Companies Act Section 210

Companies Act, Section 210: Investigation into the Affairs of a Company

Section 210 of the Companies Act, 2013 empowers the Central Government to order an investigation into the affairs of a company under certain circumstances. This provision is a key mechanism to ensure corporate transparency, prevent fraud, and protect public and shareholder interests. It lays out the scenarios under which such investigations may be initiated and the procedural framework that must be followed, including the appointment of inspectors.

1. Authority of the Central Government to Initiate Investigation

The Central Government may initiate a formal investigation into the operations, records, and governance of a company if it is of the opinion that such an investigation is necessary. This opinion may be formed based on the following three specific grounds:

(a) Based on a Report by the Registrar or Inspector under Section 208

When the Registrar of Companies or an inspector submits a written report following an inspection or inquiry (conducted under Sections 206 and 207), as required under Section 208, that raises concerns or points to irregularities or misconduct in the affairs of the company, the Central Government may consider these findings sufficient to justify an investigation.
(b) Based on a Special Resolution Passed by the Company

If the company itself, through its general body of shareholders, passes a special resolution indicating that it desires an investigation into its own affairs, this formal expression of concern or interest compels the Central Government to examine the matter and, if deemed appropriate, initiate an investigation accordingly.
(c) In Public Interest

Even in the absence of a report or a company-initiated resolution, the Central Government retains discretionary powers to order an investigation in the interest of the public. This broad provision allows action to be taken proactively to safeguard the integrity of corporate governance, especially in cases involving large public companies or those affecting stakeholders at large.
2. Mandatory Government Action on Directions by a Court or Tribunal

In addition to the discretionary authority under subsection (1), subsection (2) places a mandatory obligation on the Central Government to act when a court or tribunal such as the National Company Law Tribunal (NCLT) issues an order stating that the affairs of a company ought to be investigated.

In such a case, the Central Government must order an investigation into the company’s affairs.
This provision strengthens judicial oversight and provides a direct route for courts to trigger deeper scrutiny into potential corporate misconduct, based on proceedings before them.
3. Appointment of Inspectors by the Central Government

Under subsection (3), once the decision has been made to carry out an investigation whether by the government's own volition or on the direction of a court the Central Government is empowered to appoint one or more persons as inspectors for the purpose of conducting the investigation.

Key Points Regarding the Appointment of Inspectors:

The inspectors may be appointed from within the government or may include independent experts or professionals as the government sees fit.
The appointed inspectors are required to investigate the affairs of the company and report their findings back to the Central Government.
The scope, manner, and methodology of the investigation shall be directed and controlled by the Central Government, ensuring consistency with the objective of the inquiry and the legal framework.
Purpose and Importance of Section 210

The provision under Section 210 plays a vital role in upholding corporate accountability. It ensures that:

There are structured and legally sanctioned avenues for probing into alleged mismanagement or misconduct within companies.
Stakeholders, including shareholders and regulatory bodies, have mechanisms to trigger high-level investigations.
Public interest is preserved through discretionary oversight by the Central Government, and judicial directions are implemented without delay or obstruction.