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  • Writer's pictureArpita Maharana

Sec-217 Procedure,power,etc.,of inspectors

Updated: Oct 4, 2022

#companieslaw #powerofinspector #sec217 #procedure #power #inspector #investgationbyinspector


Procedure, powers, etc., of inspectors.

This section will deal with the procedure to be followed and power of the inspector allotted for enquiry u/s-219.

This article states the bare provision and then explains that in a version that is easy to understand. With every ascending paragraph the bare provision is stated first and then the explanation of that relevant provision is stated towards the end of every pointer. This article aims at making legal jargons easy to understand for every person who reads it.In order to understand the entire section it suggested to follow it till the end .

Quoting the bare provision

(1) It shall be the duty of all officers and other employees and agents including the former officers, employees and agents of a company which is under investigation in accordance with the provisions contained in this Chapter, and where the affairs of any other body corporate or a person are investigated under section 219, of all officers and other employees and agents including former officers, employees and agents of such body corporate or a person—

(a) to preserve and to produce to an inspector or any person authorised by him in this behalf all books and papers of, or relating to, the company or, as the case may be, relating to the 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 reasonably able to give.

Explanation :-This pointer makes it mandatory for all the officers, employees ,agents and even former officers ,employees and agents of the company which is under investigation to

  1. to help and provide with all the papers and books of the company’s which will facilitate the information required regarding the investigation.

  2. And to give every possible assistance to the inspector or the agent reasonably possible

(2) The inspector may 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 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.

Explanation:-The inspector may also require production of any person or any books other than the one stated in previous sub section, in order to furnish information for investigation then that person should be produced before the inspector to facilitate investigation.

(3) The inspector shall not keep in his custody any books and papers produced under sub-section (1) or sub-section (2) for more than one hundred and eighty days and return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers were produced:

Provided that the books and papers may be called for by the inspector if they are needed again for a further period of one hundred and eighty days by an order in writing.

Explanation:-The inspector cannot keep any books or papers provided to him in above 2 subsections for a period of not more than 180 days. They shall be returned to the respected person who provided them,but they can be asked to produce again if needed for a period of 180 days again by an authorised order in writing.

(4) An inspector may examine on oath—

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

(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, as the case may be, and for that purpose may require any of those persons to appear before him personally:

Provided that in case of an investigation under section 212, the prior approval of Director, Serious Fraud Investigation Office shall be sufficient under clause (b).

Explanation:- The inspector has right to examine under oath to following person:-

a)any officers, employees ,agents and even former officers ,employees and agents of the company which is under investigation as mentioned in sub section 1.

b)any other person who is in any way related to the company by an approval from the central government , shall be produced in person to investigation officer.

In case of investigation u/s 212 approval of director and serious fraud investigation officer will also suffice.

(5) Notwithstanding anything contained in any other law for the time being in force or in any contract to the contrary, the inspector, being an officer of the Central Government, making an investigation under this Chapter shall have all the powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit in respect of the 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.

Explanation:- The police officer will have all the powers vested in civil court under criminal procedures while trying a suit, keeping aside whatsoever is mentioned in any other law or contract in following matters:-

a)Production or discovery of any books of account or any other document at the specified time and place.

b) carrying out the attendance of persons and examining then under oath.

C) looking-over any books register or any other documents of the company at any desired place of the inspector.

(6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the inspector under this section, 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.

(ii) If a director or an officer of the company has been convicted of an offence under this section, the director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified from holding an office in any company.

Explanation:- If any officer or director of the company fails to obey the order of the investigation officer then he may be jailed for a period of 1 year or fined with a minimum amount of Rs.25000 which may go to 1 lac.

If an officer or director has been prosecuted of any offer under this section then he shall vacate his office at the very instance and will be disqualified from holding any other office in the company.

(7) The notes of any examination under sub-section (4) 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.

Explanation:-the inspector when examining under oath in sub section 4 shall record the statement in writing and shall be read over and signed by the person examined and can be used as evidence in further proceedings.

(8) If any person fails without reasonable cause or refuses—

(a) to produce to an inspector or any person authorised by him in this behalf any book or paper which is his duty under sub-section (1) or sub-section (2) to produce;

(b) to furnish any information which is his duty under sub-section (2) to furnish;

(c) to appear before the inspector personally when required to do so under subsection (4) 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 (7),

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 which may extend to one lakh rupees, and also with a further fine which may extend to two thousand rupees for everyday after the first during which the failure or refusal continues.

Explanation:- A person can be imprisoned for upto 6 months or fined with no less than Rs.25,000 which may extend upto 1 lac with an increasing fine of Rs.2000 with every subsequent day after failure or refusal under following circumstances:-

  1. failure to produce any paper or book u/subsection - 1 and 2.

  2. To give any information u/subsection-2

  3. To appear before inspector personally when asked by police officer u/subsection -4

  4. To sign the notes of examination u/subsection-7

(9) 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.

Explanation:- the investigating officer may have assisting officer from central government,state government,police or statutory authority to help with inquiry or investigation with prior approval of the central government.

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

Explanation:- The central government can enter into agreement with government of foreign state to assist in any inspection ,inquiry or investigation.

(11) 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:

Provided that the letter of request shall be transmitted in such manner as the Central Government may specify in this behalf:

Provided further that 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.

Explanation:-An application is supposed to be made to a competent court for collecting evidence outside the country or some other place in the country itself the competent court will send a request letter to the court of that particular region for inquiry of the person or collecting the evidence . The letter of request is to be sent in the manner provided by the central government.

(12) 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:

Provided that 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.

Explanation:-Upon receiving the letter from the competent court the central government can forward the letter to the concerned court ,where the court may further order the inspector for further inquiry . The inspector has to submit the investigation report with in 30 days or extended time the court may allow.

The investigation report is further forwarded to the competent court there on.

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