Companies Act Section 216 — Investigation of ownership of company
CHAPTER XIV INSPECTION, INQUIRY AND INVESTIGATION
Commercial / Corporate
Summary
Sub-section (1) says that if the Central Government believes there is a reason to do so, it can appoint one or more inspectors to investigate and report on matters related to the company and its membership. The purpose of this investigation is to determine who the true persons are in certain situations.
Under clause (a) of sub-section (1), the investigation looks at persons who are or have been financially interested in the success or failure of the company, whether that success or failure is real or only apparent.
Under clause (b) of sub-section (1), the investigation looks at persons who are or have been able to control or to materially influence the policy of the company.
Under clause (c) of sub-section (1), the investigation looks at persons who have or had a beneficial interest in shares of the company, or who are or have been beneficial owners or significant beneficial owners of the company.
Sub-section (2) states that, without limiting its powers under sub-section (1), the Central Government must appoint one or more inspectors if the Tribunal, during any proceeding before it, orders by a direction that the affairs of the company ought to be investigated regarding its membership and other related matters, for the purposes mentioned in sub-section (1).
Sub-section (3) says that when appointing an inspector under sub-section (1), the Central Government may define the scope of the investigation. This can include limiting what matters are covered, what time period is examined, or other limits, and in particular, the investigation may be restricted to matters connected with specific shares or debentures.
Sub-section (4) states that, subject to the terms of the inspector's appointment, the inspector's powers extend to investigating any circumstances that suggest the existence of an arrangement or understanding. This includes arrangements that are not legally binding but are or were observed in practice, or are likely to be observed in practice, and which are relevant to the investigation.
Official Text
(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—
(a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
(b) who are or have been able to control or to materially influence the policy of the 1[company; or]. 2[
(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).
(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.
(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.