Section 210 of the Companies Act, 2013 ("the Act") empowers the Central Government to order an investigation into the affairs of a company. The power is exercised on the receipt of a report from the ROC or an inspector under Section 208, on the intimation of a special resolution passed by the company, or on the receipt of a report from the Central Government's own officers. The investigation is a serious step, and it is reserved for cases where the ordinary inspection and inquiry powers are inadequate.
The Triggers
The Central Government may order an investigation where it is of the opinion that 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 a fraudulent or unlawful purpose, or that the persons concerned in its formation or management are guilty of fraud, misfeasance, or other misconduct.
The NCLT may also direct the Central Government to investigate a company's affairs on an application by a member or creditor under Section 210(2). The NCLT's direction is subject to the Central Government's satisfaction, and the investigation is conducted by the SFIO where the Central Government so directs.
The Procedure
The investigation is conducted by inspectors appointed by the Central Government, or by the SFIO where the case involves serious fraud. The inspectors have the powers of a civil court in respect of the attendance of witnesses, the discovery and production of documents, and the receiving of evidence on affidavits. The investigation report is submitted to the Central Government, which may take action against the company and its officers.
The Consequences
The investigation can lead to prosecution, to the winding up of the company, or to the recovery of damages. The company and its officers must cooperate with the investigation, and the failure to do so is an offence.
Call to Action
Anuj Desai & Associates advises companies and officers on Section 210 investigations—from the response to the inspection report and the special resolution to the SFIO investigation and the defence against prosecution. If your company is facing an investigation, we can help you navigate the process.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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