The Companies Act of 2013 is a landmark case which had bought many significant changes in the way companies are run in the country. The main objective of this Act was to align all the practices with the global practices, keeping in mind the Indian stakeholders and the public at large. The laws relating to inspection, investigation and inquiry by an inspector, registrar, or Serious Fraud Investigating Officer recruited by the Central government in Chapter XIV, from sections 206 to 229, have all been covered in whole by the Companies Act, 2013. This chapter is necessary because of fraudulent behaviour, corporate fraud, and the misuse of important corporate positions for individual gain while acting in the best interests of the organization. No matter if a company is a private company, public company, small company, or one person company (OPC), the requirements connected to inquiry and inspection apply to all firms equally. Government-owned or foreign-owned companies.
Section 207 of the Companies Act, 2013
- Section 207(1)
It is the duty of the employee, director or the officer to produce all the important documents and the books of accounts when the registrar or the inspector calls for them. It is their duty to produce all the documents and along with that also furnish information, statements and explanations in the required form and to render all the assistance which can be required in connection to the inspection.
- Section 207(2)
When the inspection or the inquiry is being carried out in relation to Section 206 of the Companies Act, 2013, at that time the inspector and the registrar may have to make or can be caused to make copies of the books of accounts or any other books or documents, and may also need to make some identification marks or can be caused to do the same on books or documents as a sign to that shows the inspection of such book of accounts, other books and documents is done. [Section 207(1) (a) & Section 207(1) (b)]
- Section 207 (3)
The inspector and the registrar will have the same powers as vested in the civil court during the inspection or the inquiry and can:-
- summon and enforce the person’s attendance and
- can also examine them on oath,
- can inspect at any place; any books, documents and registers of the company.
The registrar will also have the same powers as vested in civil court for production and development of other papers and the books of account.
Penalty for non-compliance of Section 207 of Companies Act, 2013
If the companies any officer or the director disobeys the order given by the Registrar or the inspector pursuant to this section, the director or officer shall be subject to a fine that must not be less than twenty-five thousand rupees but may not exceed one lakh rupees, as well as a term of imprisonment that may extend to one year. If a director or officer of the company is found guilty of a violation of this section, he or she will be considered to have resigned from that position as of the date of the conviction and will no longer be eligible to hold that position in any other company.
Difference between Inspection and Investigation
|The main aim of the investigation is to find the specific wrongdoing or violations of the law that are in question.||While inspection can be done to find irregularities and in general routine as well.|
|Investigation have are specifically related to one singular suspicion.||While inspections have a very broad scope. Inspections are carried out in regular basis for much compliance together.|
|Investigation can frequently accompany legal powers such as search and seizure.||Inspection can be carried out for a finding a wrong doing or with the means of finding the weak areas and improving them as well.|
|The end of the investigation can result into a penalty or imprisonment, legal actions etc.||Inspections can lead to some penalties or corrective measures.|
When asked for books of account and other papers according to Section 206 in Section 207, directors, officers, or employees of a business are required to furnish the Registrar or inspector with the appropriate documents and statements. The Registrar or inspector has the authority to examine business records, examine discovery, make copies, mark papers with identity, and investigate discovery. Disobedience is punishable by up to one lakh rupees in fines and jail, as well as by being barred from any post in the company.
Frequently asked Questions
To check whether the companies are not involved in any fraudulent activities or activities that are against the laws, it is essential to conduct inspection and inquiry of books of accounts along with other documents of the company.
Private companies, public companies, one person company, small companies or government companies, all are covered under Section 207 of the Companies Act, 2013.
Books of accounts and other papers are required for the examination as per section 207 by the Registrar or the appointed inspector. Therefore, it is the responsibility of every director of the firm to provide the inspector or Registrar with all such documentation.
It is the duty of the directors, employees, and officer of the company to produce all the important documents, books of account, explanations, statements and other important information, whenever required by the registrar.
The inspectors have the same power as the civil court under the Section 207 of Companies Act, 2013, in case of an investigation and inspection.
A fine of not less than twenty-five thousand rupees, but not extending one lakh and an imprisonment of up to one year. Additional the person that is on the position of the director or any officer can be also considered for the resignation.
The outcomes in case of a investigation under the Section 207 of Companies Act, 2013 can be:
• Legal actions
• Other punitive measures
Read Our Article: Section 129 Of Companies Act, 2013: Financial Statement