Regulatory Action – CS Professional Study Material

Chapter 5 Regulatory Action – Resolution of Corporate Disputes Non Compliances & Remedies Notes is designed strictly as per the latest syllabus and exam pattern.

Regulatory Action – Resolution of Corporate Disputes Non Compliances & Remedies Study Material

Question 1.
Write short notes on:
Inspection of accounts or records under Foreign Contribution (Regulation) Act, 2010. (Dec 2020, 4 marks)
Answer:
Inspection of accounts or records:
According to Section 23 of Foreign Contribution (Regulation) Act, 2010, if the Central Government has, for any reason, to be recorded in writing, any ground to suspect that any provision of this Act has been or is being, contravened by –
(a) any political party, or
(b) any person; or
(c) any organisation; or
(d) any association,

It may, by general or special order, authorise such Gazetted Officer, holding a Group A post under the Central Government or such other officer or authority or organisation, as it may think fit to inspect any account or record maintained by such political party, person, organisation or association, as the case may be, and thereupon every such inspecting off icer shall have the right to enter in or upon any premises at any reasonable hour, before sunset and after sunrise, for the purpose of inspecting the said account or record.

Question 2.
Write a short note on:
Disgorgement (Dec 2021, 4 marks)
Answer:
Disgorgement

• Under the Companies Act, 2013, in case of fraud, undue advantage or benefit, the Central government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such assets, property, or cash.
• The Central Government mpy also file and application before the T ribunal for holding directors, key managerial personnel, officers or other person personally liable without any limitation of liability.
• Disgorgement is the act of giving up something such as the profits obtained by illegal or unethical gets on demand or by legal compulsion.
• Court can order wrongdoers to pay back to prevent unjust enrichment.
• Disgorgement is a civil remedy and not a punishment or punitive civil action.
• The purpose of such a remedy, as in securities cases, is to deprive the wrongdoer of his or her ill-gotten gains and to deter violations of the law.

Question 3.
Write a short note on:
Powers of Inspector under the Factories Act, 1948. (Dec 2021, 4 marks)
Answer:
Powers of Inspector under the Factories Act, 1948
As per Section 9 of the Factories Act, 1948, an Inspector may exercise any of the following powers within the local limits for which he is appointed:
(i) He can enter any place which is used or which, he has reasons to believe, is used as a factory.
(ii) He can make examination of the premises, plant, machinery, article or substance.
(iii) He can inquire into any accident or dangerous occurrence whether resulting in bodily injury, disability or not, and take on the spot or otherwise statements of any person which he may consider necessary for such inquiry.
(iv) He can require the production of any prescribed register or any other document relating to the factory.
(v) He can seize, or take copies of any register, record of other document or any portion thereof.
(vi) He can direct the occupier that any premises or any part thereof, or anything lying therein, shall be left undisturbed for so long as is necessary for the purpose of any examination under clause (b) of section 9.
(vii) He can take measurement and photographs and make such recordings as he considers necessary for the purpose of any examination.

Question 4.
Write short note on:
Economic Offences Wing (EOW) under DSPE Act, 1946. (June 2022, 4 marks)

Question 5.
Distinguish between the following.
‘Relevant geographic market’ and ‘relevant product market’. (June 2013, 5 marks)
Answer:

Relevant Geographic Market	Relevant Product Market
1. Defined, under Section 2(s) of the Competition Act. 2002.	1. Definition provided by virtue of Section 2(t) of the Competition Act, 2002.
2. It consists of area in which conditions of competition for Supply of goods Services Demand for goods Demand for services can be segregated from that of nearby areas.	2. It consists of those products and services which can be exchanged with each other due to similarity of features etc.

Question 6.
Distinguish between the following :
‘Inspection’ and ‘investigation’. (June 2015, 4 marks)
Answer:
1. Inspection:
(a) Applicable section of Companies Act, 2013: Section 206 of the Companies Act, 2013 deals with inspection of documents and books and papers of any company.
(b) Power of Registrar and Inspector for Inspection: The section empowers the Registrar or Inspectors appointed by Central Government to conduct inspection in order to ascertain that all the transactions have been validly entered into and recorded in appropriate books and those applicable laws, rules and procedures have been compiled by the company.
(c) Penal Provisions: The section provides some penal provisions for the every defaulting officer of the company if it is clear from the inspection that the company is being or has been carried on for a fraudulent or unlawful purpose.

2. Investigation:
(a) Applicable sections of Companies Act, 2013: Sections 210 to 229 of the Companies Act, 2013, contain provisions relating to investigation of the affairs of company.
(b) Meaning: Investigation within the meaning of the relevant provisions of the Act is a form of probe; a deeper probe; into the affairs of a company. It is a fact finding exercise.
(c) Main object of Investigation: The main object of investigation is to collect evidence and to see if any illegal acts or offences are disclosed and then decide the action to be taken.
The said expression also includes investigation of all its business affairs-profits and losses, assets including goodwill, contracts and transactions, investments and other property interests and control of subsidiary companies too.

Question 17.
Distinguish between the following:
‘Inspection’ and ‘Investigation’ of companies in India. (Dec 2017, 4 marks)
Answer:
The inspection is prescribed under Section 206(2) while Section 207 deals with conduct of the inspection.
According to Section 206(2) read with sub-section (1), where the Registrar of Companies require information or explanation or any documents relating to the company and no information or explanation is furnished to the Registrar within the time specified under sub-section (1) or if the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate or if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required, he may, by another written notice, call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify in the notice.

Whereas, in case of ‘investigation’, where the Central Government is of the opinion, that it is-necessary to investigate into the affairs of a company: (a) on receipt of a report of the Registrar or Inspector under Section 208, (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest, may order an investigation into the affairs of the company. [Section 210(1)].

Further, where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of the company [Section 210(2)]. The Central Government may appoint one or more persons as inspector to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct [Section 210(3)].

Question 18.
Can the Registrar of Companies seize the books and documents of a company? Explain. (Dec 2012, 4 marks)
Answer:
Provisions of Section 209 regarding Search and Seizure
1. Power of ROC or Inspector for search and Seizure Section 209(1) Where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that

• the books and papers of a company, or relating to the key managerial personnel or any director or auditor or company secretary in practice if the company has not appointed a company secretary,
• are likely to be destroyed, mutilated, altered, falsified or secreted,
• he may, after obtaining an order from the Special Court for the seizure of such books and papers-
  (a) enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
  (b) Seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.

2. Return of books and papers seized by Registrar/ Inspector Section 209(2) The Registrar or inspector shall

• return the books and papers seized under sub-section (1),
• as soon as may be, and
• in any case not later than one hundred and eightieth day after such seizure, to the company from whose custody or power such books or papers were seized:

1st Proviso:
the books and papers may be called for by the Registrar or inspector for a further period of one hundred and eighty days by an order in writing if they are needed again:

2nd Proviso:
Registrar or inspector may, before returning such books and papers as aforesaid, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the same in such other manner as he considers necessary.

Question 19.
What are the factors which the Competition Commission of India will take into consideration in determining whether an agreement has an appreciable adverse effect on competition? (June 2013, 5 marks)
Answer:
Section 19(3) of Competition Act, 2002 provides that while determining whether an agreement has appreciable adverse effect on competition, the Competition Commission of India shall give due regard to all or any of the following factors, namely:

• creation of barriers to new entrants in the market;
• driving existing competitors out of the market;
• foreclosure of competition by hindering entry into the market;
• accrual of benefits to consumers;
• improvements in production or distribution of goods or provision of services;
• promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.
  If the benefits are more than drawbacks, the contract can be cleared.

Question 20.
State the duties of Director General under the Competition Act, 2002. (Dec 2013, 3 marks)
Answer:
“Director General” means the Director General appointed under sub-section (1) of Section 16 of the Competition Act, 2002 and includes any Additional, Joint, Deputy or Assistant Directors General appointed under that section. The xluties of a Director General are as under:
Director General to investigate contravention

• The Director General shall, when so directed by the Commission, assist the Commission in investigation into any contravention of the provisions of this Act or any rules or regulations made thereunder.
• The Director General shall have all the powers as are conferred upon the Competition Commission under sub-section (2) of Section 36.
• Without prejudice to the provisions of sub-section (2), Sections 217 and 220 of the Companies Act, 2013, so far as may be, shall apply to an investigation made by the Director General or any other person investigating under his authority, as they apply to an inspector appointed under that Act. [Section 41].

Question 21.
Explain in brief ‘anti-competitive agreements’ under the Competition Act, 2002. (June 2014, 5 marks)
Answer:

• Anti-competitive agreements are those which alter the fair competition in the market or affect normal conditions of pricing, supply, demand or distribution of goods or services. Such agreements are essentially void as they do not allow the market to develop in a healthy manner. If ihe conditions making the agreement anti-competitive are altered to remove the defects, the agreement can be implemented.
• Section 3 (1) provides that such agreements shall not be entered into by any entity as they are presumed to have appreciable adverse effect on competition and the burden of proving otherwise lies on the defendant. Section 3(2) of the Act provides that such contracts shall be essentially void.
• The list of such agreements is as follows;
  • Agreements causing price fixation, or limitation of production or supply
  • Agreements causing market apportionment Bid rigging or collusive bidding Tie-up sales
  • Resale price maintenance Refusal to deal with certain parties Exclusive supply or distribution agreements.

Question 22.
How can the order of Competition Commission imposing monetary penalty be executed under the Competition Act, 2002? Explain. (Dec 2014, 7 marks)
Answer:

• Section 39 of the Competition Act, 2002, provides that if a person fails to pay any monetary penalty imposed on him under the Act, the Commission shall proceed to recover such penalty, in a manner as it thinks fit and as is specified by the regulations.
• If in a case where the Commission believes it would be expedient to recover the penalty imposed under this Act as per the provisions of the Income Tax Act, 1961, it may make a reference to this effect to the concerned Income tax authority. Then the penalty would be recovered as if it were tax due under the Income Tax Act.
• Where a reference to the IT officials has been made by the Competition Commission for recovery of penalty, the person upon whom the penalty has been imposed shall be deemed to be an assessee in default under the income Tax Act, 1961. The repercussion of this would be that the sums due by way of penalty will be treated as amounts due by way of penalty, fine and interest under the income-tax Act, 1961.
• The Tax Recovery Commissioner and the Tax Recovery Officer referred to in the Income Tax Act, 1961 shall be deemed to be the Tax Recovery Commissioner and the Tax Recovery Officer for this purpose. The Tax Recovery Officer could then draw a certificate of recovery like a demand relating to penalty under the Income Tax Act.

Question 23.
“The Competition Act, 2002 does not prohibit dominance but the abuse of dominant position.” Discuss. (June 2015, 7 marks)
Answer:

• Dominance of an enterprise or of a group implies a position of supremacy arising from financial or other strength or clout, which enables an enterprise to operate independently of the surrounding competitive forces or to manipulate its competitors or consumers or to control the market as per its desires.
• Actual dominance does not necessarily imply its abuse. Abuse of dominant position means impeding fair competition between two entities, exploiting consumers and controlling the market towards personal ends.
• Abuse of dominant position includes:
  • imposing unfair conditions of supply or unfair pricing predatory pricing
  • limiting production or technical development segregating market
  • creating barriers to entry and impeding healthy competition
  • offering different conditions for similar transactions, i.e.
  • differentiating between consumers
  • hindering market access of consumers or competitors
  • using dominant position in one market to gain advantages in another market.
• Section 4 of the Competition Act, 2002, expressly prohibits any enterprise or group from abusing its dominant position.

Question 24.
Explain the term “Abuse of Dominance” under Competition Act, 2002. (June 2017, 3 marks)
Answer:
Dominance refers to a position of strength which enable an enterprise to operate independently of competitive forces to affect its competitors or consumers or the market in its favour. Abuse of dominant position impedes fair competition between firms, exploits consumers and makes it difficult for the other players to compete with the dominant undertaking on merit. Abuse of dominant position includes:

• imposing unfair conditions or price
• predatory pricing
• limiting production/ markets or technical development,
• creating barriers to entry,
• applying dissimilar conditions to similar transactions, denying market access, and
• using dominant position in one market to gain advantages in another market.

Question 25.
Describe the duties and powers of Director General under Competition Act, 2002. (Dec 2017, 3 marks)
Answer:
The Act provides that the Director General when so directed by the Commission, is to assist the Commission in investigation into any contravention of the provisions of this Act. The Director General is bound to comply with such a direction to render requisite assistance to the Commission.
The Director General, in order to effectively discharge his functions, has been given the same powers as are conferred upon the Commission under Section 36(2). Under section 36(2) the Commission is having same powers as are vested in Civil Court under the Code of Civil Procedure (1908) while trying a suit, in respect of the following matters, namely;
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) subject to the provisions of Sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or copy of such record or document from any office.

Question 26.
An investigation was ordered into affairs of RST Ltd. by the Central Government under Section 210 of the Companies Act, 2013. After carrying out investigation, a report was submitted by the inspector under Section 223 of the Companies Act, 2013. In such a case, what should be done by the Board of Directors of the Company? Please also inform the Board why such investigation might have been ordered. (Dec 2017, 4 marks)
Answer:
Section 224 deals with actions to be taken in pursuance of inspector’s report:
If, from a inspector’s report, made under Section 223, it appears to the Central Government that any person is guilty of any offence for which he is criminally liable, the Central Government may prosecute such person for the offence and 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.
Action also includes winding up, misfeasance, recovery proceedings, etc. if stated in the investigation report.
Where investigation report states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, 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, 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 other person liable personally without any limitation of liability.
In light of above provision, the Board of directors should keep ready point wise reply of all the matters raised by the inspector.

Investigation:
The investigation may be ordered under Sections 210,212 and 213:
210.(1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,
(a) on the receipt of a report of the Registrar or inspector under Section 208;
(b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or
(c) in public interest, it may order an investigation into the affairs of the company.

212. (1) Without prejudice to the provisions of Section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud
Investigation Office:
(a) on receipt of a report of the Registrar or inspector under Section 208;
(b) on intimation of a special resolution passed by a company that its affairs are required to be investigated;
(c) in the public interest; or
(d) on request from any Department of the Central Government or a State Government, the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.

213. The Tribunal may,
(a) on an application made by
(i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or
(ii) not less than one-fifth of the persons on the company’s register of members, in the case of a company having no share capital, and supported by such evidence as may be necessary for the purpose of showing that the applicants have good reasons for seeking an orderfor conducting an investigation into the affairs of the company; or

(b) on an application made to it by any other person or otherwise, if it is satisfied that there are circumstances suggesting that:
(i) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was – formed for any fraudulent or unlawful purpose;
(ii) persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilt of fraud, misfeasance or other misconduct towards the company or towards any of its members; or
(iii) 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, or the manager, of the company, order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an inspector or inspectors appointed by the Central Government and where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct.

Question 27.
What constitutes ‘abuse of dominance’, under Competition Law? (June 2018, 5 marks)
Answer:

• The Competition Act, 2002 focuses on sustaining competition, protect the interests of the consumers and ensure freedom of trade in markets in India. It enables a healthy competitive culture that inspires the business to be fair, competitive and innovative. This enhances consumer welfare and supports economic growth.
• According to Explanation appended to Section 4 of the Competition Act, 2002, dominant position means the strength of an enterprise in the relevant market in India which enables the enterprise to operate independently of competitive forces prevailing in the market and to affect the consumers or competitors or the market in its favor.
• In Jai Balaji Industries Ltd v. Union of India the Guwahati High Court observed that supply of water to citizens is not a sovereign function of the Government. The court found that the Development Authority was neither producing Dl pipes nor controlling the price of Dl pipes in the market.
• Hence, it had no dominant position in the market. The question of abuse of a non-existent position did not arise. Section 4 had no application.

Identification of abusive use of dominant position [Section 4(2)]
There are five kinds of abusive use of dominant position:

1. Unfair or discriminatory trade practices: According to this, abuse of dominant position happens when an enterprise or group directly or indirectly imposes discriminatory conditions on the sale of goods or rendering of prices or price in sale or purchase of predatory price of goods or services.
2. Limiting production or technical or scientific development: An abuse of dominant position happens in the market where an enterprise or group directly or indirectly imposes conditions that limit the production of the goods or technical or scientific development resulting in the production of the goods or services.
3. Denial of access to market, barriers to entry and expansion: Any condition that causes denial to access to the market in any manner shall constitute an abuse of dominant position.
4. imposition of supplementary obligations: when an enterprise makes the conclusion of contracts subject to an acceptance of supplementary obligations by other parties, and those obligations are such that by their very nature or according to commercial usage in that field, they have no connection with the subject-matter of the contract.
5. Protection of other markets: when an enterprise uses its position in a relevant market to enter into another market, then there is an abuse of dominant position.

Prohibition of abuse of dominant position:
Section 4(1) of the Competition Act, 2002 prohibits abuse of dominant position by any enterprise or group. Sub- section (1) says that no enterprise or group shall abuse its dominant position.

Remedies:
Once the abuse of dominant position has been established, the competition authorities can take the following measures:

• A cease and desist order
• Penalty Which may be 10% of annual turnover
• Direct the enterprise to take action which the authority deems fit
• Give any other order which it may think fit
• Divide the dominant enterprise
• In the case of appeal to competition appellate Tribunal, the Tribunal may order for compensation to the party bearing loss.

Conclusion:
The Competition Act, 2002 was formulated as there was a need to shift the focus from curbing monopolies to promoting competition both internal and external. Thus, through its authorities the Competition Act keeps a check on the abuse of the dominant position and other malafide trade practices in the relevant market and on receipt of any complaint, it takes necessary actions and on proving of the allegations respective penalties are imposed on the defaulters.

Question 28.
A crime is alleged to have, been committed in a particular State. The Central Government has referred the case to Central Bureau of Investigation Agency (CBI) for investigation. Can CBI conduct such investigation on the direction of Central Government? Would your answer be different if such direction was given by the Supreme Court of India? (June 2019, 4 marks)
Answer:
No, The Central Bureau of Investigation (CBI) cannot directly investigate based on the directions of Central Government. The functioning of CBI is governed by section 6 of Delhi Special Police Establishment Act, 1946. The Act prohibits the agency from investigating the case outside Delhi and other Union Territories without permission from the Respective state Government. The Central Government can authorize CBI to investigate such a crime in a State but only with the consent of the concerned State Government.
Yes. The Supreme Court and High Courts can order CBI to investigate such a crime anywhere in the country without the consent of the State.

Question 29.
Explain in brief the grounds on which the Central Government may order for investigation into affairs of company. (June 2019, 4 marks)
Answer:
Investigation into the affairs of the company may be ordered by the Central Government on grounds given in Section 210(1) of the Companies Act, 2013. The investigation shall be ordered by Central Government, where an order of investigation was made by a court or the tribunal.
Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company:
(a) on the receipt of a report of the Registrar or inspector.
(b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or
(c) in public interest, it may order an investigation into the affairs of the company.
Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated the Central Government shall order an investigation into the affairs of that company. For the purpose of investigation, the Central Government may appoint one or more inspectors to investigate the affairs of the company. These inspectors shall report on the affairs of the company in such manner as the Central Government may direct.

Question 30.
An investigation has been initiated against PR Limited under Section 210 of the Companies Act, 2013. M, the Managing Director of PR Limited, refused to produce books of accounts before the Inspector and disobeyed the direction issued by the Inspector. What would be the penal provisions for such an action under the Companies Act, 2013? (June 2019, 4 marks)
Answer:
As per section 217(6) of the Companies Act, 2013, if any director or officer of the company disobeys the direction issued by the Registrar or the inspector, 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.
If a director or an officer has been convicted of an offence, the director or the officer shall on and from the date of conviction shall be deemed to have vacated his office and shall also be disqualified from holding an office in any company.
As per section 217(8) of the Companies Act, 2013, if any person fails without reasonable cause or refuse-
(a) To produce to an inspector or authorised person any book or paper which is his duty
(b) To furnish any information which is his duty to furnish
(c) To appear before the inspector personally when required to do so or to answer any question which is put to him by the inspector
(d) To sign the notes of any examination,
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 may extend to one lakh rupees and also with a further fine which may extend to two thousand rupees for every day after the first during which the failure or refusal continues.

Question 31.
A notice of investigation was sent to Maina Limited for alleged misappropriation of funds in the Company. As the Company Secretary of the Company, prepare a report touching upon various aspects of the activities of Company which would prove that the allegation in the instant case is not true. (Dec 2019, 8 marks)
Answer:
Date:
The Investigation Authority
ABC Building
B Block, New Delhi
Subject: Investigation notice on Misappropriation of Funds in Mania Limited.
Ref: INVIT/19-20/520/dated 05-12-2019
We are in receipt of your letter vide No- INVIT/19-20/520/dated 05-12-2019 regarding misappropriation of funds in of the Company under section 179/ 180/185/186/188 and other applicable provisions of the Companies Act, 2013.

In this connection, we would like to inform you that the Business operation of the company (Basic information about the company: like Name, date of incorporation, registered off ice, branches, factories and other offices, status of the company, objects, capital structure, voting rights and shareholding pattern of the company.)
The present Board of the company comprise (Brief history of past management set up, existing management set up, composition of Board of Directors, terms and conditions of the appointment of managerial personnel, details regarding appointment of directors and their relatives to an office or place of profit.)
The Business activities of the company comprises (Nature of existing business, licensed and installed capacities, sources of finance, name of other companies falling within the same group.)
During the period referenced under the letter the company has complied with all the procedure and compliance required under the Act read with rules made thereunder.
A summary of the transaction and procedure followed by the company is provided as under for your reference please.Details of loans taken and loans advanced to Directors, the firms in which they are partners or companies in which they are Directors are in accordance with the provisions of the Act and compliance made by the company in this regard.

• Acquisition/disposal of substantial assets and compliances thereof
• The investments made by the company and limits approved by the company.
• Details of utilisation of loans taken, funds raised by the Company.
• Maintenance of statutory registers including minute’s books are being maintained up- to-date.
• Internal checks and internal control system followed by the company.
• Working results and financial position of the company in the context of its working results for the last three years.
• Compliance by the Company and its officers with the provisions of the Companies Act and other Aots, applicable to the Company.
• A scrutiny of abnormal/heavy expenditure items.
• Transactions with Related Parties

As mentioned above, we have complied with the due procedures and compliance requirement as provided in the law therefore request you kindly consider our submission and take on record the same to close the further investigation in to the affairs of the company.
We shall however submit any further information / clarification as may be required by your good selves.
Thanking you.
For, Mania Limited
(Company Secretary)

Question 32.
Competition Commission of India is proposing to initiate suo moto inquiry against a Company, which is controlling more than fifty percent of market share in the industry. List out the factors to be considered in determining the dominant position of an enterprise. (Dec 2020, 5 marks)
Answer:
Factors to be considered for determining dominant position of an enterprise:
According to Section 19(4) of the Competition Act, 2002, the Competition Commission of India shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4 of the said Act, have due regard to all or any of the following factors, namely:
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;
(h) countervailing buying power;
(i) market structure and size of market;
(j) social obligations and social costs;
(k) Any other factor which the Commission may consider relevant for the inquiry.

Question 33.
An assessing officer who is empowered to impound the books of Accounts has impounded the books of Accounts under section 131 (3) of the Income Tax Act, 1961 without writing and retained such books for one month for in-depth checking. Comment upon the manner of impounding and retention of books, whether it is valid or not with justification. (Dec 2020, 4 marks)
Answer:
According to the proviso of section 131(3) of the Income Tax Act, 1961 , – an assessing officer, being an authority specified u/s 131(1), shall not:

• impound any books / documents without recording for doing so.
• retain such books of Accounts for a period more than 15 days working days without obtaining the approval of the Principal Commissioner/chief commissioner or Principal Director General or Director General or Principal commissioner or Commissioner or Principal Director or Director a therefore.
  In the above case, the Assessing Officer has not recorded his reasons in writing. Further, the facts of the case do not indicate if the Assessing Officer obtained the permission of the Principal Commissioner/Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner or Principal Director or Director, before retaining the books of accounts for more than 15 days. Accordingly, the actions of assessing officer is not valid in the eye of law.

Question 34.
The Bombay High Court ordered the CBI to conduct an investigation against a Public Sector Undertaking (PSU) Chief of the State Government who is involved in a corruption case. The State Government objected to the same as the matter is not referred to it besides no consent is obtained from the State Government in this matter. Under these circumstances, whether Central Bureau of Investigation (CBI) can proceed on its investigation ? Quote the relevant provisions of the law. (Aug 2021, 4 marks)
Answer:
The Central Bureau of Investigation is an organization established under the Delhi Special Police Establishment Act, 1946 (DSPE Act). As per to Section 2 of DSPE Act, CBI can suo-moto take up investigation of offences notified in section 3 only in the Union Territories.
its basic jurisdiction is for Delhi and other Union Territories. Although, in practice it can investigate matters all over India on request or by extension of jurisdiction under Section 5 of the said Act.
Taking up investigation by Central Bureau of Investigation in the boundaries of a State requires prior consent of that State, except within the extended areas under Sec. 5, as per Section 6 of the DSPE Act.
The Central Government can authorize Central Bureau of Investigation to investigate such a crime in a State but only with the consent of the concerned State Government.
The High Courts and the Supreme Court have the jurisdiction to order a Central Bureau of Investigation into an offence alleged to have been committed in a state without the state’s consent, according to a five-judge constitutional bench of the Supreme Court in 2010.
The Court clarified this is an extraordinary power which must be exercised sparingly, cautiously and only in exceptional situations.
Accordingly, Central Bureau of Investigation can proceed on its investigation, as directed by the Bombay High Court in given case, against PSU Chief of the State Government involved in corruption.

Question 35.
What is Disgorgement ? Who has the power to order disgorgement and under which circumstances? (Aug 2021, 4 marks)
Answer:
Section 212(14A) and Section 224(5) of the Companies Act, 2013 provides that, in case of a fraud, where any director, key managerial personnel, 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,, the Central Government may file an application before the National Company Law Tribunal for appropriate orders with regard to disgorgement of such assets, property, or cash, as the case may be, and also for holding directors, key managerial personnel, officers or other person personally liable without any limitation of liability.
Section 212 deals with Investigation into Affairs of Company by Serious Fraud Investigation Office (SFIO) and section 224 is related Actions to be Taken in Pursuance of Inspector’s Report.
Disgorgement is the act of giving up something such as the profits obtained by illegal or unethical acts on demand or by legal compulsion. Court can order wrongdoers to pay back to prevent unjust enrichment.
Disgorgement is a civil remedy and not a punishment or punitive civil action. The purpose of such a remedy, as in securities cases, is to deprive the wrongdoer of his or her ill-gotten gains and to deter contravention of the law.
NCLT may make order of disgorgement in the circumstances mentioned under above mentioned provisions.

Question 36.
A GST Assessing Officer authorised by the Commissioner enters a shop in bazaar and purchases some goods and demands for invoice of the goods he purchased. He checks the invoice, for its correctness and then returns the goods and asks for cancellation of the bill. Whether an officer has power to purchase the goods, just to check issue of tax invoice? Whether he can demand,cancellation of bill and return of amount for such purchases? (Dec 2021, 4 marks)
Answer:
According to Section 67(12) of the Central Goods and Services Tax Act, 2017, the Commissioner or an officer authorized by him may cause purchase of any goods or services or both by any person authorized by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.
Accordingly, the GST Officer is empowered to make test purchases to check invoices or bills and bills raised for such test purchases have to be cancelled and the amount paid by the officer have to be returned.

Question 37.
Officers from Income Tax Department have seized some”‘ assets and money from Gul Ltd.’s premises. After one year of such seizure the assessment was completed by the Income Tax Department and the outstanding tax demands were met out from the sale of assets. Gul Ltd. claims interest from the Income Tax Department for the assets and monies seized, as more than one year has elapsed from seizure.
In background of provisions of Income-tax Act, is the claim of the Company justified? (Dec 2021, 4 marks)
Answer:
Interest on assets ceased
As per Section 132B(4) of the Income-tax Act, 1961 (the Act), the Central Government shall pay simple interest at the rate of one-half per cent for every month or part of a month on the amount by which the aggregate amount of money seized under section 132 of the Act or requisitioned under section 132A of the Act, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section.

Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 of the Act or requisition under section 132A of the Act was executed to the date of completion of the assessment under section 153A of the Act or under Chapter XIV-B.
Conclusion: Therefore, the claim of the Company is justified.

Question 38.
The Joint Commissioner of CGST authorised the Assistant Commissioner for search and seizure of certain goods and relevant documents available at the premises of SNL Ltd., where the goods were stored. Due to COVID-19 pandemic situation, the Assistant Commissioner could not inspect the premises on the scheduled date. Explain the further course of action available to the Officer under the CGST Act, 2017. (June 2022, 4 marks)

Question 39.
Explain the factors which Competition Commission of India (CCI) will take into account to determine whether an agreement has any appreciable adverse effect on competition in the market. (June 2022, 4 marks)

Question 40.
2013 – Dec [5] Answer the following citing the relevant provisions of law/case law, if any:
(c) One of the major creditors of Joy Ltd. is of the opinion that an investigation in the affairs of the company needs to be undertaken in the interest of the company and the creditors. Can he make an application for investigation of Joy Ltd. to the National Company Law Tribunal? (Dec 2013, 4 marks)
Answer:
1. Can a creditor can apply for investigation to Tribunal?: No a creditor is not entitled to make an application for the investigation of the affairs of Joy Ltd. to Tribunal.

2. Provisions of Section 210 of Companies Act, 2013:
(A) Order of CG: Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of the company:
(a) on the receipt of a report of the Registrar or inspector under Section 208;
(b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or
(c) in public interest, it may order an investigation into the affairs of the company.

(B) Order of Tribunal Where an order is passed by a NCLT in any proceedings before it that the affairs of a Company ought to be investigated; the Central Government shall order an investigation into the affairs of that company.

(C) Appointment of inspectors For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct. [Section 210(3)].

Question 41.
Mrs. Geeta is Managing Director of HEL Limited. She has been arrested for an offence covered under Section 447 of the Companies Act, 2013 on a complaint made by the Director, Serious Fraud Investigation Office. Geeta seeks your legal advice to know the conditions under which she can be released on bail. Advise Geeta. (June 2019, 4 marks)
Answer:
According to Section 212(6) of the Companies Act, 2013, notwithstanding anything contained in the Code o’ Criminal Procedure, 1973, offence
covered under section 447 shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless:
(i) The Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) Where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. A person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs. The Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by-
(i) The Director, Serious Fraud Investigation Office; or
(ii) Any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.
Hence, in the instant case, Geeta has been arrested for an offence covered under section 447 of the Act on a complaint made by the Director, SFIO.
Geeta may be released (on the grounds of being a woman) on bail if the Special Court so directs.

Question 42.
P is an employee of ABC Limited and he is being investigated under the provisions of Companies Act, 2013. The Company wants to terminate P on the ground that an investigation is going on against him. They have filed the application to Tribunal for approval of termination. Company has not received any reply from the Tribunal within 30 days of filling the application. The Company considers it as a deemed approval and terminates him. Is the contention of Company valid in law? (June 2019, 4 marks)
Answer:
Yes, the termination of P made by the company is totally valid in law and company can do so by considering deemed approval of tribunal.
The provision of Section 218 of the Companies Act, 2013 states that the company is required to take approval of the tribunal before taking action against the employee if there is any pendency of any proceedings against any person concerned in the conduct and management of the affairs company. The company shall require approval in the following circumstances:

• discharge or suspension of an employee or
• punishment to an employee by dismissal, removal, reduction in rank or otherwise or
• change in the terms of employment to the disadvantage of employee(s) The Tribunal shall notify its objection to the action proposed in writing.

In case, the company other body corporate or person concerned does not receive the approval of the Tribunal within 30 days of making the application, it may proceed to take the action proposed against the employee. That means it can be consider as a deemed approval by the tribunal.

Question 43.
Mrs. Meera was the Managing Director of ME India Private Limited. During her tenure, she sold few properties of the Company and cleared all the registered mortgages. She also diverted Company’s funds of ₹ 50 Lakhs to her bank account and diverted another ₹ 10 Lakhs to pay off and discharge the Housing Loan on her daughter’s property. Later, winding up proceedings were initiated against the Company.
Can the Liquidator of the Company commence proceedings against Mrs. Meera and her daughter in these circumstances? (Dec 2019, 4 marks)
Answer:
Section 336 of the Companies Act, 2013 also covers the offences which were committed by the officers of the company when the company was not under winding up.

In case where the company is subsequently ordered to be wound up, the offences committed by the officers of the company while the company was a going concern, will still be dealt under Section 336, though such offence could be dealt with under other relevant sections had it remain a going concern. Action covered under Section 336(1)(d) are those which were committed within the twelve months immediately before the commencement of the winding up or at any time there after.

Further, Section 329 of the Companies Act, 2013 provides that any transfer of property of any kind by a company other than the transfer made in the ordinary course of business or the transfer is made in good faith and for a value consideration made within a period of one year prior to the presentation of the petition for winding up shall be void against the liquidator. The facts provided are similar to the facts of Fodare Pty Ltd. v. Shearn[2011] case. Shearn was the sole director of the Company during the relevant period and by sale of a property of the Company, she cleared all registered mortgages and diverted funds to the tune of A$ 383,000 to her bank account and diverted another A$ 251,000 to pay up and discharge a mortgage over a her daughter’s property. The company was wound up. Liquidator commenced proceedings seeking a declaration that Shearn was in breach of fiduciary duties and her daughter was charged On the ground that she falls within the ambit of a constructive trustee as she was aware that she is receiving funds out of proceeds arising from sale of company’s property.

It was held that Shearn was liable to the Company for equitable compensation of both the amounts and statutory compensation together with interest and costs. Further, the Supreme Court held that her daughter was also liable to the company for equitable compensation of A$ 251,000 plus interest. The Court found that the daughter might be aware that her mother who was a former bankrupt did not have money and the property that was sold belonged to the company.

The Court said the liability of the mother and the daughter for equitable compensation of A$251,000 plus interest would run concurrently such that both of them will be jointly and severally liable.
Hence it can be concluded that Mrs. Meera and her daughter would be jointly and severally liable for diversion of Company’s funds and the Liquidator of the company can commence proceeding against Mrs. Meera and her daughter after following due procedures provided in the Act.

Question 45.
An Assistant Commissioner of Goods and Services Tax (GST) based on the returns filed by a taxable person is of the opinion that the taxable person has suppressed some transaction relating to goods/services and also claimed input Tax Credit in excess of his entitlement under the Goods and Services Act. Therefore, he authorised another officer in writing to inspect the place of business of that taxable person. The taxable person has not allowed the authorised officer to enter his place of business, as he claimed that it is not tenable order u/s 67(1) of the CGST Act.
Do you agree with the argument of the taxable person, can the authorised officer inspect place of business. Quote relevant provisions to justify your answer. (Dec 2020, 5 marks)
Answer:
As per the provisions of section 67(1) of the CGS Act, 2017, only the proper officer, not below the rank of Joint Commissioner may authorise in writing any other officer of central tax to inspect any places of business of the taxable person in case a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under Central Goods and Services Act, 2017 or has indulged in contravention of any of the provisions of the said Act or the rules made thereunder to evade tax under the said Act.
So, the Assistant Commissioner himself cannot pass such order, unless, duly authorised in writing by a Joint Commissioner or any other officer of higher rank.
Hence, the argument of the taxable person is correct as in the absence of the written authorization from an officer of the rank of Joint Commissioner or above, the person authorised by Assistant Commissioner is not allowed to inspect the place of Business of the taxable person.

Question 46.
During the course of investigation under Section 217 of the Companies Act, 2013 it is revealed that the company has taken loans worth ₹ 100 crore from a consortium of Banks in India and failed to repay
them as per the terms of the loan agreement. Further, the Managing Director of the Company, who is a UK National has moved to London and is not responding to the inquiries by the Investigating Officer.
You are required to advise the Bank on the steps to be taken to collect evidence as well as to recover the money lent by the Bank to the Company. (Dec 2020, 4 marks)
Answer:
Steps to be taken to collect evidence and to recover the money lent by the Bank to the Company:
Under sec. 217 (11) of Companies Act, 2013, an application can be made by the inspector to the competent court in India, which may issue a letter of request to a court or authority in UK to deal with such request.
(i) to examine orally, or otherwise, any person, supposed to be acquainted with the facts and circumstances of the case;
(ii) to record his statement made in the course of such examination;
(iii) 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;
(iv) 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.
The letter of request shall be transmitted in such manner as the Central Government may specify in this behalf.
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.

In order to protect the interest of lenders of money to the company assets, sufficient provisions are provided under Companies Act, 2013, which includes:
(i) Freezing of Assets of Company on Inquiry and Investigation: According to Section 221 of Companies Act, 2013, the tribunal on reference made to it by the Central Government in Connection with any inquiry or investigation into affairs of a company on any complaint made by members under Section 244 of the said act or a creditor having outstanding amount of not less than 1 lakh or any other person having a reasonable ground, may by order direct that transfer removal or disposal of funds, assets or properties of the company shall not take place during specified period not exceeding three years or may take place subject to such conditions or restrictions it may impose.
The tribunal may make such order, if it appears to the tribunal that the removal, transfer or disposal of funds, assets or properties of the company will be prejudicial to the interest of the company or shareholders or creditors or public.

(ii) Imposition of Restrictions Upon Securities:
According to Section 222 of Companies Act, 2013, where it appears to the tribunal that there is good reason to find out the relevant facts about any securities issued to or by a company and the tribunal is of the opinion that such facts cannot be found out unless certain restrictions may be imposed the tribunal may by order, direct that the securities shall be subject to restrictions as it may deem fit for such period not, exceed by three years as may be specified in the order.

Question 44.
The Registrar of Companies, Mumbai sent an order to M/s. LRM Container Services Ltd. that it would conduct investigation relating to the financial matters of the Company for the Financial Year commencing from 2016 to 2019. The management of the company after internal discussions terminated its Finance Head and three more employees of the Finance and Accounts Dept, as they were In-charge of the Dept, of the Company during the said period.
Comment on the action of the management of the company quoting the relevant provisions of- the Companies Act, 2013. (Aug 2021, 5 marks)
Answer:
Under section 218 of the Companies Act, 2013 provides protection to employees during investigation. During the course of any investigation and during pendency of any proceeding against any person concerned in the conduct and management of the affairs of a company, this company, other body corporate or person shall not discharge or suspend or punish any employee without prior approval of the National Company Law Tribunal.
This protection is accessible to employees during the investigation of the affairs or other matters of or relating to a company, other body corporate or person or of the membership, ownership of shares or debentures. Following action are not permitted without approval of the NCLT:
(a) To discharge or suspend any employee
(b) To punish any employee, whether by dismissal, removal, reduction in rank or otherwise; or .
(c) To change the terms of employment to his disadvantage.
If the applicant does not collect within 30 days of making of application, the approval of the National Company Law Tribunal only then applicant concerned may proceed to take against the employee the action proposed. If the applicant is unsatisfies is objection raised by the NCLT, (National Company Law Tribunal) it may within a period of thirty days of the receipt of the notice of the objection, prefer an appeal to the Appellate Tribunal.
The decision of the Appellate Tribunal on this appeal shall be final and binding on the Parties concerned.
Therefore, in the above case, management should not out rightly terminated the concerned head of the Finance Department and its employees.
The company should have sought the prior approval of NCLT.
The company may establish an internal enquiry committee, peruse such report, and the recommendation of the committee should be perused before NCLT for punishment or termination as per the involvement of the staff in the matter.
Therefore, the action of management of LRM Container Services Ltd, is in violation of section 218 of the Companies Act, 2013.

Question 45.
Unique Auto Products Ltd., produces electric bikes, which is a new product. Its average per km. expenses in running the bike comes under rupee One. Due to its fuel economy and low cost, it enjoys almost the monopolistic situation in the relevant market. The cost of such bike to the company comes to ₹ 60,000 and the company is able to sale it in the market for ₹ 99,000 per bike.
Looking to the announcement of the Govt of India to promote the electric bikes, some more producers entered in the market. However, due to weak demand of the electric bikes produced by other companies, the cost to these company was around ₹ 80,000 per bike.
In order to enjoy the monopolistic situation, the Unique Auto Products Ltd., reduced the prices of its bike even below its cost price, so that it may remove the other new comers in the market, in a short run.
The other manufactures made complaint before the Competition Commission of India (CCI) about the predatory price technique used by the Unique Auto Products Ltd. Comment, whether CCI can take action in such a situation ? (Aug 2021, 4 marks)
Answer:
Section 19 of the Competition Act, 2002, deals with the inquiry into certain agreements and dominant position of enterprises:
Section 19(1) states that the Competition Commission of India (CCI) may inquire into any alleged contravention of the provisions contained in section 3(1) or 4(1) of the Act either on its own motion or on –
(a) receipt of any information, in such manner and accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association: or
(b) a reference made to it by the Central Government or a State Government or a statutory authority.

Section 4 of the Competition Act, 2002 provides that:
(1) No enterprise or group shall abuse its dominant position.
(2) There shall be an abuse of dominant position under section 4(1), if an enterprise or a group-
(a) directly or indirectly, imposes unfair or discriminatory
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
In the above case, the Unique Auto Products, after entering the new entities in the market decided to sale the bikes below its cost price in order to remove the new comers. This act comes under the predatory price. Therefore, the new entities can approach the CCI for granting relief from the abusing the dominance by the Unique Auto Products Ltd.
Therefore, Competition Commission of India (CCI) may take necessary action under Competition Act, 2002.

Question 46.
Renkel RTA Services Ltd. is the Registrar to the Issue find Transfer Agent (‘RTA’) of Alphanso Ltd. Avan, an investor discovered that certain shares of Alphanso Ltd. were held by his grandfather and accordingly he applied to the RTA seeking information on transferring the said shares in his name. Avan found some mistakes by RTA, while clearing and sorting out the old documents. He made a complaint in the SCORES Platform against the RTA. Based on the complaint, Securities and Exchange’ Board of India (SEBI) ordered investigation by its Wholetime Member (WTM). The investigation revealed several such incidents. WTM of SEBI found that the RTA was negligent and did not exercise appropriate due diligence while processing various requests and prima facie.found violating Clauses 2,3 and 16 of the Schedule III of the Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 (‘Regulations of 1993′). Accordingly, the WTM issued an ex-parte ad interim order prohibiting the RTA from accepting fresh clients in respect of its activities till further directions. The RTA is aggrieved by the ex-parte ad interim order passed by the WTM of the SEBI has filed an appeal.
In light of judicial pronouncements, comment whether the action of WTM of SEBI is tenable. (Dec 2021, 5 marks)
Answer:
The facts given in the problem are similar to case decided by Securities Appellate Tribunal in Cameo Corporate Services Ltd. v. Securities and Exchange Board of India.
In this case it was observed by Securities Appellate Tribunal (SAT) that having heard the learned counsel for the parties and having perused the ex parte ad interim order and the confirmatory order we find that except . in the case of the complainant where there is a prima facie case of a person impersonating the grandfather of the complainant all other discrepancies either relate to mismatching of photographs or signatures
or that the PAN card being fake and not been verified from the Income tax website / NSDL and accordingly a prima facie case of lack of basic due diligence was made out against the appellant.

• What is noticeable is that apart from the complainant’s case no other investor has come forward to make a complaint relating to the wrongful transfer of the share certificates illegally to a third party.
• The discrepancies pointed out by SEBI do not reveal that the appellant made any gain by this wrongful transfer nor there is any finding of a loss being caused to an investor.
• So, exercising the powers under Section 11 and 11 B of the Securities Exchange Board of India (SEBI) Act, 1992 restraining the appellant from accepting fresh clients for a period of three months for failing to exercise due diligence appears to be harsh and unwarranted in the facts and circumstances of the given case.
• So, ex-parte interim order may be made when there is an urgency. As held in Liberty Oil Mills & Ors. vs. Union of India & 18 Ors. [AIR (1984) SC 1271] decided on May 1,1984, the urgency must be infused by a host of circumstances, viz. large-scale misuse and attempts to monopolise or corner the market.
• In the said decision, the Supreme Court further held that the regulatory agency must move quickly in order to curb further mischief and to take action immediately in order to instil and restore confidence in the capital market.
• The aforesaid principle of law is squarely applicable in the instant case. In our opinion, the impugned order is harsh and unwarranted.
• We are of the opinion that there was no real urgency in passing an ex parte ad interim restraint order which virtually amounts to passing a final order especially when a detailed enquiry has been ordered.
• In our opinion, the respondent is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex parte Interim order.
• We are of the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. The restraint order is in our opinion unjustified.
• In view of the aforesaid, the impugned order insofar as it restrains the appellant from accepting fresh clients is quashed. Other directions issued by the Whole Time Member of Securities Exchange Board of India will continue to operate against the appellant. The appeal is partly allowed. In the circumstances of the case, there shall be no orders as to costs.
• Based on the above judgement, it can be concluded that the Whole Time Member issued an ex-parte ad interim order prohibiting the RTA from accepting fresh clients, without any urgency.
  Conclusion: Therefore, the action of Whole Time Member may not be tenable.

Question 47.
During the income-tax assessment of PR Ltd., the Assessing Officer suspected that the Company concealed incentive income received from its related parties. The Assessing Officer wanted to pursue this further and seized certain documents and records of the Company without obtaining permission from the Competent Authorities. It has been more than two months since the documents have been seized. Is the Assessing Officer empowered to do so ? Evaluate whether the act of the Assessing Officer is justified. (June 2022, 5 marks)

Question 48.
The Board of Directors of All India Tyre Manufacturers Association Ltd., passed a resolution to the effect that no member who is indulging in activities detrimental to the interests of the Company be permitted to examine the records or obtain certified copies thereof. A member of the Company who is also a member of the rival association demands inspection of the register of merribers, minutes of general meetings and certified copies thereof.
The Company refuses the inspection, on the basis of resolution passed by its Board of Directors. Examine the validity of refusal by the Company in the light of the provisions of the Companies Act, 2013 and the remedial action, if any, available to the aggrieved member. (June 2022, 5 marks)

Question 49.
HGV, is a Senior Partner in Supreme & Co. LLP, Practising Company Secretaries. The firm has good repute in handling corporate related matters including investigations and other representations. PRO, Company Secretary of Mano Lifesciences Ltd. is a professional acquaintance of HGV and has reached out to him for advice on investigation initiated on the Company. PRO has requested HGV to meet the Board of Directors of Mano Lifesciences Ltd. and make a presentation on various statutory aspects involved in investigation. Prepare a detailed note, explaining the provisions of investigation into affairs of a Company under Section 212 of the Companies Act, 2013. (June 2022, 8 marks)

Question 50.
Write short note on serious fraud investigation office.
Answer:
The Central Government established Serious Fraud investigation office to investigate frauds related to Companies in accordance with Section 211(1) by way of notification SO 902(E) dated 26th March 2014.
The office shall be headed by a Director and consist of experts of following fields:
(a) Banking,
(b) Corporate Affairs,
(c) Taxation,
(d) Forensic auditing,
(e) Capital Market,
(f) Information Technology,
(g) Law, or
(h) Other fields.

According to Rule 3, the Central Government may appoint persons having expertise in the fields of investigations, cyber forensics, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO) functions under the Act.
The Director shall be an officer not below to the rank of a Joint Secretary having knowledge and experience in dealing with matters relating to corporate affairs.

The Central Government may appoint such experts and other officers and employees in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this Act.
The terms and conditions of service of Director, experts, and other officers and employees of the Serious Fraud Investigation Office shall be such as may be prescribed.
According to Rule 4, The terms and conditions of service of Director, experts and other officers and employees of the Serious Fraud Investigation Office under sub-section (5) of Section 211 shall be as under-
(a) the terms and conditions of appointment of Director shall be governed by the deputation rules under the Central Staffing Scheme of Government of India;
(b) the terms and conditions of service of experts from the Central Government or the State Government or Union territory Government, Public Sector Undertaking, Autonomous Bodies and such other organizations shall be as per the recruitment rules which may be duly notified by the Central Government under Article 309 of the Constitution of India;
(c) the terms and conditions of service of other officers and employees from the Central Government or the State Government or Union territory Government, Public Sector Undertaking, Autonomous Bodies and such other organizations shall be as per the recruitment rules which may be duly notified by the Central Government under Article 309 of the Constitution of India;

The Registrar shall satisfy itself before order of such inquiry on the basis of:

• information available with him; or
• information furnished to him; or
• on representation made to him by any person.

The order shall be made by the Registrar to carry out such inquiry as he deemed fit after giving the company a reasonable opportunity of being heard. The Registrar shall order inquiry after informing the company of the allegation made against it by a written order.
In this order the Registrar will call on the company in writing any information or explanation within specified time.
Further, the Central Government may, on satisfaction that circumstance so warrant, direct the Registrar or Inspector for the purpose to carry out the inquiry under this sub-section (4) of Section 206.
Where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud under Section 447.

Question 51.
Write short note on inspection.
Answer:
Inspection {Sub-section 3,5 and 6 of Section 206}
There are three circumstances, where inspection may be ordered:

• By registrar under sub- section (3) of Section 206;
• By Regional Director under power delegated to it by Central Government under sub-section (5) of Section 206; and
• By Central Government by a general or special order.

Inspection ordered by the Registrar
According to Section 206(3), Inspection may be ordered by the Registrar, where –

• If no information or explanation is furnished to the Registrar within the time specified under sub-section (1); or
• if the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate; or
• if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required.

The Registrar may by another written notice, call on the company to produce for his inspection such further books of accounts, books, papers and explanations as he may require at such place and at such time as specified in the notice.
In this written notice, the Registrar shall record his reason in writing for issuing the notice for inspection.

Inspection ordered by the Regional Director:
The Central Government may, on satisfaction that circumstance so warrant, direct inspection of books and papers of a company by an inspector appointed for the purpose. This power given under sub – section (5) to the Central Government has been delegated to jurisdictional Regional Directors.

Inspection ordered by the Central Government:
The Central Government may by general or special order authorise any statutory authority to carry out the inspection of books of account of a company or class of companies. While issuing such general or special order, the Central Government will give consider the circumstances.
This sub-section gives wide powers to the central government. Such inspection may be carried out by any statutory authority including SFIO, ICSI, ICAi, SEBI, IRDA, CCI, TRAI, etc. depending upon the Circumstances of the case.

Question 52.
Write short note on investigation.
Answer:
Shareholders have been vested with various rights including the right to elect directors under the Companies Act, 2013. However, shareholders are often ill-equipped to exercise effective control over the affairs of companies, and, particularly in companies whose shareholders are widely scattered and the affairs of such companies are managed to all intents and purposes, by its Board of directors to the exclusion of a predominant majority of shareholders. Such a situation leads to abuse of power by persons in control of the affairs of company. It became, therefore, imperative for the Central Government to assume certain powers to investigate the affairs of the company in appropriate cases particularly where there was reason to believe that the business of the company was being conducted with the intent to defraud its creditors or members or for a fraudulent or unlawful purpose, or in any manner oppressive of any of its members. Sections 210 to 229 of the Companies Act, 2013, contain provisions relating to investigation of the affairs of company.

Question 53.
Distinguish between relevant Geographic market and relevant Product market.
Answer;
Relevant Geographic Market
The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the following factors, namely:
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences; and
(h) need for secure or regular supplies or rapid after-sales services.

Relevant Product Market
The Commission shall, while determining the “relevant product market”, have due regard to all or any of the following factors, namely:
(a) physical characteristics or end-use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers; and
(f) classification of industrial products.

Question 54.
What are the adjudication of confiscation provisions under Foreign Contribution (Regulation) Act, 2010.
Answer:

Section	Confiscation	Adjudication by
Section-29	Confiscation of article or currency or security, which is seized	Without Limit: Court of Session Prescribed Limit: Officer, not below the rank of an Assistant Sessions Judge

Reasonable opportunity to make representation needs to be given to the person from whom article/ currency/ security has been seized.

Question 55.
What are the penal provisions under Foreign Contribution (Regulation) Act, 2010.
Answer:

Section 34	For paying, delivering, transferring or dealing in any article or currency or security, whether Indian or foreign, any person, on whom any prohibitory order has been served under Section 10 anything in contravention of the order	Imprisonment: 3 years, or Fine, or Both
Section 35	For accepting, or assisting any person, political party or organisation in accepting, any foreign contribution or any currency or security from a foreign source, in contravention of any provision of this Act or any rule or order made thereunder	Imprisonment: 5 years, or Fine, or Both

Question 56.
Discuss the power of Inspection, Search and Seizure under Goods and Service Tax Act.
Answer:
Power of Inspection
According to Section 67(1) of the CGST Act, (1) where the proper officer,
not below the rank of Joint Commissioner, has reasons to believe that –
(i) a taxable person
(a) has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or
(b) has claimed input tax credit in excess of his entitlement under this Act or
(c) has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

(ii) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place
(a) is keeping goods which have escaped payment of tax or has kept his accounts or
(b) goods in such a manner as is likely to cause evasion of tax payable under this Act,
he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any otiier place.

Power to search and Seizure
According to Section 67(1), where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

Question 57.
Discuss the Search and Seizure under Income Tax Act, 1961.
Answer:
Search and seizure
According to Section 132(1), search and seizure may take place where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that
(a) any person to whom a summons under sub-section (1) of Section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 131 of this Act, or a notice under sub-section (4) of Section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or

(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property).

Section 132 authorises:
(A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or
(B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer,
(the officer so authorised in all cases being hereinafter referred to as the authorised officer) to do search and seizure.
These officers may
(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;
(a) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article orthing;
(b) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search, except bullion, jewellery or other valuable article or thing, being stock-in-trade of the business after making a note of inventory;
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.

Question 58.
Discuss the duties of director general to investigate contravention.
Answer:
According to Section 41(1), the Director General shall, when so directed by the Commission, assist the Commission in investigating into any contravention of the provisions of this Act or any rules or regulations made thereunder.
Powers of Director General
According to Section 41(2), the Director General shall have all the powers as are conferred upon the Commission under sub-section (2) of Section 36. Powers of Civil Court
According to Section 36(2), the Commission shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavit;
(d) issuing commissions for the examination of witnesses or documents;
(e) requisitioning, subject to the provisions of Sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), any public record or document or copy of such record or document from any office.
Powers related to production and seizure of documents and evidence so far as may be, shall apply to an investigation made by the Director General or any other person investigating under his authority, as they apply to an inspector appointed under that Act.
The Factories Act, 1948
According to Section 9 of the Factories act, 1948, an Inspector may exercise any of the following powers within the local limits for which he is appointed:

1. He can enter any place which is used or which, he has reasons to believe, is used as a factory.
2. He can make examination of the premises, plant, machinery, article or substance. Inquire into any accident or dangerous occurrence whether resulting in bodily injury, disability or not, and take on the spot or otherwise statements of any person which he may consider necessary for such inquiry.
3. Require the production of any prescribed register or any other document relating to the factory. Seize or take copies of any register, record of other document or any portion thereof.
4. Take measurement and photographs and make such recordings as he considers necessary for the purpose of any examination.
5. In case of any article or substance found in any premises, being an article or substance which appears to him as having caused or is likely to cause danger to the health or safety of the workers, direct it to be dismantled or subject it to any process or test (but not so as to damage or destroy it unless the same is in the circumstances necessary, for carrying out the purposes of this Act) and take possession of any such article or substance or a part thereof, and detain it for so long as is necessary for such examination.

Production of documents:
The Factories Act requires the maintenance of certain registers and records. Inspectors have been empowered to ask for the production of any such documents maintained under law, and the non-compliance of this has been made an offence.
Power of Central Government to appoint Inquiry Committee

1. According to Section 41D(1) of the Act, the Central Government may, in event of the occurrence of an extraordinary situation involving a factory engaged in a hazardous process, appoint an Inquiry Committee to inquire into the standards of health and safety observed in the factory with a view to finding out the causes of any failure or neglect in the adoption of any measures or standards prescribed for the health and safety of the workers employed in the factory or the general public affected, or likely to be affected, due to such failure or neglect and for the prevention and recurrence of such extraordinary situations in future in such factory or elsewhere.
2. The Committee- appointed under sub-section (1) shall consist of a Chairman and two other members and the terms of reference of the Committee and the tenure of office of its members shall be such as may be determined by the Central Government according to the requirements of the situation.
3. The recommendations of the Committee shall be advisory in nature.

Question 59.
What are the factors determining Dominant Position?
Answer:
Factors determining dominant position
According to Section 19(4), the Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under Section 4, have due regard to all or any of the following factors, namely:
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant for the inquiry.

Question 60.
Discuss the Procedure of Appeal, Penalty and Punishment under Foreign Contribution (Regulation) Act, 2010.
Answer:
Appeal:
Section 31 deals with appeals and provides that any person aggrieved by any order made under Section 29 may prefer an appeal, where the order has been made by the Court of Session, to the High Court to which such Court is subordinate; or where the order has been made by any officer specified, to the Court of Session within the local limits of whose jurisdiction such order of adjudication of confiscation was made, within one month from the date of communication to such person of the order.
Further the appellate court may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of one month, allow such appeal to be preferred within a further period of one month, but not thereafter.
Every appeal preferred under this section shall be deemed to be an appeal from an original decree and the provisions of Order XLI of the First Schedule to the Code of Civil Procedure, 1908, shall, as far as may be, apply thereto as they apply to ah appeal from an original decree.

Penalty and Punishment:
Section 34 prescribes for penalty on any person, on whom any prohibitory order has been served under Section 10, pays, delivers, transfers or otherwise deals with, in any manner whatsoever, any article or currency or security, whether Indian or foreign, in contravention of such prohibitory order, he shall be punished with imprisonment for a term which may extend to three years, or with fine, or with both. The court trying such contravention may also impose on the person convicted an additional fine equivalent to the market value of the article or the amount of the currency or security in respect of which the prohibitory order has been contravened by him or such part thereof as the court may deem fit.

Section 35 provides for punishment with imprisonment for a term which may extend to five years, or with fine, or with both for accepting, or assisting any person, political party or organisation in accepting, any foreign contribution or any currency or security from a foreign source, in contravention of any provision of this Act or any rule or order made there under.

Offences by companies:
Section 39 deals with offences by companies and provides-that where an offence has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. However, such person shall not liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
Further in the case an offence has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Question 61.
Discuss the Procedure of Contravention by Companies under Foreign Exchange Management Act, 1999.
Answer:
Contravention by companies
According to Section 42(1), where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a comoany, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
Nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised due diligence to prevent such contravention.
According to Section 42(2), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any – neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
For the purposes of this section
(i) company means any body corporate and includes a firm or other association of individuals; and
(ii) director, in relation to a firm, means a partner in the firm.

Section 42 of the Act deals with contravention of the provisions of the Act by the Companies and provides that where the person committing the contravention of the Act or Rules happened to be a company, every person who at the time the contravention was committed, was in charge of and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the contravention and liable to be proceeded against and punished accordingly. However, no such persons shall be deemed to be guilty of committing any offence if he proves that such contravention took place without his knowledge or that he exercised adequate steps to prevent such contravention.

In case the contravention is committed by a company and it is proved that such contravention is committed with the knowledge, consent and connivance or is attributed to the neglect on the part of any director, manager or secretary or other officer of the company, they will also be deemed to be guilty of contravention and liable to be proceeded against and punished accordingly.

Question 62.
Explain in brief an Investigation Procedure by SEBI under SEBI Act, 1992.
Answer:
Investigations procedure by SEBI under SEBI Act, 1992 Section 11C of the Act provides that where SEBI has reasonable ground to believe that the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or any intermediary or any person associated with the securities market has. violated any of the provisions of this Act or the rules or the regulations made or directions issued by SEBI thereunder, it may, at any time by order in writing, direct any person specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to SEBI. It is the duty of every manager, managing director, officer and other employee of the company and every intermediary or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to the company or, as the case may be, of or relating to the intermediary or such person, which are in their custody or power.

The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before it or any person authorized by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation. The Investigating Authority may keep in its custody any books, registers, other documents and record produced for six months and thereafter shall return the same to any intermediary or any person associated with securities market by whom or on whose behalf the books, registers, other documents and record are produced.

The Investigating Authority may call for any book, or register, other document and record if they are needed again.
Further, if the person on whose behalf the books, registers, other documents and record are produced requires certified copies of the books, registers, other documents and record produced before the Investigating Authority, it shall give certified copies of such books, registers, other documents and record to such person or on whose behalf the books, registers, other documents and record were produced.
Any person, directed to make an investigation may, examine on oath, any manager, managing director, officer and other employee of any intermediary or any person associated with securities market in any manner, in relation to the affairs of his business and may administer an oath accordingly and for that purpose may require any of those persons to appear before it personally.
If any person fails without reasonable cause or refuses to produce to the Investigating Authority or any person authorised by it in this behalf any book, register, other document and record which is his duty to produce; or to furnish any information which it is his duty to furnish; or to appear before the Investigating Authority personally when required to do so or to answer any question which is put to him by the Investigating Authority; or to sign the notes of any examination, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, which may extend to one crore rupees, or with both, and also with a further fine |which may extend to five lakh rupees for every day after the first during which the failure or refusal continues.

Sub-section 7 lays down that notes of any examination 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. Sub-section 8 lays down that where in the course of jan investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to any, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Magistrate or Judge of such during noted court in Mumbai, as may be notified by the Central Government for an order for the seizure of such books, registers, other documents and records.

Sub-section 8A stipulates that the authorised officer may requisition the services of any police officer or any office of the Central Government, or of both, to assist him for all or any of the purposes specified above and it shall be the duty of every such officer to comply with such requisition. Sub-section (9) provides that after considering the application and hearing the Investigating Authority, if necessary, the Magistrate or Judge of the Designed Court, by order, authorize the investigating authority
(a) to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept.
(b) to search that place or those places in the manner specified in the order and.
(c) to seize books, registers and other documents and records, it consider necessary for the purpose of the investigation.
However, the Magistrate or Judge of the Designated Court shall not authorize seizure of books, registers, other documents and record of any listed public company or a public company (not being the intermediary specified under Section 12) which intends to get its securities listed on any recognized stock exchange unless such company indulges in insider trading or market manipulation.

Sub-section 10 provides that the Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company or the pther body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized. The Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof. Every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures made under that Code.

Question 63.
Discuss the Provision of Investigation under Section 212 of Companies Act, 2013.
Answer:
Investigate into Affairs of a Company (Section 212)
The provision of investigation under Section 212 is in addition of the provision of investigation under Section 210.
The Central Government may by order assign investigation into the affairs of a company-
(a) On receipt of a report of the Registrar or inspector under Section 208;
(b) On intimation of a Special Resolution passed by a company that its affairs are required to be investigated;
(c) In the public interest, or
(d) On request from any department of Central Governmeht or State Government.
According to sub-section (2), Once, a case has been assigned to the Serious Fraud Investigation Office, the case shall not investigated by any other department of Central Government or State Government and all existing investigation shall also be transferred to the Serious Fraud Investigation Office.
Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter. The SFIO shall submit its report to the Central Government within such period as may be specified in the order.
According to sub-section (4), the investigation Officer (IO) Of the Serious Fraud Investigation Office has power of inspector under Section 217.
The company and its officers and employees, who are or have been in employment of the company shall under sub-section (5), be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation.
The Offence contained under the Companies Act, which attract punishment for fraud under Section 447 of the Act, shall be cognizable.
No person accused of any offence under those sections shall be released on bail or on his own bond unless –
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence While on bail,
A person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.
The Special court shall not take cognizance of any office except only upon a complaint in writing made by – . (a) The Director, Serious Fraud Investigation Office; or
(b) Any officer of the Central Government authorised by a general or specialorder in writing in this behalf.
The limitation on granting of bail specified sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail.

Question 61.
What are the different type of aspects should be considered by company secretary to face investigation?
Answer:
The aspects which should be considered by the secretary include:

1. Basic information about the company – Name of the company; date of incorporation; location of the registered office, branches, factories and other offices; status of the company – public or private; objects of the company – capital structure; voting rights attached to the shares; shareholding pattern of the company.
2. Business activities – Nature of existing business, licensed and installed capacities, expansion programme and sources of finance, whether the company belongs to a particular group; if so the names of other companies falling within the same group.
3. Debentures, bank finance and deposits.
4. oreign collaboration agreements.
5. Management – Brief history of past management set up; existing management set up; composition of Board of Directors; whether the terms and conditions of the appointment of managerial personnel are being adhered to; details regarding appointment of directors and their relatives to an office or place of profit.
6. Whether all the statutory registers including minute’s books are being maintained up-to-date?
7. Whether the internal checks and internal control system is being properly followed?
8. Working results and financial position – General assessment of working of the company, evaluation of the level of performance and efficiency of the management, a review of the profits of the company, performance data, financial position of the company in the context of its working results for the last three years.
9. Compliance by the company and its officers with the provisions of the Companies Act, 2013.
10. Compliance with the provisions of other Acts applicable to the company.
11. Whether the loans taken and loans advanced to Directors,, the firms in which they are partners or companies in which they are Directors are in accordance with the provisions of the Act.
12. The investments made by the company.
13. Sole selling agency agreement.
14. Instance of mismanagement and other irregularities.
15. Acquisition/disposal of substantial assets.
16. A scrutiny of abnormal/heavy expenditure items.
17. Complaints, if any, against the company and its management and steps taken to redress them.
18. Brief particulars of the litigations against the company and the reasons thereof.
19. Management’s relations with the employees and labour.
20. Shareholders-Instance of oppression of minority shareholders, allegations of non-receipt of dividend, notices of meetings, accounts, share certificates, etc.; illegal forfeiture of shares, etc. and steps taken to redress Investors, complaints.’
21. Auditors-Name and address of Statutory auditors, Secretarial Auditor and Cost Auditor, compliance as per the provisions of Companies Act, 2013.

Question 62.
Discuss the Penalty for false statement.
Answer:
Penalty for false statement etc (Section 229)
Where a person who is required to provide an explanation or make a statement during the course of inspection, inquiry or investigation, or an officer or other employee of a company or other body corporate which is also under investigation,
(a) destroys, mutilates or falsifies, or conceals or tampers or unauthorisedly removes, or is a party to the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, documents relating to the property, assets or affairs of the company or the body corporate;
(b) makes, or is a party to the making of, a false entry in any document concerning the company or body corporate; or
(c) provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in Section 447.

Question 63.
Discuss the Procedure of freezing of assets of company on inquiry and investigation.
Answer:
Freezing of assets of company on inquiry and investigation (Section 221):
The Tribunal,

• on a reference made to it by the Central Government;
• in connection with any inquiry or investigation into affairs of a company;
• on any complaint made by members under Section 244;
• a creditor having one lakh amount outstanding against the company; or
• any other person having a reasonable ground to believe;

it may by order direct that such transfer, removal or disposal shall not take place during a specified period not exceeding three years or may take place subject to such conditions and restrictions as it may deem fit.
The tribunal may make such order, where it appears to the tribunal that the removal, transfer or disposal of funds, assets, properties of the company is likely to take place prejudicial to the interests of the company or its shareholders or creditors or in public interest.
In case of contravention of this order, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Question 64.
Discuss the Procedure of seizure of documents by Inspector.
Answer:
Seizure of Documents by Inspector (Section 220)
In the course of an investigation, the inspector has reasonable grounds to believe that the books and papers of or relating to any company or other body corporate or managing director of manager of the company are likely to be destroyed, mutilated, altered, falsified or secreted. In such case, the inspector may –
(a) Enter with such assistance as may be required, the place or places such books and papers are kept; and
(b) Seize books and papers as he considers necessary after allowing the company to take companies of or extract from such books and papers at its cost for the purpose of his investigation.
The inspector shall keep in his custody the books and papers seized up to the conclusion of the investigation as he considers necessary and thereafter shall return the same to the person from whose custody or power they were seized.
The inspector may before returning such books and papers, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the dame in the manner as he consider necessary.
The provisions of the Code of Criminal Procedure, 1973 relating to searches or seizure shall apply mutatis mutandis to every search or seizure under this Section.

Question 65.
Discuss the power of Inspector to conduct Investigation into affairs of related companies.
Answer:
Power of Inspector to Conduct Investigation into Affairs of Related Companies (Section 219)
An inspector shall subject to prior approval of the Central Government, investigate the affairs of –
(a) Any other body corporate which is or has at any relevant time been the company’s subsidiary company or holding company or a subsidiary of its holding company;
(b) Any other body corporate which is or has any relevant time been managed by any person as managing director or as manager of the company;
(c) Any other body corporate whose Board of Directors comprises nominees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors;
or
(d) Any person who is or has at any relevant time been the company’s managing director or manager or employee.
Such investigation should be in continuation of ongoing investigation under Sections 210,212 and 213.
Information, Inspection, Inquiries and Investigation of Foreign Company (Section 228)
The provisions of this Chapter XIV shall apply mutatis mutandis to inspection, inquiry or investigation in relation to foreign companies. Procedure and Powers of Inspectors (Section 217)
Duty of Employees {sub-section (1) of Section 217}
It shall be duty of all past and present officers, other employees and agents of a company or body corporate or a person under investigation –
(a) To preserve and to produce to an inspector or any other authorised person all books and papers of the company or relating to the company or 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 reasonable able to give.

Duty of other Bodies Corporate {sub-section (2) of Section 217}
The inspector may require any other body corporate to furnish such information to or produce such books and papers before him or any authorised person to furnish of information or produce books and papers relevant or necessary for the purpose of his investigation.

Period for custody of books {sub-section (3) of Section 217}
The inspector shall not keep books and papers for more than one hundred eighty days and returns the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers were produced.
This initial period may be extended to one hundred and eighty-days by an order in writing.

Examination on oath {sub-section (4) of Section 217}
An inspector may examine on oath-
(a) Any past or present officer or employee,
(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 and for that purpose may require any of those persons to appear before him personally.
In case of investigation under Section 212, the prior approval of the Director of Serious Fraud Investigation Office shall be sufficient.

Notes of examination {sub-section (7) of Section 217}
The notes of any examination shall be taken down in writing and shall be read over to or by and signed by the person examined. Such notes may thereafter be used in evidence against said person.
Power of Inspectors {sub-section (5) of Section 217}
The inspector making an investigation shall have all the powers of civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of 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.

Punishment for disobeys {sub-section (6) of Section 217}
If any director or officer of the company disobeys the direction issued by the Registrar or the inspector, 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.
If a director or an officer has been convicted of an offence, the director or the officer shall oh and from the date of conviction shall be deemed to have vacated his office and shall also be disqualified from holding an office in any company.

Failure of a person {sub-section (8) of Section 217)
If any person fails without reasonable or refuse –
(a) To produce to an inspector or authorised person any book or paper which is his duty;
(b) To furnish any information which is his duty to furnish;
(c) To appear before the inspector personally when required to do so or to answer any question which is put to him by the inspector;
(d) To sign the notes of any examination,
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 may extend to one lakh rupees and also with a further fine which may extend to two thousand rupees for every day after the first during which the failure or refusal continues.

Assistance to inspector by state authority {sub-section (9) of Section 217}
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.
Assistance by foreign government {sub-section (10) of Section 217}{sub-section (4) of Section 217}
The Central Government may enter into an agreement with the Government of a foreign State for reciprocal arrangement to assist in any inspection, inquiry or investigation under this Act or under the corresponding law in force that State with which reciprocal arrangements have been made subject to such notification, exceptions, conditions and qualifications as may be deemed expedient for implementing the agreement with that State.

Letter of Request from India {sub-section (11) of Section 217}
On an application made by the inspector to the competent court in India, such court may issue a letter of request to a court or authority in such country of place, competent to deal with such request. Such application shall state that evidence is, or may be, available in that country or place outside India.
The letter of request shall ask the court in that country or place outside India-

• 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;
• 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

The letter of request shall be transmitted in such manner as the Central Government may specify in this behalf.
According to Rule 6 of the Companies (inspection, Investigation and Inquiry) Rules 2014, the letter of request shall be transmitted in such manner as specified by the Ministry of Corporate Affairs.
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.

Letter of Request to India {sub-section (12) of Section 217}
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 in India.
The court concern in India shall –

• 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.

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.

Question 66.
Discuss the Procedure of an Investigation into affairs of company.
Answer:
Investigation into Affairs of Company (Section 210)
Investigation into the affairs of the company may be ordered by the Central Government on grounds given in sub-section (1) of Section 210. The investigation shall be ordered by Central government, where an order of investigation was made by a court or the tribunal.
Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,-
(a) on the receipt of a report of the Registrar or inspector;
(b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or
(c) in public interest,
it may order an investigation into the affairs of the company.
Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company.
For the purpose of investigation, the Central Government may appoint one or more inspectors to investigate the affairs of the company. These inspectors shall report on the affairs of the company in such manner as the central government may direct.
According to Rule 5 of the Companies (Inspection, Investigation and Inquiry) Rules 2014, the Central Government may before appointing an inspector under sub-section (3) of Section 210, require the applicant to give a security not exceeding twenty-five thousand rupees for payment of the costs and expenses of investigation as per the criteria given below-

Turnover as per previous year balance sheet (₹)	Amount of security (₹)
1. Turnover upto ₹ 50 crore	₹ 10,000
2. Turnover more than ₹ 50 crore and upto 200 crore	₹ 15,000
3. Turnover more than ₹ 200 crore	₹ 25,000

The security shall be refunded to the applicant if the investigation results in prosecution.
Investigation into the Company’s Affairs on Application made by Members or other Persons (Section 213)
The Tribunal may order after giving a reasonable opportunity of being heard to the parties concerned that affairs of a company ought to be investigated. Where such a order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company and to report thereupon.
The tribunal may make this order on an application made by –
(a) not less one hundred members or members holding not less than one – tenth of the total voting power, in case of a company having a share capital; or
(b) not less than one – fifth of the persons on the company’s register of members, in case company having no share capital and supported by evidence showing good reason for seeking and order for conducting and investigation into affairs of the company.
The Tribunal may also make such order on an application made to it by any other person or otherwise, if it is satisfied that the circumstance suggest that-
(a) the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose;
(b) person concerned in the formation of the company or the management of its affairs have been guilty of fraud, misfeasance or other misconduct towards the company or towards its members; or
(c) the members of the company have not been given ail reasonable information including information relating to the calculation of commission payable to a managing or other director or the manager of the company.

If after investigation it is proved that –
(a) 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 that the company was formed for any fraudulent or unlawful purpose; or
(b) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud under Section 447.

Question 67.
What are the purpose of Conducting Inspection?
Answer:
Purpose of conducting Inspection
Section 206 does not specify the circumstances or pre conditions which must be satisfied to invoke these provisions. Some of the objectives of conducting such inspections may be thus:

1. To detect concealment of income by falsification of accounts.
2. To secure knowledge about the mismanagement of the business of a company and transactions entered into with an intent to defraud creditors, shareholders or otherwise for fraudulent or unlawful purposes.
3. To ascertain whether the statutory auditors have discharged their functions and duties in certifying the true and fair view of a company’s accounts and their proper maintenance.
4. To enable the Government to ascertain the quantum of profits accrued . but not adequately accounted for.
5. To detect misapplication of funds leading a company to a state of perpetual financial crisis.
6. To keep a watch on performance of a company.
7. To detect misuse of fiduciary responsibilities by the company’s management for personal aggrandizement.

Inspection is intended to be a routine and not ad hoc or special affair. However, if sufficient evidence suggests that of the company’s affairs are being mismanaged and/or managed in fraudulent way manner, then inspection can lead to orders for investigation into the affairs of the company.

Regulatory Action Notes

Inspection, Inquiry and Investigation:

• Inspection, inquiry and investigation are three connected but different regulatory actions. These regulatory actions start with some information.
• We can understand this in a general example form a day to day public knowledge about criminal law.
• The Police get some information about happening of something. The police officer, having jurisdiction, visits and inspect the place where the incident had happened.
• He receives all kind of information which might directly or indirectly, be related to the incident reported. After this, police file a formal first information report.
• Their after police do its own inquiry before filing its charge sheet in the court. The court order investigation in the matter, wherever required.

Purpose of conducting Inspection:
Section 206 does not specify the circumstances or pre conditions which must be satisfied to invoke these provisions. Some of the objectives of conducting such inspections may be thus:

1. To detect concealment of income by falsification of accounts.
2. To secure knowledge about the mismanagement of the business of a company and transactions entered into with an intent to defraud creditors, shareholders or otherwise for fraudulent or unlawful purposes.
3. To ascertain whether the statutory auditors have discharged their functions and duties in certifying the true and fair view of a company’s accounts and their proper maintenance.
4. To enable the Government to ascertain the quantum of profits accrued but not adequately accounted for.
5. To detect misapplication of funds leading a company to a state of perpetual financial crisis.
6. To keep a watch on performance of a company,

Inquiry
The Registrar may initiate inquiry under sub-section (4) of Section 206, if the Registrar is satisfied that the business of the company is being carried on:

• for a fraudulent purpose;
• unlawful purpose; or
• not in compliance with the provision of this Act; or
• investors grievances not being addressed.
• The Registrar shall satisfy itself before order of such inquiry on the basis of-
• information available with him; or
• information furnished to him; or
• on representation made to him by any person.

Kinds of Investigation:
The Companies Act, 2013 provides for carrying out the following kinds of investigation:

• Investigation of the affairs of the company if it is necessary to investigate into the affairs of the company in public interest (Section 210);
• Investigation of the affairs of related companies (Section 219);
• Investigation about the ownership of a Company (Section 216)
• Investigation of foreign companies (Section 228)
• Investigation by Serious Fraud Investigation Office directed by Central Government under (Section 212)
• Investigation on the order of Tribunal. (Section 213)

Protection of Employees during Investigation (Section 218):

• Section 218 provide protection to employees during investigation. During the course of any investigation and during pendency of any proceeding against any person concerned in the conduct and management of the affairs of a company, Such company, other body corporate or person shall not discharge or suspend or punish any employee without approval of the Tribunal.
• This protection is available to employees during the investigation of the affairs or other matters of or relating to a company, other body corporate or person or of the membership, ownership of shares or debentures.

Following action are not permitted without approval of the Tribunal –
(a) To discharge or suspend any employee;
(b) To punish any employee, whether by dismissal, removal, reduction in rank or otherwise; or
(c) To change the terms of employment to his disadvantage.

Seizure of documents by Inspector (Section 220):
In the course of an investigation, the inspector has reasonable grounds to believe that the books and papers of or relating to any company or other body corporate or managing director or manager of the company are likely to be destroyed, mutilated, altered, falsified or secreted. In such case, the inspector may:
(a) Enter with such assistance as may be required, the place or places such books and papers are kept; and
(b) Seize books and papers as he considers necessary after allowing the company to take companies of or extract from such books and papers at its cost for the purpose of his investigation.

Freezing of assets of company on inquiry and investigation (Section 221)
The Tribunal,

• on a reference made to it by the Central Government;
• in connection with any inquiry or investigation into affairs of a company;
• on any complaint made by members under Section 244;
• a creditor having one lakh amount outstanding against the company; or
• any other person having a reasonable ground to believe.

Inspector’s Report (Section 223):
The report under Section 223 is different from the report made by SFIO under Section 212.
In inspector shall submit all interim reports, if any, and final report to the Central Government.
Every report shall be in writing or printed as per direction of the Central Government.
A copy of the report may be obtained by any one by making an application to the Central Government.
The report of any inspector shall be authenticated either –
(a) by the seal of the company investigated; or
(b) by a certificate of a public officer having the custody of the report.

Voluntary winding up of company not to stop investigation (Section 226):
An investigation may be initiated and no investigation shall be stopped or suspended by reason only of, the fact that –
(a) an application has been made under Section 241;
(b) the company has passed a special resolution for voluntary winding up;
(c) any other proceeding for the winding up of the company is pending before the Tribunal.
Where a winding up order is passed by the Tribunal, the inspector shall inform the Tribunal about the pendency of the investigation proceeding before him and the Tribunal shall pass such order as it may deem fit. Nothing in the winding up order shall absolve any director or other employee of the company from participating in the proceedings before the inspector or any liability as a result of the finding by the inspector.

Penalty for false statement etc. (Section 229)
Where a person who is required to provide an explanation or make a statement during the course of inspection, inquiry or investigation, or an officer or other employee of a company or other body corporate which is also under investigation,
(a) destroys, mutilates orfalsifies, or conceals or tampers or unauthorisedly removes, or is a party to the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, documents relating to the property, assets or affairs of the company or the body corporate;
(b) makes, or is a party to the making of, a false entry in any document concerning the company or body corporate; or
(c) provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in Section 447.

Establishment of serious fraud investigation office (Section 211):
The Central Government established Serious Fraud investigation office to investigate frauds related to Companies in accordance with Section 211(1) by way of notification SO 902(E) dated 26th March 2014. The office shall be headed by a Director and consist of experts of following fields:
(a) Banking,
(b) Corporate Affairs,
(c) Taxation,
(d) Forensic auditing,
(e) Capital Market,
(f) Information Technology,
(g) Law, or
(h) Other fields.

Investigate into affairs of a company (Section 212):
The provision of investigation under Section 212 is in addition of the provision of investigation under Section 210.
The Central Government may by order assign investigation into the affairs of a company
(a) On receipt of a report of the Registrar or inspector under Section 208;
(b) On intimation of a Special Resolution passed by a company that its affairs are required to be investigated;
(c) In the public interest, or
(d) On request from any department of Central Government or State Government.

Investigations procedure by SEBI under SEBI Act, 1992:

• Section 11C of the Act provides that where SEBI has reasonable ground to believe that the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or any intermediary or
• any person associated with the securities market has violated any of the provisions of this Act or
• the rules or the regulations made or directions issued by SEBI . thereunder, it may, at any time by order in writing, direct any person
  specified in the order to investigate the affairs of such intermediary or
• persons associated with the securities market and to report thereon to SEBI.

Foreign Exchange Management Act, 1999 Directorate of Enforcement.:
According to Section 36(1), the Central Government shall establish a Directorate of Enforcement with a Director and such other officers or class of officers as it thinks fit, who shall be called officers of Enforcement, for the purposes of this Act.
According to Section 37(1), the Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in Section 13.

Foreign Contribution (Regulation) Act, 2010:
(a) Inspection, Search and Seizure Inspection of accounts or records
According to Section 23, if the Central Government has, for any reason, to be recorded in writing, any ground to suspect that any provision of this Act has been or is being, contravened by –
(a) any political party; or
(b) any person; or
(c) any organisation; or
(d) any association,

(b) Seizure of accounts or records
According to Section 24, if, after inspection of an account or record referred to in Section 23, the inspecting officer has any reasonable cause to believe that any provision of this Act or of any other law relating to foreign exchange has been, or is being, contravened, he may seize such account or record and produce the same before the court, authority or Tribunal in which any proceeding is brought for such contravention.

(c) Appeal
Section 31 deals with appeals and provides that any person aggrieved by any order made under Section 29 may prefer an appeal, where the order has been made by the Court of Session, to the High Court to which such Court is subordinate; or where the order has been made by any officer specified, to the Court of Session within the local limits of whose jurisdiction such order of adjudication of confiscation was made, within one month from the date of communication to such person of the order.

(d) Penalty and Punishment
Section 34 prescribes for penalty on any person, on whom any prohibitory order has been served under Section 10, pays, delivers, transfers or otherwise deals with, in any manner whatsoever, any article or currency or security, whether Indian or foreign, in contravention of such prohibitory order, he shall be punished with imprisonment for a term which may extend to three years, or with fine, or with both.

Inquiry by Competition Commission of India:
According to Section 19(1) of the Competition Act, 2002, the Commission may inquire into any alleged contravention of the provisions contained in sub – Section (1) of Section 3 or sub-section (1) of Section 4 either on its own motion or on
(a) receipt of any information, in such manner and] accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or
(b) a reference made to it by the Central Government or a State Government or a Statutory authority.

Factors determining dominant position:
According to Section 19(4), the Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under Section 4, have due regard to all or any of the following factors, namely:
(a) market share of the enterprise
(b) size and resources of the enterprise
(c) size and importance of the competitors
(d) economic power of the enterprise including commercial advantages over competitors
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise.

Goods and Service Tax Act,
Power of Inspection, Search and Seizure
(i) Power of Inspection
According to Section 67(1) of the CGST Act, (1) where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that:
A taxable person
(a) has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or
(b) has claimed input tax credit in excess of his entitlement under this Act or
(c) has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act;
(ii) Power to search and Seizure
According to Section 67(1), where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.
(iii) Duration of Seizure
According to Second Proviso to Section 67(2), the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.
(iv) Return of documents not relied upon
The documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

Income Tax Act, 1962:
Power regarding discovery, production of evidence, etc.
According to Section 131(1), the Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals), Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of Section 144C shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.

The Central Bureau of Investigation

• The Central Bureau of Investigation is an organisation established under the Delhi Special Police Establishment Act, 1946.
• According to Section 2 of the DSPE Act, CBI can suo-moto take up investigation of offences notified in Section 3 only in the Union Territories.
• Its basic jurisdiction is for Delhi and other Union Territories. However, in practice is investigate matters all over India on request or by extension of jurisdiction under Section 5.
• Taking up investigation by CBI in the boundaries of a State requires prior consent of that State as per Section 6 of the DSPE Act.
• The Central Government can authorize CBI to investigate such a crime in a State but only with the consent of the concerned State Government.
• The Supreme Court and High Courts, however, can order CBI to investigate such a crime anywhere in the country without the consent of the State.