WELCOME TO SINGHAL AJAY & ASSOCIATES

CHAPTER XIV

INSPECTION, INQUIRY AND INVESTIGATION
 
 
206.Power to call for information, inspect books and conduct inquiries.

(1) Where on a scrutiny of any document filed by a company or on any information
received by him, the Registrar is of the opinion that any further information or explanation or
any further documents relating to the company is necessary, he may by a written notice
require the company—
(a) to furnish in writing such information or explanation; or
(b) to produce such documents,
within such reasonable time, as may be specified in the notice.
(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company
and of its officers concerned to furnish such information or explanation to the best of their
knowledge and power and to produce the documents to the Registrar within the time specified
or extended by the Registrar:
Provided that where such information or explanation relates to any past period, the
officers who had been in the employment of the company for such period, if so called upon
by the Registrar through a notice served on them in writing, shall also furnish such information
or explanation to the best of their knowledge.
(3) If no information or explanation is furnished to the Registrar within the time
specified under sub-section (1) or if the Registrar on an examination of the documents
furnished is of the opinion that the information or explanation furnished is inadequate
or if the Registrar is satisfied on a scrutiny of the documents furnished that an
unsatisfactory state of affairs exists in the company and does not disclose a full and fair
statement of the information required, he may, by another written notice, call on the
company to produce for his inspection such further books of account, books, papers
and explanations as he may require at such place and at such time as he may specify in
the notice:
Provided that before any notice is served under this sub-section, the Registrar shall
record his reasons in writing for issuing such notice.
(4) If the Registrar is satisfied on the basis of information available with or furnished to
him or on a representation made to him by any person that the business of a company is
being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions
of this Act or if the grievances of investors are not being addressed, the Registrar may, after
informing the company of the allegations made against it by a written order, call on the
company to furnish in writing any information or explanation on matters specified in the
order within such time as he may specify therein and carry out such inquiry as he deems fit
after providing the company a reasonable opportunity of being heard:
Provided that the Central Government may, if it is satisfied that the circumstances so
warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the
inquiry under this sub-section:
Provided further that where business of a company has been or is being carried on for
a fraudulent or unlawful purpose, every officer of the company who is in default shall be
punishable for fraud in the manner as provided in section 447.
(5) Without prejudice to the foregoing provisions of this section, the Central
Government may, if it is satisfied that the circumstances so warrant, direct inspection of
books and papers of a company by an inspector appointed by it for the purpose.
(6) The Central Government may, having regard to the circumstances 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.
(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.
 
 
 
207.Conduct of inspection and inquiry.

(1) Where a Registrar or inspector calls for the books of account and other books
and papers under section 206, it shall be the duty of every director, officer or other employee
of the company to produce all such documents to the Registrar or inspector and furnish him
with such statements, information or explanations in such form as the Registrar or inspector
may require and shall render all assistance to the Registrar or inspector in connection with
such inspection.
(2) The Registrar or inspector, making an inspection or inquiry under section 206 may,
during the course of such inspection or inquiry, as the case may be,—
(a) make or cause to be made copies of books of account and other books and
papers; or
(b) place or cause to be placed any marks of identification in such books in token
of the inspection having been made.
(3) Notwithstanding anything contained in any other law for the time being in force or in
any contract to the contrary, the Registrar or inspector making an inspection or inquiry shall
have all the powers as are vested in 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, at
such place and time as may be specified by such Registrar or inspector making the
inspection or inquiry;
(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.
(4) (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.
 
 
 
208. Report on inspection made.

The Registrar or inspector shall, after the inspection of the books of account or an
inquiry under section 206 and other books and papers of the company under section 207,
submit a report in writing to the Central Government along with such documents, if any, and
such report may, if necessary, include a recommendation that further investigation into the
affairs of the company is necessary giving his reasons in support.
 
 
 
209. Search and seizure.

(1) Where, upon information in his possession or otherwise, the Registrar or
inspector has reasonable ground to believe that the books and papers of a company, or
relating to the key managerial personnel or any director or auditor or company secretary in
practice if the company has not appointed a company secretary, are likely to be destroyed,
mutilated, altered, falsified or secreted, he may, after obtaining an order from the
Special Court for the seizure of such books and papers,—
(a) enter, with such assistance as may be required, and search, the place or
places where such books or papers are kept; and
(b) seize such books and papers as he considers necessary after allowing the
company to take copies of, or extracts from, such books or papers at its cost.
(2) The Registrar or inspector shall return the books and papers seized under subsection
(1), as soon as may be, and in any case not later than one hundred and eightieth day
after such seizure, to the company from whose custody or power such books or papers were
seized:
Provided that the books and papers may be called for by the Registrar or inspector for a
further period of one hundred and eighty days by an order in writing if they are needed again:
Provided further that the Registrar or inspector may, before returning such books
and papers as aforesaid, take copies of, or extracts from them or place identification marks
on them or any part thereof or deal with the same in such other manner as he considers
necessary.
(3) The provisions of the Code of Criminal Procedure, 1973 relating to searches
or seizures shall apply, mutatis mutandis, to every search and seizure made under this
section.
 
 
 
210.Investigation into affairs of company.

(1) Where the Central Government is of the opinion, that it is necessary to
investigate into the affairs of a company,—
(a) on the receipt of a report of the Registrar or inspector under section 208;
(b) on intimation of a special resolution passed by a company that the affairs of
the company ought to be investigated; or
(c) in public interest,
it may order an investigation into the affairs of the company.
(2) Where an order is passed by a court or the Tribunal in any proceedings before it
that the affairs of a company ought to be investigated, the Central Government shall order an
investigation into the affairs of that company.
(3) For the purposes of this section, the 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.
 
 
 
211.Establishment of Serious Fraud Investigation Office.

(1) The Central Government shall, by notification, establish an office to be called
the Serious Fraud Investigation Office to investigate frauds relating to a company:
Provided that until the Serious Fraud Investigation Office is established under subsection
(1), the Serious Fraud Investigation Office set-up by the Central Government in terms
of the Government of India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall
be deemed to be the Serious Fraud Investigation Office for the purpose of this section.
(2) The Serious Fraud Investigation Office shall be headed by a Director and consist
of such number of experts from the following fields to be appointed by the Central Government
from amongst persons of ability, integrity and experience in,—
(i) banking;
(ii) corporate affairs;
(iii) taxation;
(iv) forensic audit;
(v) capital market;
(vi) information technology;
(vii) law; or
(viii) such other fields as may be prescribed.
(3) The Central Government shall, by notification, appoint a Director in the Serious
Fraud Investigation Office, who shall be an officer not below the rank of a Joint Secretary to
the Government of India having knowledge and experience in dealing with matters relating to
corporate affairs.
(4) The Central Government may appoint such experts and other officers and employees
in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge
of its functions under this Act.
(5) The terms and conditions of service of Director, experts, and other officers and
employees of the Serious Fraud Investigation Office shall be such as may be prescribed.
 
 
 
212.Investigation into affairs of Company by Serious Fraud Investigation Office.

(1) Without prejudice to the provisions of section 210, where the Central
Government is of the opinion, that it is necessary to investigate into the affairs of a company
by the Serious Fraud Investigation Office—
(a) on receipt of a report of the Registrar or inspector under section 208;
(b) on intimation of a special resolution passed by a company that its affairs are
required to be investigated;
(c) in the public interest; or
(d) on request from any Department of the Central Government or a State
Government,
the Central Government may, by order, assign the investigation into the affairs of the said
company to the Serious Fraud Investigation Office and its Director, may designate such
number of inspectors, as he may consider necessary for the purpose of such investigation.
(2) Where any case has been assigned by the Central Government to the Serious
Fraud Investigation Office for investigation under this Act, no other investigating agency of
Central Government or any State Government shall proceed with investigation in such case
in respect of any offence under this Act and in case any such investigation has already been
initiated, it shall not be proceeded further with and the concerned agency shall transfer the
relevant documents and records in respect of such offences under this Act to Serious Fraud
Investigation Office.
(3) Where the investigation into the affairs of a company has been assigned by the
Central Government to Serious Fraud Investigation Office, it shall conduct the investigation
in the manner and follow the procedure provided in this Chapter; and submit its report to the
Central Government within such period as may be specified in the order.
(4) The Director, Serious Fraud Investigation Office shall cause the affairs of the
company to be investigated by an Investigating Officer who shall have the power of the
inspector under section 217.
(5) The company and its officers and employees, who are or have been in employment
of the company shall be responsible to provide all information, explanation, documents and
assistance to the Investigating Officer as he may require for conduct of the investigation.
(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the
offences covered under sub-sections (5) and (6) of section 7, section 34, section 36, subsection
(1) of section 38, sub-section (5) of section 46, sub-section (7) of section 56, subsection
(10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206,
section 213, section 229, sub-section (1) of section 251, sub-section (3) of section 339 and
section 448 which attract the punishment for fraud provided in section 447 of this Act shall
be cognizable and no person accused of any offence under those sections shall be released
on bail or on his own bond unless—
(i) the Public Prosecutor has been given an opportunity to oppose the application
for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied
that there are reasonable grounds for believing that he is not guilty of such offence
and that he is not likely to commit any offence while on bail:
Provided that a person, who, is under the age of sixteen years or is a woman or is sick
or infirm, may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence referred
to this sub-section except upon a complaint in writing made by—
(i) the Director, Serious Fraud Investigation Office; or
(ii) any officer of the Central Government authorised, by a general or special
order in writing in this behalf by that Government.
(7) The limitation on granting of bail specified in sub-section (6) is in addition to the
limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in
force on granting of bail.
(8) If the Director, Additional Director or Assistant Director of Serious Fraud
Investigation Office authorised in this behalf by the Central Government by general or
special order, has on the basis of material in his possession reason to believe (the reason for
such belief to be recorded in writing) that any person has been guilty of any offence punishable
under sections referred to in sub-section (6), he may arrest such person and shall, as soon as
may be, inform him of the grounds for such arrest.
(9) The Director, Additional Director or Assistant Director of Serious Fraud Investigation
Office shall, immediately after arrest of such person under sub-section (8), forward a copy of
the order, along with the material in his possession, referred to in that sub-section, to the
Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed
and the Serious Fraud Investigation Office shall keep such order and material for such period
as may be prescribed.
(10) Every person arrested under sub-section (8) shall within twenty-four hours, be
taken to a Judical Magistrate or a Metropolitan Magistrate, as the case may be, having
jurisdiction:
Provided that the period of twenty-four hours shall exclude the time necessary for the
journey from the place of arrest to the Magistrate's court.
(11) The Central Government if so directs, the Serious Fraud Investigation Office shall
submit an interim report to the Central Government.
(12) On completion of the investigation, the Serious Fraud Investigation Office shall
submit the investigation report to the Central Government.
(13) Notwithstanding anything contained in this Act or in any other law for the time
being in force, a copy of the investigation report may be obtained by any person concerned
by making an application in this regard to the court.
(14) On receipt of the investigation report, the Central Government may, after examination
of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud
Investigation Office to initiate prosecution against the company and its officers or employees,
who are or have been in employment of the company or any other person directly or indirectly
connected with the affairs of the company.
(15) Notwithstanding anything contained in this Act or in any other law for the time
being in force, the investigation report filed with the Special Court for framing of charges
shall be deemed to be a report filed by a police officer under section 173 of the Code of
Criminal Procedure, 1973.
(16) Notwithstanding anything contained in this Act, any investigation or other action
taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies
Act, 1956 shall continue to be proceeded with under that Act as if this Act had not been
passed.
(17) (a) In case Serious Fraud Investigation Office has been investigating any offence
under this Act, any other investigating agency, State Government, police authority, income-tax
authorities having any information or documents in respect of such offence shall provide all
such information or documents available with it to the Serious Fraud Investigation Office;
(b) The Serious Fraud Investigation Office shall share any information or documents
available with it, with any investigating agency, State Government, police authority or incometax
authorities, which may be relevant or useful for such investigating agency, State
Government, police authority or income-tax authorities in respect of any offence or matter
being investigated or examined by it under any other law.
 
 
 
213.Investigation into company’s affairs in other cases.

The Tribunal may,—
(a) on an application made by—
(i) not less than one hundred members or members holding not less than
one-tenth of the total voting power, in the case of a company having a share
capital; or
(ii) not less than one-fifth of the persons on the company’s register of
members, in the case of a company having no share capital,
and supported by such evidence as may be necessary for the purpose of showing that the
applicants have good reasons for seeking an order for conducting an investigation into the
affairs of the company; or
(b) on an application made to it by any other person or otherwise, if it is satisfied
that there are circumstances suggesting that—
(i) 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;
(ii) persons concerned in the formation of the company or the management
of its affairs have in connection therewith been guilty of fraud, misfeasance or
other misconduct towards the company or towards any of its members; or
(iii) the members of the company have not been given all the information
with respect to its affairs which they might reasonably expect, including
information relating to the calculation of the commission payable to a managing
or other director, or the manager, of the company,
order, after giving a reasonable opportunity of being heard to the parties concerned, that the
affairs of the company ought to be investigated by an inspector or inspectors appointed by
the Central Government and where such an order is passed, the Central Government shall
appoint one or more competent persons as inspectors to investigate into the affairs of the
company in respect of such matters and to report thereupon to it in such manner as the
Central Government may direct:
Provided that if after investigation it is proved that—
(i) the business of the company is being conducted with intent to defraud its
creditors, members or any other persons or otherwise for a fraudulent or unlawful
purpose, or that the company was formed for any fraudulent or unlawful purpose; or
(ii) any person concerned in the formation of the company or the management of
its affairs have in connection therewith been guilty of fraud,
then, every officer of the company who is in default and the person or persons concerned in
the formation of the company or the management of its affairs shall be punishable for fraud
in the manner as provided in section 447.
 
 
 
214.Security for payment of costs and expenses of investigation.

 Where an investigation is ordered by the Central Government in pursuance of
clause (b) of sub-section (1) of section 210, or in pursuance of an order made by the Tribunal
under section 213, the Central Government may before appointing an inspector under subsection
(3) of section 210 or clause (b) of section 213, require the applicant to give such
security not exceeding twenty-five thousand rupees as may be prescribed, as it may think fit,
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.
 
 
 
215.Firm, body corporate or association not to be appointed as inspector.

No firm, body corporate or other association shall be appointed as an inspector.
 
 
 
216.Investigation of ownership of company.

(1) Where it appears to the Central Government that there is a reason so to do, it
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, whether
real or apparent, of the company; or
(b) who are or have been able to control or to materially influence the policy of
the company.
(2) Without prejudice to its powers under sub-section (1), the Central Government
shall appoint one or more inspectors under that sub-section, if the Tribunal, in the course of
any proceeding before it, 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 to the
company, for the purposes specified in sub-section (1).
(3) While appointing an inspector under sub-section (1), the Central Government may
define the scope of the investigation, whether as respects the matters or the period to which
it is to extend or otherwise, and in particular, may limit the investigation to matters connected
with particular shares or debentures.
(4) Subject to the terms of appointment of an inspector, his powers shall extend to the
investigation of any circumstances suggesting the existence of any arrangement or
understanding which, though not legally binding, is or was observed or is likely to be
observed in practice and which is relevant for the purposes of his investigation.
 
 
 
217.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.
(2) The inspector may require any body corporate, other than a body corporate referred
to in sub-section (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.
(3) 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, 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.
(7) 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.
(10) 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.
(11) Notwithstanding anything contained in this Act or in the Code of Criminal
Procedure, 1973 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 thereupon 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.
 
 
 
218.Protection of employees during investigation.

(1) Notwithstanding anything contained in any other law for the time being in
force, if—
(a) during the course of any investigation of the affairs and other matters of or
relating to a company, other body corporate or person under section 210, section 212,
section 213 or section 219 or of the membership and other matters of or relating to a
company, or the ownership of shares in or debentures of a company or body corporate,
or the affairs and other matters of or relating to a company, other body corporate or
person, under section 216; or
(b) during the pendency of any proceeding against any person concerned in the
conduct and management of the affairs of a company under Chapter XVI,
such company, other body corporate or person proposes—
(i) to discharge or suspend any employee; or
(ii) to punish him, whether by dismissal, removal, reduction in rank or otherwise;
or
(iii) to change the terms of employment to his disadvantage,
the company, other body corporate or person, as the case may be, shall obtain approval of
the Tribunal of the action proposed against the employee and if the Tribunal has any objection
to the action proposed, it shall send by post notice thereof in writing to the company, other
body corporate or person concerned.
(2) If the company, other body corporate or person concerned does not receive within
thirty days of making of application under sub-section (1), the approval of the Tribunal, then
and only then, the company, other body corporate or person concerned may proceed to take
against the employee, the action proposed.
(3) If the company, other body corporate or person concerned is dissatisfied with the
objection raised by the Tribunal, it may, within a period of thirty days of the receipt of the
notice of the objection, prefer an appeal to the Appellate Tribunal in such manner and on
payment of such fees as may be prescribed.
(4) The decision of the Appellate Tribunal on such appeal shall be final and binding on
the Tribunal and on the company, other body corporate or person concerned.
(5) For the removal of doubts, it is hereby declared that the provisions of this section
shall have effect without prejudice to the provisions of any other law for the time being in
force.
 
 
 
219.Power of inspector to conduct investigation into affairs of related companies, etc.

If an inspector appointed under section 210 or section 212 or section 213 to
investigate into the affairs of a company considers it necessary for the purposes of the
investigation, to investigate also the affairs of—
(a) 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;
(b) 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;
(c) 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
(d) any person who is or has at any relevant time been the company’s managing
director or manager or employee,
he 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.
 
 
 
220.Seizure of documents by inspector.

(1) Where in the course of an investigation under this Chapter, 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, falsified or secreted, the inspector may—
(a) 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
(b) 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.
(2) 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:
Provided that the inspector may, before returning such books and papers as aforesaid,
take copies of, or extracts from them or place identification marks on them or any part thereof
or deal with the same in such manner as he considers necessary.
(3) The provisions of the Code of Criminal Procedure, 1973, relating to searches or
seizures shall apply mutatis mutandis to every search or seizure made under this section.
 
 
 
 
221.Freezing of assets of company on inquiry and investigation.

(1) Where it appears to the Tribunal, on a reference made to it by the Central
Government or in connection with any inquiry or investigation into the affairs of a company
under this Chapter or on any complaint made by such number of members as specified under
sub-section (1) of section 244 or a creditor having one lakh amount outstanding against the
company or any other person having a reasonable ground to believe that the removal,
transfer or disposal of funds, assets, properties of the company is likely to take place in a
manner that is prejudicial to the interests of the company or its shareholders or creditors or
in public interest, it may by order direct that such transfer, removal or disposal shall not take
place during such period not exceeding three years as may be specified in the order or may
take place subject to such conditions and restrictions as the Tribunal may deem fit.
(2) In case of any removal, transfer or disposal of funds, assets, or properties of the
company in contravention of the order of the Tribunal under sub-section (1), the company
shall be punishable with fine which shall not be less than one lakh rupees but which may
extend to twenty-five lakh rupees and every officer of the company who is in default shall be
punishable with imprisonment for a term which may extend to three years or with fine which
shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with
both.
 
 
 
222.Imposition of restrictions upon securities.

(1) Where it appears to the Tribunal, in connection with any investigation under
section 216 or on a complaint made by any person in this behalf, that there is good reason to
find out the relevant facts about any securities issued or to be issued by a company and the
Tribunal is of the opinion that such facts cannot be found out unless certain restrictions, as
it may deem fit, are imposed, the Tribunal may, by order, direct that the securities shall be
subject to such restrictions as it may deem fit for such period not exceeding three years as
may be specified in the order.
(2) Where securities in any company are issued or transferred or acted upon in
contravention of an order of the Tribunal under sub-section (1), the company shall be
punishable with fine which shall not be less than one lakh rupees but which may extend to
twenty-five lakh rupees and every officer of the company who is in default shall be punishable
with imprisonment for a term which may extend to six months or with fine which shall not be
less than twenty-five thousand rupees but which may extend to five lakh rupees, or with
both.
 
 
 

 
 

223.Inspector’s report.
 
 
 
(1) An inspector appointed under this 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.
(2) Every report made under sub-section (1) shall be in writing or printed as the Central
Government may direct.
(3) A copy of the report made under sub-section (1) may be obtained by making an
application in this regard to the Central Government.
(4) The report of any inspector appointed under this Chapter shall be authenticated
either—
(a) by the seal of the company whose affairs have been investigated; or
(b) by a certificate of a public officer having the 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.
(5) Nothing in this section shall apply to the report referred to in section 212.
 
 
 
224.Actions to be taken in pursuance of inspector’s report.

(1) 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.
(2) If any company or other body corporate is liable to be wound up under this Act and
it appears to the Central Government from any such report made under section 223 that it is
expedient so to do by reason of any such circumstances as are referred to in section 213, the
Central Government may, unless the company or body corporate is already being wound up
by the Tribunal, cause to be presented to the Tribunal by any person authorised by the
Central Government in this behalf—
(a) a petition for the winding up of the company or body corporate on the
ground that it is just and equitable that it should be wound up;
(b) an application under section 241; or
(c) both.
(3) If from any such report as aforesaid, it appears to the Central Government that
proceedings ought, in the public interest, to be brought by the company or any body
corporate whose affairs have been investigated under this Chapter—
(a) for the recovery of damages in respect of any fraud, misfeasance or other
misconduct in connection with the promotion or formation, or the management of the
affairs, of such company or body corporate; or
(b) 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.
(4) The Central Government, shall be indemnified by such company or body corporate
against any costs or expenses incurred by it in, or in connection with, any proceedings
brought by virtue of sub-section (3).
(5) Where the report made by an inspector states that fraud has taken place in a company
and due to such fraud any director, key managerial personnel, other officer of the company or
any other person or entity, has taken undue advantage or benefit, whether in the form of any
asset, property or cash or in any other manner, the Central Government may file an application
before the Tribunal for appropriate orders with regard to disgorgement of such asset, property,
or cash, as the case may be, and also for holding such director, key managerial personnel,
officer or other person liable personally without any limitation of liability.
 
 
 
225.Expenses of investigation.

(1) The expenses of, and incidental to, an investigation by an inspector appointed
by the Central Government under this Chapter other than expenses of inspection under
section 214 shall be defrayed in the first instance by the Central Government, but shall be
reimbursed by the following persons to the extent mentioned below, namely:—
(a) any person who is convicted on a prosecution instituted, or who is ordered
to pay damages or restore any property in proceedings brought, under section 224, to
the extent that he may in the same proceedings be ordered to pay the said expenses as
may be specified by the court convicting such person, or ordering him to pay such
damages or restore such property, as the case may be;
(b) any company or body corporate in whose name proceedings are brought as
aforesaid, to the extent of the amount or value of any sums or property recovered by it
as a result of such proceedings;
(c) unless, as a result of the investigation, a prosecution is instituted under
section 224,—
(i) any company, body corporate, managing director or manager dealt with
by the report of the inspector; and
(ii) the applicants for the investigation, where the inspector was appointed
under section 213,
to such extent as the Central Government may direct.
(2) Any amount for which a company or body corporate is liable under clause (b) of
sub-section (1) shall be a first charge on the sums or property mentioned in that clause.
 
 
 
226.Voluntary winding up of company, etc., not to stop investigation proceedings.

An investigation under this Chapter may be initiated notwithstanding, and no
such investigation shall be stopped or suspended by reason only of, the fact that—
(a) an application has been made under section 241;
(b) the company has passed a special resolution for voluntary winding up;
or
(c) any other proceeding for the winding up of the company is pending before
the Tribunal:
Provided that where a winding up order is passed by the Tribunal in a proceeding
referred to in clause (c), the inspector shall inform the Tribunal about the pendency of the
investigation proceedings before him and the Tribunal shall pass such order as it may deem
fit:
Provided further that nothing in the winding up order shall absolve any director or
other employee of the company from participating in the proceedings before the inspector or
any liability as a result of the finding by the inspector.
 
 
 
227.Legal advisers and bankers not to disclose certain information.

Nothing in this Chapter shall require the disclosure to the Tribunal or to the
Central Government or to the Registrar or to an inspector appointed by the Central
Government—
(a) by a legal adviser, of any privileged communication made to him in that
capacity, except as respects the name and address of his client; or
(b) by the bankers of any company, body corporate, or other person, of any
information as to the affairs of any of their customers, other than such company, body
corporate, or person.
 
 
 
228.Investigation, etc., of foreigncompanies.

The provisions of this Chapter shall apply mutatis mutandis to inspection, inquiry
or investigation in relation to foreign companies.
 
 
 
229.  Penalty for furnishing false statement, mutilation, destruction of documents.
.
Where a person who is required to provide an explanation or make a statement
during the course of inspection, inquiry or investigation, or an officer or other employee of
a company or other body corporate which is also under investigation,—
(a) destroys, mutilates or falsifies, or conceals or tampers or unauthorisedly
removes, or is a party to the destruction, mutilation or falsification or concealment or
tampering or unauthorised removal of, documents relating to the property, assets or
affairs of the company or the body corporate;
(b) makes, or is a party to the making of, a false entry in any document concerning
the company or body corporate; or
(c) provides an explanation which is false or which he knows to be false,
he shall be punishable for fraud in the manner as provided in section 447.