporate.
Conclusion –
The affairs of the company are managed by the board of directors to the exclusion of majority of shareholders as they can exercise effective control over the affairs of company as its members which can lead to the abuse of power by persons or managing directors or employees .Thus due to such reasons central government can conduct investigation whenever they feel that the misuse of power is being pursued followed by misconduct and fraudulent practices,for which it can appoint inspectors to look into the matter of company.The inspector for the purpose of investigation is vested with certain powers such as power to make copies or records of accounts,duty to cooperate ,power of a civil court ,powers relating to search and seizure ,to conduct investigation etc.
References –
https://taxguru.in/company-law/inspection-inquiry-investigation-companies-act-2013.html
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