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  • Writer's picturealkapranjal


Updated: Oct 7, 2022









01 The Central Government may prosecute the person for the offence if it appears from an inspector's report made under section 223[1] that the person has violated any law concerning the company, any other body corporate (including an organization formed outside of India, but excludes the following: cooperative societies registered under any law governing cooperative societies, and any other corporate organization that the Central Government may specify in this regard by notification and that is not a company as specified in this Act)[2], or any other person whose affairs have been investigated under this Chapter. It is the responsibility of all officers (including any director, manager, or key managerial staff, as well as any individual who the Board of Directors or one or more of the directors are or are used to acting by when making decisions)[3] and other employees of the company (denotes a business that was founded by this Act or previous company legislation)[4] Or body corporatize to cooperate with the prosecution.

02 If it appears to the Central Government from any such report made under section 223 that it is expedient to do so because of any such circumstances as are referred to in section 213[5] and the company or other body corporate is liable to be wound up under this Act or under the Insolvency and Bankruptcy Code, 2016[6], the Central Government may, unless the Tribunal is already winding up the company or body corporate, cause to be presented to the Tribunal by any person which the Central Government authorizes in this behalf

  • A petition for the corporation or body corporate to be dissolved because doing so is just and equitable;

  • A request made under Section 241[7]; or

  • Both. (In effect as of 12/15/2016)[8]

03 If, based on any such report as stated above, the Central Government determines that action should be taken by the corporation or any other entity whose operations have been inspected under this Chapter—

  • To recover damages for any fraud, misrepresentation, or other wrongdoing in connection with the promotion of, the establishment of, or administration of the operations of, such corporation or body corporate; or

  • The Central Government may initiate winding-up procedures on its behalf to reclaim any of the company's or body corporate's property that has been improperly used or held.

04 Such corporation or body corporate shall reimburse the Central Government for any charges or expenses paid by it in connection with any proceedings initiated under subsection (3).

05 The Central Government may file an application before the Tribunal for appropriate orders about the disgorgement of such asset, property, or cash where the report made by an inspector states that fraud has occurred in a company and due to such fraud any director, key managerial personnel (the Chief Executive Officer, the Managing Director, or the Manager; the Company Secretary; the Full-Time Director; the Chief Financial Officer; any other officer designated by the Board as Key Management Personnel who are not more than one level below the Directors and who is employed Full-Time; and any other officer as may be prescribed)[9], other officers of the company, or any other person or entity, has taken unfair advantage or benefit. (Reported on 2016-06-01)

Rules of such orders-

Rule- 88 Reference to the Tribunal[10]

Any referral to the Tribunal under section 441 of the Act, any referral to the Tribunal by the Central Government under the proviso to subsection (5) of sections 140[11], 221[12], subsection (2) of section 224, subsection (5) of section 224, subsection (2) of section 241 of the Act, any referral under subsection (2) of section 75[13], any complaint by any person under subsection (1) of section 222, or any reference made by a firm under clause (c) of sub-section (4) of section 22A[14] of the Securities Contracts (Regulations) Act, 1956, must be made through a petition or application in Form Number NCLT. 9[15] in Annexure A and be supported by the papers listed in Annexure B.

[1] Companies Act 2013 (Section 223)- [2] Companies Act 2013 (Section 2 (11))- [3] Companies Act 2013 (Section 2 (59))- [4] Companies Act 2013 (Section 2 (20))- [5] Companies Act 2013 (Section 213)- [6] Came into effect after Eleventh Schedule of the Insolvency and Bankruptcy Code, 2016 [7] Companies Act 2013 (Section 224)- [8] Came into effect after Eleventh Schedule of the Insolvency and Bankruptcy Code, 2016 [9] Companies Act 2013 (Section 2 (51))- [10] National Company Law Tribunal Rule 2016 (Rule 88)- [11] Companies Act 2013 (Section 140)- [12] Companies Act 2013 (Section 221)- [13] Companies Act 2013 (Section 75)- [14] Securities Contracts Act, 1956 (Section 22A)- [15] Form number NCLT 09

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