POWER TO CALL FOR INFORMATION, INSPECT BOOKS AND CONDUCT INQURIES [SECTION 206]
Section 206 of the Companies Act, 2013 provides for the power to call for information, inspect books and conduct inquiries.
According to this section:
(i) Power of the Registrar to call for information, explanation or documents [Section 206 (1)]: According to section 206(1) of the Companies Act, 2013, where on scrutiny of any document filed by a company or on any information received by him, the Registrar is of the opinion that any further information or explanation or any further documents relating to the company is necessary, he may by a written notice require the company—
(a) to furnish in writing such information or explanation; or
(b) to produce such documents, within such reasonable time, as may be specified in the notice.
(ii) Duty of the company and its officers [Section 206 (2)]: On the receipt of a notice under sub-section (1) of section 206, it shall be the duty of the company and its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar
Duty of past officers of the company: According to the proviso to sub-section (2) of section 206, where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge.
(iii) Additional written notice by the Registrar [Section 206 (3)]: The Registrar may by another written notice call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify in the notice:
(a) If no information or explanation is furnished to the Registrar within the time specified under Section 206 (1); or
(b) If the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate; or
(c) If the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and the information or documents do not disclose a full and fair statement of the information required.
Provided that, before any notice is served under this sub-section, the Registrar shall record his reasons in writing for issuing such notice.
(iv) Inquiry by the Registrar [Section 206 (4)]:
(a) The Registrar may call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard, if the Registrar is satisfied:
(1) on the basis of information available with or furnished to him; or
(2) on a representation made to him by any a person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act; or
(3) the grievances of investors are not being addressed,
(b) Before calling the company to furnish in writing any information or explanations and carrying out the inquiry, the Registrar has to inform the company of the allegations made against it by a written order.
(c) The Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section.
(d) It is further provided that where the business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447.
(v) Inspection by Central Government: 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 [Section 206 (5)].
(vi) The Central Government may, having regard to the circumstances by general or special order, authorize any statutory authority to carry out the inspection of books of account of a company or class of companies [Section 206 (6)].
(vii) Failure to furnish information: If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to 1 lakh rupees and in the case of a continuing failure, with an additional fine which may extend to 500 rupees for every day after the first during which the failure continues [Section 206 (7)].
Note: The said provisions apply to the foreign company also [section 228 of the Companies Act, 2013].
Inquiry under section 206(1) of Companies Act, 2013 is fact finding. It is administrative in nature, and it is not necessary to give hearing to the company before ordering inquiry.
