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Mumbai University · FY LLB · Sem II
Investigating Powers of the Inspectors under Companies Act, 2013
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Investigating Powers of the Inspectors under Companies Act, 2013
Q2Write Short NotesAttempt Any Two • 6 marks each • Total: 12 marks2024
(4)Investigating Powers of the Inspectors under Companies Act, 2013

Overview

The Companies Act, 2013 (Chapters XIV and XV, Sections 206–229) empowers the Central Government and the Registrar of Companies to investigate the affairs of companies where there is evidence of fraud, mismanagement, or public interest concerns. The investigation may be conducted by Inspectors appointed by the Central Government or by the Serious Fraud Investigation Office (SFIO).

Power to Call for Information — Section 206

  • The Registrar or the Central Government may direct a company to furnish information or explanations on any matter relating to its affairs or books of accounts.
  • If not satisfied, the Registrar may direct an inspection of books and papers of the company.

Investigation by Inspectors — Section 210

The Central Government shall appoint Inspectors to investigate the affairs of a company if:

  • The company passes a Special Resolution requesting investigation.
  • The court or NCLT orders it in the public interest.
  • The Central Government is of the opinion that it is necessary in the public interest — Section 210(1)(b).

Investigation of Related Companies — Section 219

Where an Inspector is investigating a company, they may also investigate related companies (holding, subsidiary, or associate companies) if they believe the affairs of the related company are relevant to the investigation of the main company.

Powers of Inspectors — Section 217

  • Examine on oath any present or past officer, employee, or agent of the company — the person examined is bound to answer truthfully; refusal is punishable.
  • Require production of books, accounts, and documents — the company and any of its officers must produce all records required by the Inspector.
  • Require any bank or financial institution to furnish information about the company's accounts and transactions.
  • Search and seizure — on obtaining a warrant from a Magistrate, the Inspector may search the company's premises and seize documents.
  • The Inspector's findings are recorded in an Inspector's Report, which is submitted to the Central Government; based on the report, the Central Government may prosecute offenders, apply for winding up, or initiate civil proceedings.

SFIO Investigation — Section 212

The Serious Fraud Investigation Office (SFIO) investigates complex frauds involving multiple companies, large-scale misrepresentation, or matters of substantial public interest. Once SFIO takes over, no other investigating agency may proceed with the same case. Arrests can be made without a warrant for cognizable offences under Section 447 (fraud).

Anurag Bhatia v. Registrar of Companies (2003) Delhi HC — The court held that the power of investigation under the Companies Act is quasi-criminal in nature and must be exercised fairly, but it is not a judicial proceeding; persons examined by Inspectors have no right to cross-examine other witnesses, though they may have legal representation.