Companies Act Section 217

Companies Act, Section 217: Procedure, Powers, and Duties of Inspectors during Investigation

Section 217 of the Companies Act, 2013 sets out the procedures, powers, and duties of inspectors investigating company affairs. It mandates cooperation from involved parties, prescribes penalties for non-compliance or obstruction, and enables coordination for cross-border evidence gathering.

1. Duty of Officers and Employees to Assist in the Investigation

Sub-section (1) of Section 217 requires all current and former officers, employees, and agents of the company (and of any other entity under Section 219) to fully cooperate with the inspector. They must preserve and produce relevant documents and provide necessary assistance and explanations to facilitate the investigation.

2. Authority of Inspectors to Require Information

Sub-section (2) empowers the inspector to require any unrelated body corporate to provide information or documents deemed necessary for the investigation, ensuring cooperation from third parties holding relevant material.

3. Limitation on Retention of Documents

Sub-section (3) limits the inspector’s retention of documents to 180 days, after which they must be returned to the provider. A further 180-day extension is allowed with written authorization, balancing investigation needs with the rights of document owners.

4. Power of Inspectors to Examine Persons on Oath

Sub-section (4) empowers inspectors to examine individuals under oath, including company personnel and others with relevant knowledge (with Central Government or SFIO approval for fraud cases). This ensures the collection of direct testimony essential to the investigation.

5. Civil Court Powers of Inspectors

Sub-section (5) grants inspectors civil court powers under the Civil Procedure Code, 1908, including summoning witnesses, enforcing attendance, conducting inspections, and compelling document production ensuring full access to evidence during investigations.

6. Penalties for Disobedience

Sub-section (6) penalizes non-compliant directors or officers with up to one year’s imprisonment, a fine of ?25,000 to ?1 lakh, and disqualification from office upon conviction ensuring accountability during investigations.

7. Documentation of Examinations

Sub-section (7) requires written, signed records of examinations under sub-section (4), ensuring accuracy and allowing their use as evidence in the investigation.

8. Penalties for Non-compliance with Inspector’s Requests

Sub-section (8) penalizes individuals who fail to comply with inspector’s requests—such as not producing documents, providing information, or appearing for examination—with up to six months’ imprisonment, fines between ?25,000 and ?1 lakh, and ?2,000 per day of continued non-compliance, reinforcing the importance of cooperation.

9. Assistance from Government Authorities

Sub-section (9) allows inspectors, with prior Central Government approval, to seek help from government officers, police, or statutory authorities ensuring necessary support for effective investigations.

10. Cross-border Cooperation

Sub-section (10) enables international cooperation by allowing the Central Government to form reciprocal agreements with foreign governments for information exchange and coordinated investigations, with adjustments to ensure smooth collaboration.

11. Evidence Collection from Abroad

Sub-section (11) allows inspectors to request evidence from foreign jurisdictions by applying to an Indian court for a letter of request. This letter seeks foreign assistance in examining individuals and producing documents, with gathered evidence treated as valid in India.

12. Receiving Evidence from Foreign Courts

Sub-section (12) outlines the process for receiving evidence from foreign courts when India is under investigation. The Central Government forwards foreign requests to the relevant Indian authorities, who take necessary actions, and the collected evidence is sent back to the foreign jurisdiction.