• Krishna Iyer V H

Section 223 and Section 224 of the Companies Act

Updated: May 11


Both Sections 223 and 224 of the Companies Act are a part of Chapter XIV, which deals with Inspection, Inquiry, and Investigation.


Section 223 deals with the report of the inspector after an investigation under Chapter XIV. Section 223(1) provides that the inspector may submit an interim report and he shall submit an interim report if directed by the Central Government. It also provides that at the conclusion of any investigation under this chapter he shall submit a final report to the Central Government. Section 223(2) provides that every such report made under sub-section (1) shall be in writing or printed as directed by the Central Government. Section 223(3) provides that a copy of any such report made under sub-section (1) may be obtained by members, creditors or any other person whose interest is likely to be affected after an application for the same has been made to the Central Government. Section 223(4) states that an inspector appointed under this chapter shall authenticate the report by either:

  1. a seal of the company being investigated under this chapter, or

  2. by a certificate of a public officer having the custody of the report, as provided under section 76 of the Indian Evidence Act, 1872, and such report shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report.

Section (5) states that nothing in this section shall apply to a report made under Section 212 of the Companies Act.


Section 224 lists down the actions that have to be taken pursuant to receiving a report under Section 223.


Section 224(1) provides that if from an inspector’s report, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate or other person whose affairs have been investigated under Chapter XIV has been guilty of any offense for which he is criminally liable, the Central Government may prosecute such person for the offense. The section also provides that it shall be the duty of all officers and other employees of the company or body corporate to give the Central Government the necessary assistance in connection with the prosecution.


Under Section 224(2) if any company or other body corporate is liable to be wound up under this Act or under the Insolvency and Bankruptcy Code of 2016 and it appears to the Central Government from any such report made under section 223 that it is expedient so to do by reason of any such circumstances as are referred to in section 213, the Central Government may, unless the company or body corporate is already being wound up by the Tribunal, present to the Tribunal by any person authorized by the Central Government in this behalf either:

  1. a petition for the winding-up of the company or body corporate on the ground that it is just and equitable that it should be wound up; or

  2. an application under section 241; or

  3. both.


Section 224(3) provided that if from any such report as mentioned above, 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 under this Chapter for the purpose of either:

  1. 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

  2. recovery of any property of such company or body corporate which has been misapplied or wrongfully retained,

then the Central Government may itself bring proceedings for winding up in the name of such company or body corporate.


Section 224(4) further states that the Central Government shall be indemnified by 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 (3).


Section 224(5) provides that if the report made by an inspector states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, any other officer of the company, or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, then the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property, or cash, as the case may be, and also for holding such director, key managerial personnel, officer or any other person liable personally without any limitation of liability.


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