“We will end the Inspector – Raj”
This is most promising promise by Indian politicians since last 25 years or more. But Inspectors are essential part of our law enforcement system. All prominent laws have provision of inspectors including the Companies Act, 2013. Recently, Ministry of Corporate Affairs circulated a draft of a notification pending publication in Official Gazette. We will discuss this notification and law behind this notification.
To understand appointment of inspectors, a brief background about appointment of inspectors shall be helpful. [We have already discussed Section 206 earlier here in detail].
The Registrar of Companies may ask information or explanation or document from a company, on scrutiny of a document filed with it. In case of inadequate information or unsatisfactory explanation, the Registrar may by another written notice, call on the company to produce for his inspection such further books of accounts, books, papers and explanations as he may require at such place and at such time as specified in the notice.
Importantly, according to sub – section (5) of Section 206,
“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.”
This sub – section contains empowering provision for appointment of inspector. Any statutory authority may be an inspector, if government authorizes it as such, under sub – section (6) of Section 206.
However, under Section 206(5), inspector should be appointed while under Section 206(6) it should be authorized.
Section 206(5) makes Central Government an appointing authority for purpose of appointment of inspectors. This power to appoint auditor is being delegated under present notification.
As Section 206(5) does not contain power of delegation, the Central Government in present notification gets this power from Section 458(1). According to Section 458(1):
“The Central Government may, by notification, and subject to such conditions, limitations and restrictions as may be specified therein, delegate any of its powers or functions under this Act other than the power to make rules to such authority or officer as may be specified in the notification.”
The condition talked about under Section 458(1) and given under Section 206(5) is “if it is satisfied that the circumstances so warrant”.
Even though, circumstances may in each case differ, the Central Government, for the purpose of this notification assumed general circumstances. By this assumption, the Central Government delegated its power to appoint inspector in general manner to the Regional Director. With this general delegation of power, the Regional Director may appoint inspectors.
As an effect, Regional Directors need not require to have any “satisfaction of the circumstance so warrant” while appointing inspector under Section 206(5) under delegated powers as central government has not put this or any other condition on the Regional Directors to satisfy before appointment of inspection. For the purpose of condition mentioned under Section 206(5), Central Government is already satisfied that there are circumstances present so warrant and only power of appointment is delegated as per existing general circumstances.
Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.