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To keep an effective control and check over the functioning of the companies, the Companies Act, 2013 provides for administrative machinery as well as the procedure for inspection, inquiry and investigation of companies. Chapter XIV (Ss.206 to 229) of the Act provides for the inspection, inquiry and investigation of the companies. The Act imposes a duty upon the directors and officers of any company to produce books and papers and information demanded by the Registrar
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Acknowledgement
or any further documents relating to the company is necessary, he may by a written notice require the company to furnish in writing such information. [Sec.206 (1)]
(1)]. The Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company [Sec.210 (2)]. No firm, body corporate or association shall be appointed as an inspector. [Sec.215]
If the information so provided by the company is inadequate or in Registrar’s opinion, unsatisfactory state of affairs exists in the company or does not disclose a full and fair statement of the information required, he may again call on the company to produce such books or papers. [Sec.206 (3)]. After fulfilling the procedure, the Registrar may carry such inquiry as he deems fit. [Sec.206 (4)]
The Central Government shall establish an office called Serious Fraud Investigation Office (SFIO) to investigate frauds relating to companies. It is a multidisciplinary organization consisting of experts from various fields inter alia Banking, Law, Corporate Affairs, Taxation and Information Technology etc. [Sec.211]
The Central Government may authorize any statutory authority to carry out the inspection of books of account of a company or class of companies. [Sec.206 (5)]
The Director of SFIO may designate such number of inspectors as he may consider necessary to investigate into the affairs of company [Sec. (1)]. Where any case has been assigned to SFIO, no other investigation agency of either Central or State Government is to investigate the same case. [Sec. 212(2)].
For carrying out such inspection or inquiry, the Registrar or inspector shall have powers of a civil court in relation to the matters as prescribed. [Sec.207 (3)]
The officer designated shall have the powers of an inspector under Sec.217.
The Registrar or Inspector shall submit a report to the Central Government and recommend, if necessary, further investigations into the affairs of the company ([Sec.208]
SFIO shall conduct the investigation in the manner and follow the procedure as per the provisions and submit its report to the Central Government within the specified period. The Central Government may demand an interim report of investigation. [Sections 212(3) and 212(11-17)].
The Registrar or inspector may enter and search the place or places and seize such books and papers if they have reasonable ground to believe that such papers as mentioned are likely to be destroyed, mutilated, altered or falsified or secreted. Before doing the search and seizure, they have to obtain an order from the Special Court. [Sec.209(1)]
The Director, Additional Director or Assistant Director of SFIO may arrest any person who he believes is guilty of an offence punishable under the sections referred in sec. 212(6) and such person arrested sub-section (8) shall within 24 hours be taken to a Judicial Magistrate or a Metropolitan Magistrate having the jurisdiction. [Sec.212(10)]
No company or member can ask for a copy of inspection report.
A copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court.[ Sec.212(13)]
The expenses of inspection are borne entirely by the Government and are not recoverable.[Sec.225]
The expenses, in the first instance, shall be defrayed by the Central Government but may be reimbursed partially or fully by the persons as prescribed under Section 225.
3 Rule 3 Companies (Inspection, Investigation & Inquiry Rules), 2014. 4 Sec. [212(12)], The Companies Act, 2013.
5 sec. [212(14)]. The Companies Act, 2013.
10 Sec 447, The Companies Act, 2013