Section 206: Power to call for information, inspect books and conduct inquiries
This section is for giving the Registrar and the Central Government the power to ask for information, inspect books, and conduct inquiries to ensure companies comply with the law and to address any fraudulent or unlawful activities.
Penalty
(4) Provided further that 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 in the manner as provided in section 447.
(7) If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional fine which may extend to five hundred rupees for everyday after the first during which the failure continues.
The section, clause by clause
What the section says
In plain terms
(1)Where on a scrutiny of any document filed by a company or on any information received by him, the Registrar is of the opinion that any further information or explanation or any further documents relating to the company is necessary, he may by a written notice require the company—
The Registrar can ask a company for more information or documents in writing if they think it's necessary after reviewing a document filed by the company or receiving some information, and the company must provide this within a reasonable time specified in the notice.
(1)(a)to furnish in writing such information or explanation; or
(1)(b)to produce such documents, within such reasonable time, as may be specified in the notice.
(2)On the receipt of a notice under sub-section (1), it shall be the duty of the company and of its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar:
When a company receives a notice from the Registrar, it's the company's duty and that of its officers to provide the required information or explanation to the best of their knowledge and produce the documents within the specified time.
provisoProvided that where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge.
(3)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 in adequate 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:
If the Registrar doesn't receive the required information or thinks the provided information is inadequate, or if they find an unsatisfactory state of affairs in the company, they can ask the company to produce more books and papers for inspection at a specified place and time.
provisoProvided that before any notice is served under this sub-section, the Registrar shall record his reasons in writing for issuing such notice.
(4)If the Registrar is satisfied on the basis of information available with or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard:
The Registrar can investigate a company if they suspect it's being run for fraudulent or unlawful purposes, or not following the law, and can ask the company to provide information and carry out an inquiry after giving the company a chance to respond.
provisoProvided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this sub-section:
provisoProvided further that 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 in the manner as provided in section 447.
(5)Without prejudice to the foregoing provisions of this section, the Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose.
The Central Government can direct an inspector to inspect a company's books and papers if they think it's necessary.
(6)The Central Government may, having regard to the circumstances 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.
The Central Government can authorise a statutory authority to inspect a company's or class of companies' books of account by general or special order.
(7)If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional fine which may extend to five hundred rupees for everyday after the first during which the failure continues.
If a company fails to provide required information or produce documents, it and its defaulting officers can be fined up to one lakh rupees, and an additional five hundred rupees for every day the failure continues.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 22 of 2019, s. 30, for sub-section (5) (w.e.f. 2-11-2018).
- 2. Subs. by Act 29 of 2020, s. 41, for certain words (w.e.f. 21-12-2020).
This section refers to
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.