Companies Act Section 218 — Protection of employees during investigation
CHAPTER XIV INSPECTION, INQUIRY AND INVESTIGATION
Commercial / Corporate
Summary
Sub-section (1) sets out a general protection for employees during an investigation or certain legal proceedings. If an investigation is underway into a company, other body corporate, or person under the specified sections, or if a proceeding is pending against someone involved in managing a company's affairs under Chapter XVI, and that company, body corporate, or person wants to take any of these actions against an employee — discharging or suspending the employee, punishing the employee through dismissal, removal, reduction in rank, or otherwise, or changing the employee's terms of employment to their disadvantage — then the company, body corporate, or person must first get the approval of the Tribunal for the proposed action. If the Tribunal objects to the proposed action, it must send written notice of that objection by post to the company, body corporate, or person concerned.
Sub-section (2) states that if the company, body corporate, or person concerned does not receive the Tribunal's approval within thirty days of making the application under sub-section (1), then, and only then, may it proceed to take the proposed action against the employee.
Sub-section (3) provides that if the company, body corporate, or person concerned is dissatisfied with the objection raised by the Tribunal, it may, within thirty days of receiving the notice of the objection, appeal to the Appellate Tribunal. The appeal must be made in the manner and on payment of such fees as may be prescribed.
Sub-section (4) states that the decision of the Appellate Tribunal on such an appeal shall be final and binding on both the Tribunal and the company, body corporate, or person concerned.
Sub-section (5) clarifies that the provisions of this section operate without prejudice to the provisions of any other law for the time being in force.
Official Text
(1) Notwithstanding anything contained in any other law for the time being in force, if—
(a) during the course of any investigation of the affairs and other matters of or relating to a company, other body corporate or person under section 210, section 212, section 213 or section 219 or of the membership and other matters of or relating to a company, or the ownership of shares in or debentures of a company or body corporate, or the affairs and other matters of or relating to a company, other body corporate or person, under section 216; or
(b) during the pendency of any proceeding against any person concerned in the conduct and management of the affairs of a company under Chapter XVI, such company, other body corporate or person proposes—
(i) to discharge or suspend any employee; or
(ii) to punish him, whether by dismissal, removal, reduction in rank or otherwise; or
(iii) to change the terms of employment to his disadvantage, the company, other body corporate or person, as the case may be, shall obtain approval of the Tribunal of the action proposed against the employee and if the Tribunal has any objection to the action proposed, it shall send by post notice thereof in writing to the company, other body corporate or person concerned.
(2) If the company, other body corporate or person concerned does not receive within thirty days of making of application under sub-section (1), the approval of the Tribunal, then and only then, the company, other body corporate or person concerned may proceed to take against the employee, the action proposed.
(3) If the company, other body corporate or person concerned is dissatisfied with the objection raised by the Tribunal, it may, within a period of thirty days of the receipt of the notice of the objection, prefer an appeal to the Appellate Tribunal in such manner and on payment of such fees as may be prescribed.
(4) The decision of the Appellate Tribunal on such appeal shall be final and binding on the Tribunal and on the company, other body corporate or person concerned.
(5) For the removal of doubts, it is hereby declared that the provisions of this section shall have effect without prejudice to the provisions of any other law for the time being in force.