Section 224 of the Companies Act, 2013 ("the Act") empowers the Central Government to take action against persons who have been found guilty of fraud, misfeasance, or other misconduct in the investigation report. The action can include prosecution, an application to the NCLT for appropriate orders, or the winding up of the company.
The NCLT Application
Where the report states that fraud has taken place and that a director, key managerial personnel, or other person has taken undue advantage or benefit, the Central Government may file an application before the NCLT for appropriate orders. The NCLT can order the disgorgement of the undue benefit, the recovery of the loss, and the imposition of penalties.
The Orders
The NCLT's orders under Section 224 are in addition to the criminal prosecution. The Tribunal can order the person to repay the amount, to compensate the company, and to refrain from holding office. The orders are enforceable as decrees of a civil court.
The Defence
The person against whom the action is taken can challenge the findings in the NCLT proceedings and in the criminal proceedings. The defence must address the evidence in the investigation report and must show that the person did not obtain any undue advantage.
Call to Action
Anuj Desai & Associates advises companies and officers on Section 224 proceedings—from the response to the investigation report to the defence in the NCLT and the criminal proceedings. If you are facing a Section 224 application, we can help you respond.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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