PROCEDURE RELATED TO INQUIRY AND INVESTIGATIONS


We are going to deal corporate frauds, genre of crime committed by most educated, polished, professional, greedy white colour criminals. You may find these people to come out on technical or procedural grounds even after committed in all black and whites.

HUMAN INSPECTOR (SECTION 215):

No firm, body corporate or other association shall be appointed as an inspector.

This leaves only human being to be appointed as inspector.

PROCEDURE AND POWERS OF INSPECTORS (SECTION 217):

Duty of Employees:

It shall be duty of all past and present officers, other employees and agents of a company or body corporate or a person under investigation –

(a)  To preserve and to produce to an inspector or any other authorised person all books and papers of the company or relating to the company or 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 reasonable able to give.

Duty of Other Company:

The inspector may require any other body corporate to furnish such information to or produce such books and papers before him or any authorised person to furnish of information or produce books and papers relevant or necessary for the purpose of his investigation.

Period for custody of books:

The inspector shall not keep books and papers for more than one hundred eighty days and returns the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers were produced.

This initial period may be extended to one hundred and eighty days by an order in writing.

Examination on oath:

An inspector may examine on oath –

(a)  Any past or present officer or employee,

(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 and for that purpose may require any of those persons to appear before him personally.

In case of investigation under Section 212, the prior approval of the Director of Serious Fraud Investigation Office shall be sufficient.

The notes of any examination shall be taken down in writing and shall be read over to or by and signed by the person examined and may thereafter by be used in evidence against him.

Power of Inspectors:

The inspector making an investigation shall have all the powers of civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of 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.

Punishment for disobeys:

If any director or officer of the company disobeys the direction issued by the Registrar or the inspector, 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.

If a director or an officer has been convicted of an offence, the director or the officer shall on and from the date of conviction shall be deemed to have vacated his office and shall also be disqualified from holding an office in any company.

Failure of a person:

If any person fails without reasonable or refuse –

(a)  To produce to an inspector or authorised person any book or paper which is his duty;

(b) To furnish any information which is his duty to furnish;

(c)  To appear before the inspector personally when required to do so or to answer any question which is put to him by the inspector;

(d)  To sign the notes of any examination,

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 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.

Assistance to inspector by state authority:

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.

Assistance by foreign government:

The Central Government may enter into an agreement with the Government of a foreign State for reciprocal arrangement to assist in any inspection, inquiry or investigation under this Act or under the corresponding law in force that State with which reciprocal arrangements have been made subject to such notification, exceptions, conditions and qualifications as may be deemed expedient for implementing the agreement with that State.

Gathering evidence through court evidence:

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.

The letter of request shall be transmitted in such manner as the Central Government may specify in this behalf.

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.

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.

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.

PROTECTION OF EMPLOYEES DURING INVESTIGATION (SECTION 218):

If,

(a)  During the course of any investigation of the affairs or other matters of or relating to a company, other body corporate or person or of the membership, ownership of shares or debentures; or

(b) During the pendency of any proceeding against any person concerned in the conduct and management of the affairs of a company,

Such company, other body corporate or person shall not discharge or suspend or punish any employee without approval of the Tribunal.

Following action are not permitted without approval:

(a)  To discharge or suspend any employee; or

(b) To punish any employee, whether by dismissal, removal, reduction in rank or otherwise; or

(c)  To change the terms of employment to his disadvantage.

If the applicant does not receive within thirty days of making of application the approval of the Tribunal, only then applicant concerned may proceed to take against the employee the action proposed.

If the applicant 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. The decision of the Appellate Tribunal on such appeal shall be final and binding on the Parties concerned.

POWER OF INSPECTOR TO CONDUCT INVESTIGATION INTO AFFAIRS OF RELATED COMPANIES (SECTION 219):

If an inspector considers it necessary for the purposes of the investigation, to also investigate 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 of its holding company;

(b) Any other body corporate which is or has any relevant time been managed by any person as managing director or as 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 prior approval of the Central Government, investigate.

SEIZURE OF DOCUMENTS BY INSPECTOR (SECTION 220):

Where in the course of an investigation, 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 of manager of the 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 such books and papers are kept ; and

(b) Seize books and papers as he considers necessary after allowing the company to take companies of or extract from such books and papers at ist cost for the purpose of his investigation.

The inspector shall keep in his custody the books and papers seized up to the conclusion of the investigation as he considers necessary and thereafter shall return the same to the person from whose custody or power they were seized.

The inspector may before returning such books and papers, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the dame in the manner as he consider necessary.

The provisions of the Code of Criminal Procedure, 1973 relating to searches or seizure shall apply mutatis mutandis to every search or seizure under this Section.

FREEZING OF ASSETS OF COMPANY ON INQUIRY AND INVESTIGATION (SECTION 221):

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 affairs of a company or
  • on any complaint made by members under Section 244 or
  • a creditor having one lakh amount outstanding against the company or
  • any other person having a reasonable ground to believe

 that he removal, transfer or disposal of funds, assets, properties of the company is likely to take place 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 a specified period not exceeding three years or may take place subject to such conditions and restrictions as it may deem fit.

In case of contravention of this order, 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.

IMPOSITION OF RESTRICTIONS UPON SECURITIES (SECTION 222):

Where it appears to the Tribunal, in connection with any investigation 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.

In case of contravention of this order, 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.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

Advertisements

2 responses to “PROCEDURE RELATED TO INQUIRY AND INVESTIGATIONS

  1. Pingback: INSPECTOR’S REPORT AND THEREAFTER | AishMGhrana

  2. Pingback: INSPECTOR’S REPORT AND THEREAFTER (Companies Act, 2013) | AishMGhrana

No professional query in comments (but in mail). Only academic discussion here. Comments moderated. Sometime, reply to your mail ID. To subscribe blog, check homepage.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.