Inspection, Inquiry and Investigation

In one line

The Registrar may call for information, inspect the books and hold an inquiry; the Central Government may order an investigation by inspectors or assign it to the Serious Fraud Investigation Office; the Tribunal may order one on a qualified minority's application or on evidence of fraud; inspectors have a civil court's powers, may seize books and may investigate related companies; the Tribunal may freeze assets and restrict securities; and on the report the Central Government may prosecute, petition for winding up or oppression, and seek disgorgement with unlimited personal liability.

In exam wording: section 206 is inspection and inquiry, section 210 investigation by the Central Government, section 212 the Serious Fraud Investigation Office, section 213 investigation ordered by the Tribunal, and section 224 the action on the report.

Why the law has this at all

Company law depends on filings that companies make about themselves. That works while companies are honest, and it fails exactly where the law matters most.

So the Act builds a ladder of increasing intrusion, and the ladder is the structure of any answer on this topic.

At the bottom, the Registrar asks a question. Section 206(1): furnish an explanation, produce a document. Nobody's rights are affected.

Next, he looks for himself. Section 206(3): produce your books for my inspection, and he must record his reasons in writing before he may.

Then he inquires. Section 206(4): where he is satisfied that the business is being carried on for a fraudulent or unlawful purpose, or that investors' grievances are not being addressed, he tells the company the allegations and inquires after giving it a reasonable opportunity of being heard.

Above that, an investigation. Sections 210 to 213: inspectors appointed by the Central Government, on its own opinion, on a report, on the company's own special resolution, in the public interest, on a court's or the Tribunal's order, or on a qualified minority's application.

And at the top, the Serious Fraud Investigation Office, a standing multi-disciplinary body which, once seized of a case, excludes every other agency.

The rise in intrusion is matched by a rise in who decides. The Registrar decides the first two steps himself; the inquiry needs a hearing; the investigation needs the Central Government or the Tribunal.

Some words this chapter uses

An inspector is a person appointed under this Chapter to investigate. Books and papers include books of account, deeds, vouchers, writings, documents, minutes and registers. Disgorgement is the surrender of a benefit wrongly obtained. A significant beneficial owner is the person behind a registered holding. Privileged communication is a communication protected from disclosure by law.