MEANING OF INVESTIGATION

In the commercial parlance the term “investigation”

means investigation of the company’s affairs, which
includes all business activities pertaining to the profits
and losses, goodwill, contracts, investment and other
transactions. It is a fact that a company is formed on the
basis of capital investment by the members or
shareholders, thus though the share holders are investors
but its capital is managed by the Board of directors to the
total exclusion of the share holders. To detect the
corporate abuses the present Companies Act makes
provision for investigation in the affairs of the companies.

POWER TO CALL FOR INFORMATION,

INSPECTION AND INQUIRIES (SECTION 206):
This is a long but very powerful section as it appear from
its section – heading.
Information or explanation (Sub – section 1 and 2):
The Registrar by a written notice require a company to:
(a)  furnish in writing information or explanation (ok, no
power to ask for oral information or explanation); or
(b) to produce documents,
within a given reasonable specified time.
The Registrar may ask such information:
(a)  on scrutiny of any document filed by the company,
not by any other company; or
(b) on any information received by him.
It shall be a duty of the company and of its officers:
(a)  to furnish the information or explanation to the best of
their knowledge and power; and
(b) to produce the documents
within the specified or extended time.

Past Employees: Where such informationrelates to any

past period, the officers who had been in the employment
of the company shall also answer the ROC.

Inspection (Sub – section 3, 5 and 6):

In case of inadequate information or unsatisfactory
explanation, the Registrar may by another written notice,
call on the company to produce for his inspection such
further books of accounts, books, papers and explanations
as he may require at such place and at such time as
specified in the notice. In this notice, the Registrar shall
record his reason in writing for issuing the notice.
The Central Government may, on satisfaction that
circumstance so warrant, direct inspection of books and
papers of a company by an inspector.
The Central Government may by general or special order
authorise any statutory authority to carry out the
inspection of books of account of a company or class of
companies.

Inquiry (Sub – section 4):

If the Registrar is satisfied that the business of the
company is being carried on (a) for a fraudulent purpose,
(b) unlawful purpose or (c) not in compliance with the
provision of this Act or (d) investors grievances not being
addressed; the Registrar may after informing the company
of the allegation made against it carry out such inquiry as
he deemed fit after giving the company a reasonable
opportunity of being heard.

Enforcement of this Section (Sub – section 7):

If a company fails to furnish any information or
explanation or produce any document required under this
section, the company and every officer of the company,
who is in default shall be punishable with a fine which
may extend to one lakh rupees and in the case of a
continuing failure, with an additional fine which may
extend to five hundred rupees for every day after the first
during which the failure continues.

CONDUCT OF INSPECTION AND INQUIRY

(SECTION 207):
it shall be the duty of every director, officer or other
employee of the company to produce all the documents to
the Registrar or inspector and also to furnish statements,
information or explanation as the Registrar or inspector
may require and shall render all assistance to the Registrar
of inspector in connection with the inspection.
The Registrar or inspection making an inspection or
inquiry shall have all powers of a civil court under the
Code of Civil Procedure, 1908 while trying a suit in
respect of the following matters, namely—
(a)  the discovery and production of books of account and
other documents;
(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.
INSPECTION REPORT (SECTION 208):
The Registrar or inspector shall, after the inspection or an
inquiry, submit a report in writing to the Central
Government along with such documents, if any.

Search and seizure(S.209)

Seize of books and papers can be carried out, If

the Registrar or Inspector has reasonable ground to
believe that the books and papers of the Company,
Directors, Auditors and Key Managerial Personnel are
likely to be destroyed or altered.

Before such seizure, an order from the Special Court is

required.

Period of Seizure: Books can be seized for a maximum

period of 180 days. ROC can extend this to 180 days
more by a written order.

The provisions of the Code of Criminal Procedure, 1973

relating to searches or seizures shall apply, mutatis
mutandis, to every search and seizure.
Investigation into affairs of company 210

CG May order investigation into the company,

1. On the receipt of a report of the Registrar or inspector;

2. A Special Resolution is passed for investigation;

3. By order of a court or tribunal;

4. in public interest, CG may call the investigation Suo

Moto (For eg., this has happened in the case of
Kingfisher).

INVESTIGATION INTO COMPANY’S AFFAIRS IN

OTHER CASES (SECTION 213):
The Tribunal may order after giving a reasonable
opportunity of being heard to the parties concerned that
affairs of a company ought to be investigated and where
such a order is passed, the Central Government shall
appoint one or more competent persons as inspectors to
investigate into the affairs of the company and to report
thereupon.
The tribunal may make this order on an application made
by MEMBERS of the COMPANY and supported by
evidence showing good reason for seeking and order for
conducting and investigating into affairs of the company.
The Tribunal may also make such order on an application
made to it by any other person or otherwise, if it is
satisfied that the circumstance suggest that –
(a)  the business of the company is being conducted with
intent to defraud its creditors, members or any other
person or otherwise for a fraudulent or unlawful
purpose or in a manner oppressive to any of its members
or that the company was formed for any fraudulent or
unlawful purpose;
(b) person concerned in the formation of the company or
the management of its affairs have been guilty of fraud,
misfeasance or other misconduct towards the company
or towards its members; or
(c)  the members of the company have not been given
all reasonable information including information
relating to the calculation of commission payable to a
managing or other director or the manager of the
company.
And if any officer of the company is in default shall be
punished for fraud.
SECURITY FOR PAYMENT OF COST AND
EXPENSES OF INVESTIGATION (SECTION 214):
the Central Government may before appointing an
inspector require the applicant to give such security not
exceeding twenty-five thousand rupees as may be
prescribed for payment of the costs and expenses of the
investigation and such security shall be refunded to the
applicant if the investigation results in prosecution.

INVESTIGATION OF OWNERSHIP OF COMPANY

(SECTION 216):
The Central Government may appoint one or more
inspectors to investigate and report on matters relating to
the company, and its membership for the purpose of
determining the true persons—
(a) who are or have been financially interested in the
success or failure of the company; or
(b) who are or have been able to control or to materially
influence the policy of the company.
The Central Government shall appoint one or more
inspectors if the Tribunal directs by an order that the
affairs of the company ought to be investigated as regards
the membership of the company and other matters relating
financial control or material influence to the company.
The Central Government may define the scope of the
investigation and may limit the investigation to particular
shares of debenturs.

INFORMATION, INSPECTION, INQUIRIES AND

INVESTIGATION OF FOREIGN COMPANY
(SECTION 228):
The provisions of this Chapter XIV shall apply mutatis
mutandis to inspection, inquiry or investigation in relation
to foreign companies.

Serious Fraud Investigation Office (SFIO) 211-212

SFIO is Headed by a Director. The Director shall be

appointed by the CG, an officer not below the rank of a
Joint Secretary.

SFIO shall consist of members who are experts in fields

like Banking, Corporate Affairs, Taxation, Forensic
Audit, Information Technology, Law etc.
SFIO shall Investigation into affairs of Company
on receipt of a report of the Registrar, on request from any
Department of CG or SG, a SR is passed in GM and in
public interest.

Any offence disclosed by SFIO shall be covered under

section 447 and therefore are cognizable.