Companies Act Section 405

Companies Act, Section 405: Power of Central Government to Require Companies to Submit Information or Statistics

Section 405 of the Companies Act, 2013 empowers the Central Government with significant authority to obtain information from companies in order to ensure proper regulatory oversight, transparency, and compliance. 

This provision lays down the manner in which the Government can demand data relating to the internal structure or functioning of companies when required for administrative, regulatory, or policy purposes.

1. Authority to Demand Information or Statistics

Under Section 405(1), the Central Government has the right to issue an order directing:

All companies, or a specific class of companies, or any particular company to provide details, information, or statistical data regarding their constitution, operations, management, or any other matter considered necessary.

The order will clearly specify the type of information required and the time limit within which such information must be provided.

This enables the Government to gather essential data about the functioning of companies operating in India, especially in situations where uniformity, accountability, or sectoral analysis is required.

2. Publication and Communication of the Order

Every such order issued must be published in the Official Gazette, ensuring legal authenticity and formal communication to the public.

The order may be addressed to companies generally, or to a specific category or section of companies.

The date of publication in the Official Gazette will be considered the effective date from which the requirement to submit the information begins.

This ensures that companies are deemed to have been properly notified and are obligated to follow the instructions contained in the order.

3. Verification of Submitted Information

Under Section 405(3), the Central Government also has the authority to:

Verify the accuracy, correctness, and completeness of the data submitted. Issue further orders requiring companies to:

Produce specific records or documents, allow inspection of their books and records by designated officers, provide additional information as may be deemed necessary.

This power exists to prevent false reporting and ensure that companies comply truthfully with government requirements.

4. Penalty for Non-Compliance or Furnishing False Information

If a company fails to comply with an order requiring submission of information, or provides information that is incorrect, false, or incomplete in any essential aspect.

The company and every defaulting officer shall be liable to a penalty of ?20,000.

In case the default continues, there will be an additional penalty of ?1,000 per day after the first day. However, the total penalty shall not exceed ?3,00,000.

This ensures strict enforcement and accountability in corporate reporting.

5. Applicability to Foreign Companies Operating in India

The section applies equally to foreign companies carrying on business in India, but only to the extent of their business activities within India.

Thus, foreign companies are not exempt from providing operational details when required and must comply with the same obligations as Indian companies.