TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 340
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....e action of the 3rd respondent-the Inspector & Joint Director, Ministry of Corporate Affairs, in issuing summons dated 27-05-2019 under Section 207(3)(b) of the 2013 Act as being illegal, ultra-virus, arbitrary, contrary to Chapter XIV of the Act and violative of Articles 14, 19 & 21 of the Constitution and for grant of consequential reliefs. 2. Since the parties and the subject matter being similar in these writ petitions, they are heard and disposed of together. Suffice it to advert to the facts in WP No. 10201 of 2017. 3. The case of the 2nd petitioner is that the 1st petitioner-Company was established in the year 1978 engaged in the business of manufacturing industrial fans and allied products. The 2nd petitioner, besides being himself as the managing director of the Company, as on 26-02-2007 was holding 42% shares of the Company, his sons who are petitioners in writ petition No. 12296 of 2019, are also shareholders and directors of the Company. That his younger brother who is impleaded as 4th respondent in both these writ petitions was also made a director of the company, and he held 28% shares of the Company, their brother-in-law held 30% shares in the Company. That the 2nd....
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.... 27-02-2007 be maintained and bound by it and had also specifically agreed that the fabricated documents would be put away as ineffective; however, later the 4th respondent's shares were transferred which originally belonged to him in 2nd petitioner's name, on 09-09-2010, to maintain the status-quo ante. That thereafter, the 2nd petitioner withdrawn the powers of the 4th respondent to deal with the affairs of the Company. That due to the above said incident, the 4th respondent absconded from the Company from 29-10-2010 and thereafter, he never returned back to the Company and did not stand to trial for his criminal acts. That as he did not attend three consecutive Board meetings, he had been treated as ceased to be a director of the Company from 29-10-2010 under Section 283(1)(g) of the Companies Act, 1956, which corresponds to Section 167 of the 2013 Act. 5. It is stated that the 4th respondent had filed a company petition being CP No. 40 of 2011 before the Company Law Board, Chennai, (now (NCLT) National Company Law Tribunal, Hyderabad) and the same is also now disposed of against which the petitioners have filed appeal being company appeal (AT) No. 20 of 2017 before the....
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....05-2013 vide SRN No. B74751553 against the petitioners Company alleging that he has been illegally removed from the directorship of the Company, for which the e-form 32 was filed by the 2nd petitioner to ROC. As per item No. 5(1) of the said e-form 32, his cessation date is shown as 15-12-2011 whereas as per minutes of board meeting attached thereto, he has vacated office under Section 283(1)(g) of the 2013 Act, on 29-10-2010 on the ground that he was absent for 3 consecutive meetings of the Board of directors of the Company. He further prayed to cancel the said e-form 32, mark the Company under management dispute, penalize and launch prosecution against the managing director (2nd petitioner), practicing company secretary who digitally certified the said false and unauthorized e-form 32 regarding his cessation. That the 4th respondent has also submitted physical complaints dated 18-04-2014 and 27-06-2014 against the affairs of the Company. It is stated that the inspection carried out by the ROC is under the orders of Central Government and it is in tune with the provisions of Section 206 of the 2013 Act. Hence, the writ petitions are liable to be dismissed. 8. Heard Sri K. Rajendr....
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....oth groups of the petitioners and the 4th respondent, the mismanagement, oppressive and vindictive conduct of the 2nd petitioner stands exposed. It is also contended that the impugned inspection of the Company and the consequent steps thereof are statutory in nature to protect the interest of the stakeholders in the Company and to prevent any prejudicial action in dealing with the affairs of the Company by the 2nd petitioner and his sons. 12. Power to call for information, inspect books and conduct inquiries and conduct of inspection and inquiry are defined under Section 206 and 207 of Indian Companies Act, 2013, they are reproduced for convenience sake:- "Section 206. Power to call for information, inspect books and conduct inquiries.-- (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-- (a) to furnish in writing such information or explanation; or (b) to produce such documents, within such reasonable time, as may be specified in the notice. ....
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.... 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. (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. (6) The Central Government may, having regard to the circumstances by general or special order, authorize any statutory authority to carry out the inspection of books of account of a company or class of companies. (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 every day after the first during which the failure continues. Section 207. Conduct of inspection and inquiry.--(1) Where a Regis....
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.... is clear that under Section 206 of the 2013 Act, the Registrar of Companies where on a scrutiny of any document filed by a Company or on any information received by him, and he 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; (a) to furnish in writing such information or explanation; or (b) to produce such documents, within such reasonable time, as may be specified in the notice. Further as per sub-Sections (5) and (6) of Section 206, the Central Government is authorized to direct inspection of records of a company by inspectors appointed by it. The Company does not comply within the specified time period mentioned in the notice or the information provided by the Company is unsatisfactory, the Registrar feels that not all the information has been provided for review, the defaulting officers are liable to pay a fine of up to Rs. 1,00,000/- and a supplementary fine of Rs. 500 for each day of default. Section 207 of the 2013 Act, speaks about the conduct of inspection and inquiry. It states that every director of a Company has the duty to provide any and all inf....
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....ents on the allegation of oppression and mismanagement which the 2013 Act provides for. Pendency of proceedings before the NCLT or continuing of thereof in appeal by the aggrieved party is not to the exclusion of other proceedings if instituted for valid reasons. Even otherwise, what is sought to be undertaken by the impugned notice issued under Section 206(5) in WP No. 10201 of 2017 is inspection of the books of account and other books and papers of the subject company and for that purpose; 1) minute books of meetings of the Board of Directors and of shareholders of the Company since for last 3 years; 2) all statutory registers required to be maintained under the Companies Act, 1956, for the last 3 years; and 3) income tax assessment orders for the last two completed assessment years and the petitioner was required to keep the said records for inspection and certain other information mentioned therein. The summons issued under Section 207(3)(b) of the Act, impugned in WP No. 12296 of 2019 is also on the same lines and same information sought but by the Ministry of Corporate Affairs represented by the 3rd respondent, which are empowered under the Act 2013. 16. In the instant case,....
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.... oppression and mis-management and where there is a prayer to investigate into the affairs of the Company, though sometimes it is called a motivated complaint, if there are serious allegations made in it, there is no reason why inspection, inquiry be not ordered against such a Company. Section 206 of the 2013 Act corresponds to Sections 209A and 234 of the repealed Companies Act, 1956. Section 206 of the 2013 Act is a combination of Sections 209A and 234 of the Act 1956. The scope of sub-Sections (1) and (3) of Section 206 of the 2013 Act read together provides enlarged powers to the Registrar as compared to the provisions of the 1956 Act. The Central Government may pass order of inspection either by the Registrar or an Inspector or any statutory authority, appointed for this purpose under Section 206 of the 2013 Act. The contention of the learned counsel for the petitioners that when NCLT has not chosen to order inspection into the affairs of the petitioner-company in proceedings initiated by the 4th respondent, the initiation of the proceedings by the Central Government under Section 207 amounts to continuing of parallel proceedings, more so when a judicial body refused such a re....