Section 216: Investigation of ownership of company
This section is for investigating the ownership of a company to determine the true persons with a financial interest or control.
The section, clause by clause
What the section says
In plain terms
(1)Where it appears to the Central Government that there is a reason so to do, it may appoint one or more inspectors to investigate and report on matters relating to the company, and its membership for the purpose of determining the true persons—
The Central Government can appoint inspectors to investigate a company's membership and ownership to determine the true persons who have a financial interest or can control the company, including those with beneficial interest in shares.
(1)(a)who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
(1)(b)who are or have been able to control or to materially influence the policy of the 1[company;
(1)or].
(1)(c)who have or had beneficial interest in shares of a company or who are or have been beneficial owners or significant beneficial owner of a company].
(2)Without prejudice to its powers under sub-section (1), the Central Government shall appoint one or more inspectors under that sub-section, if the Tribunal, in the course of any proceeding before it, directs by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purposes specified in sub-section (1).
The Central Government must appoint inspectors if the Tribunal orders an investigation into a company's affairs and membership.
(3)While appointing an inspector under sub-section (1), the Central Government may define the scope of the investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debentures.
When appointing an inspector, the Central Government can define the scope of the investigation, including the matters and period to be investigated, and may limit it to specific shares or debentures.
(4)Subject to the terms of appointment of an inspector, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though not legally binding, is or was observed or is likely to be observed in practice and which is relevant for the purposes of his investigation.
An inspector's powers include investigating any arrangements or understandings that may not be legally binding but are relevant to the investigation, as long as it is within the terms of their appointment.
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 1 of 2018, s. 71, for “company” (w.e.f. 13-6-2018).
- 2. Ins. by s. 71, ibid. (w.e.f. 13-6-2018).
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.