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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956



All notices of any other communications relating to, any general meeting of a company which any member of the company is entitled to have sent to him shall also be forwarded to the auditor of the company; and the auditor shall be entitled to attend any general meeting and to be heard at any general meeting which he attends on any part of the business which concerns him as auditor.



If default is made by a company in complying with any of the provisions contained in sections 225 to 231, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1*[five thousand rupees].

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1. Substituted by Act 53 of 2000, Section 110, for "five hundred rupees" (w.e.f. 13-12-2000 ).

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If any auditor's report is made, or any document of the company is signed or authenticated, otherwise than in conformity with the requirements of sections 227 and 229, the auditor concerned, and the person, if any, other than the auditor who signs the report or signs or authenticates the document, shall, if the default is willful, be punishable with fine which may extend to1*[ten thousand rupees].

233A -2* Power of Central Government to direct special audit in certain cases

(1) Where the Central Government is of the opinion-

(a) That the affairs of any company are not being managed in accordance with sound business principles or prudent commercial practices; or

(b) That any company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or

(c) That the financial position of any company is such as to endanger its solvency;the Central Government may at any time by order direct that a special audit of the company's accounts for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order appoint either a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) (whether or not such chartered accountant is a chartered accountant in practice within the meaning of that Act), or the company's auditor himself to conduct such special audit.

(2) The chartered accountant or the company's auditor appointed under sub-section (1) to conduct a special audit as aforesaid is hereafter in this section referred to as the special auditor.

(3) The special auditor shall have the same powers and duties in relation to the special audit as an auditor of a company has under section 227:-

Provided that the special auditor shall, instead of making his report to the members of the company, make the same to the Central Government.

(4) The report of the special auditor shall, as far as may be, include all the matters required to be included in an auditor's report under section 227 and, if the Central Government so directs, shall also include a statement on any other matter which may be referred to him by that Government.

(5) The Central Government may by order direct any person specified in the order to furnish to the special auditor within such time as may be specified therein such information or additional information as may be required by the special auditor in connection with the special audit; and on failure to comply with such order such person shall be punishable with fine which may extend to 3*[five thousand rupees].

(6) On receipt of the report of the special auditor, the Central Government may take such action on the report as it considers necessary in accordance with the provisions of this Act or any other law for the time being in force:-

Provided that if the Central Government does not take any action on the report within four months from the date of its receipt, that Government shall send to the company either a copy of, or relevant extract from, the report with its comments thereon and require the company either to circulate that copy or those extracts to the members or to have such copy or extracts read before the company at its next general meeting.

(7) The expenses of, and incidental to, any special audit under this section (including the remuneration of the special auditor) shall be determined by the Central Government (which determination shall be final) and paid by the company and in default of such payment shall be recoverable from the company as an arrear of revenue.]

233B - 4* Audit of cost accounts in certain cases

(1) Where in the opinion of the Central Government it is necessary so to do in relation to any company required under clause (d) of sub-section (1) of section 209 to include in its books of account the particulars referred to therein, the Central Government may, by order, direct that an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor 5*[who shall be a cost accountant within the meaning of the Cost and Work Accountants Act, 1959 (23 of 1959):-

Provided that if the Central Government is of opinion that sufficient number of cost accountants within the meaning of the Cost and Works Accountants Act, 1959 (23 of 1959), are not available for conducing the audit of the cost accounts of companies generally, that Government may, by notification in the Official Gazette, direct that, for such period as may be specified in the said notification, such chartered accountant within the meaning of the Chartered Accountants Act, 1949 (33 of 1949), as possesses the prescribed qualifications, may also conduct the audit of the cost accounts of companies, and thereupon a chartered accountant possessing the prescribed qualifications may be appointed to audit the cost accounts of the company.]

6*[(2) The auditor under this section shall be appointed by the Board of directors of the company in accordance with the provisions of sub-section (1B) of section 224 and with the previous approval of the Central Government:-

Provided
that before the appointment of an auditor is made by the Board, a written certificate shall be obtained by the Board from the auditor proposed to be so appointed to the effect that the appointment, if made, will be in accordance with the provisions of sub-section (1B) of section 224.]

(3) An audit conducted by an auditor under this section shall be in addition to an audit conducted by an auditor appointed under section 224.

(4) An auditor shall have the same powers and duties in relation to an audit conducted by him under this section as an auditor of a company has under sub-section (1) of section 227 and such auditor shall make his report to the7*[Central Government] in such form and within such time as may be prescribed and shall also at the same time forward a copy of the report to the company.]

8*[(5) (a) A person referred to in sub-section (3) or sub-section (4) of section 226 shall not be appointed or re-appointed for conducting the audit of the cost accounts of a company.

(b) A person appointed, under section 224, as an auditor of a company, shall not be appointed or re-appointed for conducting the audit of the cost accounts of that company.

(c) If a person, appointed for conducting the audit of cost accounts of a company, becomes subject, after his appointment, to any of the disqualifications specified in clause (a) or clause (b) of this sub-section, he shall, on and from the date on which he becomes so subject, cease to conduct the audit of the cost accounts of the company.

(6) Upon receipt of an order under sub-section (1) it shall be the duty of the company to give all facilities and assistance to the person appointed for conducting the audit of the cost accounts of the company.

(7) The company shall, within thirty days from the date of receipt of a copy of the report referred to in sub-section (4) furnish the Central Government with full information and explanations on every reservation or qualification contained in such report.

(8) If, after considering the report referred to in sub-section (4) and the information and explanations furnished by the company under sub-section (7), the Central Government is of opinion that any further information or explanation is necessary, that Government may call for such further information and explanation and thereupon the company shall furnish the same within such time as may be specified by that Government.

(9) On receipt of the report referred to in sub-section (4) and the in formations and explanations furnished by the company under sub-section (7) and sub-section (8), the Central Government may take such action on the report, in accordance with the provisions of this Act or any other law for the time being in force, as it may consider necessary.

(10) The Central Government may direct the company whose cost accounts have been audited under this section to circulate to its members, along with the notice of the annual general meeting to be held for the first time after the submission of such report the whole or such portion of the said report as it may specify in this behalf.

(11) If default is made in complying with the provisions of this section, the company shall be liable to be punished with fine which may extend to five thousand rupees, and every officer of the company who is in default shall be liable to be punished with imprisonment for a term which may extend to three years, or with fine which may extend to 9* [fifty thousand rupees], or with both.]

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1 . Substituted by Act 53 of 2000, Section 111, for "one thousand rupees" (w.e.f. 13-12-2000).

2. Inserted by Act 65 of 1960, Section 71 (w.e.f. 28-12-1960).

3. Substituted by Act 53 of 2000, Section 112, for "five hundred rupees" (w.e.f. 13-12-2000).

4. Inserted by Act 31 of 1965, Section 23 (w.e.f. 15-10-1965).

5. Substituted by Act 41 of 1974, Section 25, for certain words (w.e.f. 1-2-1975).

6. Sub-section (2) Substituted by Act 41 of 1974, Section 25 (w.e.f. 1-2-1975) and again substituted by Act 31 of 1988, section 35 (w.e.f. 15-6-1988).

7. Substituted by Act 41 of 1974, Section 25, for "Company Law Board" (w.e.f. 1-2-1975).

8. Inserted by Act 41 of 1974, Section 25 (w.e.f. 1-2-1975).

9. Substituted by Act 53 of 2000, Section 113, for "five thousand rupees" (w.e.f. 13-12-2000).

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(1) Where, on perusing any document which a company is required to submit to him under this Act, the Registrar is of opinion that any information or explanation is necessary 1*[with respect to any matter to which such document] purports to relate, he may, by a written order call on the company submitting the document to furnish in writing such information or explanation, within such time as he may specify in the order.

(2) On receipt by the company of an order under sub-section (1), it shall be the duty of the company, and of all persons who are officers of the company, to furnish such information or explanation to the best of their power.

(3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power.

2*[(3A) If no information or explanation is furnished within the time specified or if the information or explanation furnish is, in the opinion of the Registrar, inadequate, the Registrar may by another written order call on the company to produce before him for his inspection such books and papers as he considers necessary within such time as he may specify in the order; and it shall be the duty of the company, and of all persons who are officers of the company, to produce such books and papers.]

(4) If the company, or any such person as is referred to in sub- section (2) or (3), refuses or neglects to furnish any such information or explanation 2*[or if the company or any such person as is referred to in sub-section (3A) refuses or neglects to produce any such books and papers], -

3*[(a) The company and each such person shall be punishable with fine which may extend to 4*[five thousand rupees] and in the case of a continuing offence, with an additional fine which may extend to 5*[five hundred rupees] for every day after the first during which the offence continues; and

(b) The court trying me offence may, on application of the Registrar and after notice to the company, make an order on the company for production before the Registrar of such books and papers as in the opinion of the court, may reasonably be required by the Registrar for the purpose referred to in sub¬section (1).]

6*[(5) On receipt of any writing containing the information or explanation referred to in sub-section (1), or of any book or paper produced whether in pursuance of an order of the Registrar under sub-section (3A) or of an order of the court under sub-section (4), the Registrar may annex that writing, book or paper, or where that book or paper is required by the company, any copy or extract thereof to the document referred to in sub-section (1); and any writing or any book or paper or copy or extract thereof so annexed shall be subject to the like provisions as to inspection, the taking of extracts and the furnishing of copies, as that document is subject.]

7*[(6) If such information or explanation is not furnished within the specified time or if after perusal of such information or explanation or of the books and papers produced whether in pursuance of an order of the Registrar under sub-section (3A) or of an order of the court under sub-section (4), the Registrar is of opinion that the document referred to in sub-section (1), together with such information or explanation or such books and papers discloses an unsatisfactory state of affairs or does not disclose a full and fair statement of any matter to which the document purports to relate, the Registrar shall report in writing the circumstances of the case to the Central Government.]

(7) If it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may, after giving the company an opportunity of being heard by a written order, 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 the provisions of sub-sections (2), (3), 2*[(3A)], and (4) and (6) of this section shall apply to such order.If upon inquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his information to the company.

(8) The provisions of this section shall apply mutatis mutandis to documents which a liquidator, or a foreign company within the meaning of section 591, is required to file under this Act.

234A - 8* Seizure of documents by Registrar

(1) Where, upon information in his possession or otherwise, the Registrar has reasonable ground to believe that books and papers of, or relating to, any company or other body corporate, 9[***] or managing director or manager of such company or other body corporate, 10[***] may be destroyed, mutilated, altered, falsified or secreted, the Registrar may make an application 11[***] to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the Registrar, if necessary, the 12*[Magistrate] may, by order, authorise the Registrar-

(a) To enter, with such assistance as may be required, the place or places where such books and papers are kept;

(b) To search that place in those places in the manner specified in the order; and

(c) To seize such books and papers as he considers necessary.

(3) The, Registrar shall return the books and papers seized under this section as soon as may be, and in any case not later than the thirtieth day, after such seizure, to the company or the other body corporate or, as the case may be, to 14[***] the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized an inform the 12*[Magistrate] of such return:

Provided that the Registrar may, before returning such books and papers as aforesaid, take copies of, or extracts from them 13* [or place identification marks on them or any part thereof] or deal with the same in such other manner as he considers necessary.

(4) Save as otherwise provided in this section, every search 13* [or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898)7 relating to searches 13*[or seizures] made under that Code.]

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1. Substituted by Act 65 of 1960, Section 72, for certain words (w.e.f. 28-12-1960).

2. Inserted by Act 65 of 1960, Section 72 (w.e.f. 28-12-1960).

3. Substituted by Act 65 of 1960, Section 72, for clause (a) and (b) (w.e.f. 28-12-1960).

4. Substituted by Act 53 of 2000, Section 114, for "five hundred rupees" (w.e.f. 13-12-2000).

5. Substituted by Act 53 of 2000, Section 114, for "fifty rupees" (w.e.f. 13-12-2000).

6. Substituted by Act 65 of 1960, Section 72, for sub-section (5) (w.e.f. 28-12-1960).

7. Substituted by Act 65 of 1960, Section 72, for sub-section (6) (w.e.f. 28-12-1960).

8. Inserted by Act 65 of 1960, Section 73 (w.e.f. 28-12-1960).

9. The words "any managing agent or secretaries and treasurers or" omitted by Act 53 of 2000, Section 115 (w.e.f. 13-12-2000).

10. Certain words omitted by Act 53 of 2000, Section 115 (w.e.f. 13-12-2000).

11. The words "to the Tribunal or" Inserted by Act 31 of 1965, Section 24 (w.e.f. 15-10-1965) and omitted by Act 17 of 1967, Section 4 and Schedule (w.e.f. 1-7-1967).

12. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Tribunal or Magistrate, as the case may be" (w.e.f. 1-7-1967).

13. Inserted by Act 31 of 1965, Section 24 (w.e.f. 15-10-1965).

14. See now the Code of Criminal Procedure, 1973 (2 of 1974).

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(1) The Central Government may, where a report has been made by the Registrar under sub-section (6) of section 234, or under sub-section (7) of that section, read with sub-section (6) thereof, appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct.

(2) Where -

(a) In the case of a company having a share capital, an application has been received from not less then two hundred members or from members holding not less than one-tenth of the total voting power therein, and

(b) In the case of a company having no share capital, an application has been received from not less than one-fifth of the persons on the company's register of members,the 2*[Tribunal] may, after giving the parties an opportunity of being heard, by order, declare mat the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct.]

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1. Substituted by Act 31 of 1988, Section 36, for section 235 (w.e.f. 31-5-1991).

2. Substituted by Act 11 of 2003, Section 29, for "Company Law Board".

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An application by members of a company 1*[under sub-section (2) of section 235] shall be supported by such evidence as the 2*[3* [Tribunal] may require] for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount not exceeding one thousand rupees as it may think fit, for payment of the costs of the investigation.

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1. Substituted by Act 31 of 1988, Section 37, for "under clause (a) or (b) of section 235" (w.e.f. 31-5-1991).

2. Substituted by Act 31 of 1988, Section 37, for "Central Government may require" (w.e.f. 31-5-1991).

3. Substituted by Act 11 of 2003, Section 29, for "Company Law Board".

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Without prejudice to its powers under section 235, the Central Government -

(a) Shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if -

(i) The company, by special resolution; or

(ii) The Court, by order,declares that the affairs of the company ought to be investigated by an inspection appointed by the Central Government; and

(b) May do so1*[ in its opinion or in the opinion of the Tribunal ] there are circumstances suggesting -

(i) That the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose;

(ii) That persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or

(iii) That the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director,2[***] or the manager, of the company.

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1. Substituted by Act 11 of 2003, Section 30, for "if in the opinion of the Company Law Board".

2. The words "the managing agent the secretaries, and treasurers" omitted by Act 31 of 1988, Section 38 (w.e.f. 31-5-1991).

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No firm, body corporate or other association shall be appointed as an inspector under section 235 or 237.



(1) If an inspector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of -

(a) Any other body corporate which is, or has at any relevant time been the company's subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary;

2*[(b) Any other body corporate which is, or has at any relevant time been managed by any person as managing director or as manager, who is, or was, at the relevant time, the managing director or the manager of the company; or]

(c) Any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of directors comprises of nominees of the company or is accustomed to act in accordance with the directors or instructions of-

(i) The company, or

(ii) Any of the directors of the company, or

(iii) Any company of whose directorships is held by the employees or nominees of those having the control and management of the first-mentioned company; or

3*[(d) Any person who is or has at any relevant time been the company's managing director or manager,]

4*[The inspector shall, subject to the provisions of sub-section (2) have power so to do and shall report on the affairs of the other body corporate or of the managing director, or manager, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.]

(2) In the case of any body corporate or person referred to in clause (b) (ii), (b) (iii), (c) or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto:-

Provided that before according approval under this sub-section, the Central Government shall give the body corporate or person a reasonable opportunity to show cause why such approval should not be accorded.]

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1 . Substituted by Act 65 of 1960, Section 74, for section 239 (w.e.f. 28-12-1960).

2 . Substituted by Act 53 of 2000, Section 116, for clause (b) (w.e.f. 13-12-2000).

3 . Substituted by Act 53 of 2000, Section 116, for clause (d) (w.e.f. 13-12-2000).

4 . Substituted by Act 53 of 2000, Section 116, for certain words (w.e.f. 13-12-2000).

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Section -240 Production of documents and evidence

1*[(1) It shall be the duly of all officers and other employees and agents of the company, and where the affairs of any other body corporate are investigated by virtue of section 239, of all officers and other employees and agents of such body corporate-

(a) To preserve and to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to, the company or, as the case may be, or of relating to the other body corporate, 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 reasonably able to give.]

2*[(1A) The inspector may, with the previous approval of the Central Government, require any body corporate [other than a body corporate referred to in sub-section (1)] to furnish such information to, or produce such books and papers before him or any person authorised by him in this behalf 3 [with the previous approval of that Government] as he may consider necessary if the furnishing of such information or the production of such books and papers is relevant or necessary for the purposes of his investigation.

(1B) The inspector may keep in his custody any books and papers produced under sub-section (1) or sub-section (1A) for six months and thereafter shall return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers are produced:-

Provided that the inspector may call for the books and papers if they are needed again:-

Provided further that if certified copies of the books and papers produced under sub-section (1A) are furnished to the inspector, he shall return those books and papers to the body corporate concerned.]

4*[(2) An inspector may examine on oath -

(a) Any of the persons referred to in sub-section (1); and

(b) With the previous approval of the Central Government, any other person,in relation to the affairs of the company, 5*[other body corporate] and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally.

(3) If any person fails without reasonable cause or refuses -

(a) To produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which is his duty under sub-section (1) or sub-section (1A) to produce; or

(b) To furnish any information which it is his duty under sub-section (1A) to furnish; or

(c) To appear before the inspector personally when required to do so under sub-section (2) or to answer any question which is put to him by the inspector in pursuance of that sub-section; or

(d) To sign the notes of any examination referred to in sub-section (5),he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 6 [twenty thousand rupees], or with both, and also with a further fine which may extend to 7*[two thousand rupees] for every day after the first during which the failure or refusal continues.]

8[***]

(5) Notes of any examination under sub-section (2) 9 [***] shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(6) In this section -

(a) The expression "officers", in relation to any company or body corporate, includes any trustee for the debenture-holders of such company or body corporate;

(b) The expression "agent", in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporate or person; and

(c) Any reference to 10 [officers and other employees], agents or partners shall be construed as a reference to past as welt as present 10 [officers and other employees], agents or partners, as the case may be.

240A -11* Seizure of documents by inspector

(1) Where in the course of investigation under section 235 or section 237 or section 239 or section 247, the inspector has reasonable ground to believe that the books and papers of, or relating to, any company or other body corporate 12 [***] or managing director or manager of such company or other body corporate, 13 [***] may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application 14 [***] to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate, having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the inspector, if necessary, the 15*[Magistrate] may by order authorise the inspector-

(a) To enter, with such assistance, as may be required, the place or places where such books and papers are kept;

(b) To search that place or those places in the manner specified in the order; and

(c) To seize books and papers he considers necessary for the purposes of his investigation.

(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclusion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate, 16 [***] or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 15*[Magistrate] of such return:-

17*[Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.]

(4) Save as otherwise provided in this section, every search 17* [or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898)18* to searches 17*[or seizures] made under that Code.]

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1. Substituted by Act 53 of 2000, Section 117, for sub-section (1) (w.e.f. 13-12-2000).

2. Inserted by Act 31 of 1965, Section 25 (w.e.f. 15-10-1965).

3. Inserted by Act 34 of 1966, Section 2 (w.e.f. 1-4-1967).

4. Substituted by Act 31 of 1965, Section 25, for sub-sections (2), (3), (3A) and (4) (w.e.f. 15-10-1965).

5. Substituted by Act 53 of 2000, Section 117, for "other body corporate, managing agent, secretaries and treasurers or associate," (w.e.f. 13-12-2000).

6. Substituted by Act 53 of 2000, Section 117, for "two thousand rupees" (w.e.f. 13-12-2000).

7. Substituted by Act 53 of 2000, Section 117, "two hundred rupees" (w.e.f. 13-12-2000).

8. Sub-section (4) omitted by Act 31 of 1965, section 25, as a result of substitution of sub-section (2), (3), (3A) and (4) (w.e.f. 15-10-1965).

9. The word, brackets and figure "or (4)" omitted by Act 31 of 1965, Section 25 (w.e.f. 15-10-1965).

10. Substituted by Act 65 of 1960, Section 75, for "officers" (w.e.f. 28-12-1960).

11. Inserted by Act 65 of 1960, Section 76 (w.e.f. 28-12-1960).

12. The word "any managing agent or secretaries and treasurers or" omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).

13. The words "or any associate of such managing agent or secretaries and treasurers" omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).

14. The words "to the Tribunal or" Inserted by Act 31 of 1965, Section 26 (w.e.f. 15-10-1965) and omitted by Act 17 of 1967, Section 4 and Schedule (w.e.f. 1-7-1967).

15. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Tribunal or Magistrate, as the case may be," (w.e.f. 1-7-1967).

16. Certain words omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).

17. Inserted by Act 31 of 1965, Section 26 (w.e.f. 15-10-1965).

18. See now the Code of Criminal Procedure, 1973 (2 of 1974).

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(1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation shall make a final report to the Central Government.

Any such report shall be written or printed, as the Central Government may direct.

(2) The Central Government -

(a) Shall forward a copy of any report 1*[(other than an interim report)] made by the inspectors to the company at its registered office, and also to anybody corporate 2 [***] dealt with in the report by virtue of section 239;

(b) May, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person -

3*[(i) Who is a member of the company or other body corporate deal with in the report by virtue of section 239; or]

4 [***]

(iii) Whose interests as a creditor of the company, other body corporate, 2 [***]aforesaid appear to the Central government to be affected;

(c) Shall, where the inspectors are appointed 5 [in pursuance of the provisions of sub-section (2)] of section 235, furnish, at the request of the applicants for the investigation, a copy of the report to them;

(d) Shall, where the inspectors are appointed under section 237 in pursuance of an order of the court, furnish a copy of the report to the Court; 6 [***]

7*[(dd) shall, where the inspectors are appointed in pursuance of the provisions of sub-section (2) of section 235 furnish a copy of the report to the 8 [Tribunal]; and]

(e) May also cause report to be published.

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1. Inserted by Act 31 of 1965, Section 27 (w.e.f. 15-10-1965).

2. The words ", managing agent, secretaries and treasurers or associate" omitted by Act 53 of 2000, Section 119 (w.e.f. 13-12-2000).

3. Substituted by Act 53 of 2000, Section 119, for sub-clause (i) (w.e.f. 13-12-2000).

4. Sub-clause (ii) omitted by Act 53 of 2000, Section 119 (w.e.f. 13-12-2000).

5. Substituted by Act 31 of 1988, Section 39, for "under clause (a) or (b)" (w.e.f. 31-5-1991).

6. The word "and" omitted by Act 31 o f1988, Section 39 (w.e.f. 31-5-1991).

7. Inserted by Act 31 of 1988, Section 39 (w.e.f. 31-5-1991).

8. Substituted by Act 11 of 2003, Section 31, for "Company Law Board".

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(1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate,1[***] whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence and it shall be the duty of 9 2*[all officers and other employees] and 3*[agents of the company, or body corporate,] (other than the accused in the proceedings), to give the Central Government all assistance in connection with the prosecution which they are reasonably able to give.

(2) Sub-section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.

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1 . Certain words omitted by Act 53 of 2000, Section 120 (w.e.f. 13-12-2000).

2 . Substituted by Act 65 of 1960, Section 77, for "all officers" (w.e.f. 28-12-1960).

3 . Substituted by Act 53 of 2000, Section 120, for certain word (w.e.f. 13-12-2000).

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If any such company or other body corporate,1[***] is liable to be wound up under this Act and it appears to the Central Government from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (b) of section 237, the Central Government may, unless2*[the company or body corporate,] is already being wound up by the3*[Tribunal], cause to be presented to the3*[Tribunal] by any person authorised by the Central Government in this behalf-

(a) A petition for the winding up of2[the company or body corporate,] on the ground that it is just and equitable that it should be wound up;

(b) An application for an order under section 397 or 398;

(c) Both a petition and an application as aforesaid.

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1 . Certain words omitted by Act 53 of 2000, Section 121 (w.e.f. 13-12-2000).

2 . Substituted by Act 53 of 2000, Section 121, for certain words (w.e.f. 13-12-2000).

3 . Substituted by Act 11 of 2003, Section 32, for "Court".

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(1) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated in pursuance of clauses (a), (b) or (c) of section 239,-

(a) For the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the promotion or formation, or the management of the affairs, of such company or body corporate; or

(b) For the recovery of any property of such company, or body corporate, which has been misapplied or wrongfully retained,
the Central Government may itself bring proceedings for that purpose in the name of such company or body corporate.

(2) The Central Government shall indemnify such company or body corporate against any costs or expenses incurred by it in, or in connection with, any proceedings brought by virtue of sub-section (1).



(1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under section 235 or 237 shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses:-

(a) Any person who is convicted on a prosecution instituted in pursuance of section 242, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 244, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the court convicting such person, or ordering him to pay such damages or restore such property as the case may be;

(b) Any company or body corporate in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings; and

(c) Unless as a result of the investigation, a prosecution is instituted in pursuance of section 242, -

1*[(i) Any company, body corporate, 2 [***] managing director or manager dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except insofar as, the Central Government otherwise directs; and]

(ii) The applicants for the investigation, where the inspector was appointed 3 [in pursuance of the provisions of sub-sections (2)] of section 235, shall be liable to such extent, if any, as the Central Government may direct.

(2) Any amount for which a company or body corporate is liable by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause.

4*[(3) The amount of expenses in respect of which any company, body corporate, 2 [***] managing director or manager is liable under sub-clause (i) of clause (c) of sub¬section (1) to reimburse the Central Government shall be recoverable from that company, body corporate, 2 [***] managing director or manager, as an arrear of land revenue.]

(4) For the purposes of this section, any costs or expenses incurred by the Central Government in or in connection with proceedings brought by virtue of section 244 (including expenses incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.

(5) (a) Any liability to reimburse the Central Government imposed by clauses (a) and (b) of sub-section (1) shall, subject to satisfaction of the right of the Central Government to reimbursement, be a liability also to indemnify all persons against liability under clause (c) of that sub-section.

(b) Any such liability imposed by the said clause (a) shall subject as aforesaid, be a liability also to indemnify all persons against liability under the said clause (b).

(c) Any person liable under the said clause (a) or (b) or sub-clause (i) or (ii) of the said clause (c) shall be entitled to contribution from any other person liable under the same clause or sub-clause, as the case may be, according to the amount of their respective liabilities there under.

(6) Insofar as the expenses to be defrayed by the Central Government under this section are not recovered thereunder, they shall be paid out of moneys provided by Parliament.

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1. Substituted by Act 65 of 1960, Section 78, for sub-clause (i) (w.e.f. 28-12-1960).

2. The words "managing agent, secretaries and treasurers, associate" omitted by Act 53 of 2000, Section 122 (w.e.f. 13-12-2000).

3. Substituted by Act 31 of 1988, Section 40, for "under clause (A) or clause (b)" (w.e.f. 31-5-1991).

4. Substituted by Act 65 of 1960, Section 78, for sub-section (3) (w.e.f. 28-12-1960).

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Last updated on September, 2016

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