As per Section 209 of the Companies Act, 2013 the procedure of Search and Seizure will be as follows:
Application to Special Court: Registrar or inspector on reasonable grounds to believe that books and papers relating to the affairs of the company may be destroyed, mutilated, altered, falsified or secreted, he can make an application to Special Court.
Power of special court to search and seize: The Special Court, may, by order, authorize it, to enter into the places or premises where books and papers are placed, to search the place and to seize the books and papers as necessary, after allowing the company to make copies.
Search and seizure must be according to provisions of Code of Criminal Procedure.
Return of seized papers: The seized papers must be returned within 180 days. The Registrar can take copies of any document or place identification marks on them before returning the books and papers. He can ask for the books and papers again, if needed.
According to this section:
(i) Circumstances for seizure [Sub-section (1)]: Where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that the books and papers of
(a) a company, or relating to
(b) the key managerial personnel or
(c) any director or
(d) auditor or
(e) company secretary in practice (if the company has not appointed a company secretary),
are likely to be destroyed, mutilated, altered, falsified or secreted, he may, after obtaining an order from the Special Court for the seizure of such books and papers,
(1) enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
(2) seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.
(ii) Period of seizure [Sub-section (2)]:
Original period of seizure: The Registrar or inspector shall return the books and papers seized under sub-section (1), as soon as may be, and in any case not later than 180 day after such seizure, to the company from whose custody or power such books or papers were seized.
Further period of seizure: The books and papers may be called for by the Registrar or inspector for a further period of 180 days by an order in writing if they are needed again.
(iii) Taking of copies, placing identification marks [second proviso to sub-section (2)]:
The Registrar or inspector may, before returning such books and papers as aforesaid, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the same in such other manner as he considers necessary.
(iv) Applicability of the provisions of the Code of Criminal Procedure, 1973 [Sub-section (3)]:
The provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures shall apply, mutatis mutandis, to every search and seizure made under this section. EXAMPLE: A group of creditors of Mac Trading Limited makes a complaint to the Registrar of Companies, Hyderabad alleging that the management of the company is including in destruction and falsification of the accounting records of the company. The complainants requested the Registrar to take immediate steps to seize the records of the company so that the management may not be allowed to temper with the records.
Here, according to the provisions, Registrar may enter and search the place where such books or papers are kept and seize them only after obtaining an order from the Special court.
Since in the given question, Registrar entered the premises for the search and seizure of books of the company without obtaining an order from the Special Court, it was held that he is not authorized to seize the books of the Mac Trading Limited.
