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Unit 10: Share Capital

The following chart shows the powers of the Central Government to appoint one or more Notes
competent inspectors to conduct investigation of the affairs of a company (Ss.235 and 237).
Table 10.2: Power of Investigation of Central Government

Discretionary Mandatory
(i) if required by the Members, or (i) If required by the company by special
resolution; or
(ii) on the Report by the Registrar; or (ii) If required by the Court.
(iii) on its own motion.

10.6.1 Discretionary Powers of the Central Government

The Central Government may appoint one or more competent persons as inspectors to investigate
into the affairs of any company and to report in such manner as the Central Government may
direct in the circumstances as under.
(i) On the application of members of a company. Where (a) in the case of a company having
a share capital, the number of members making application is not less than 200, or the
members are holding not less than one-tenth of the total voting power, or (b) in the case
of a company not having a share capital, an application has been received from not less
than one-fifth of the members, the Company Law Board may, after giving the parties an

opportunity of being heard, by order, declare that the affairs of the company should be
investigated by an inspector or inspectors and on such declaration being made, the Tribuna
shall appoint one or more competent persons as inspectors to investigate the affairs of the
company and to report thereon in such manner as the Central Government may direct
(s.235).
(ii) On the report of the registrar. The Central Government may, where a report has been made
by the Registrar in pursuance of s.243, appoint one or more inspectors to investigate the
affairs of a company and to report thereon in such manner as the Central Government may

direct. The Registrar’s report is made where a document filed by any company (whether
having a share capital or not) with him discloses an unsatisfactory state of affairs, or it does
not disclose full and fair statement of the matter to which it purports to relate [s.235 (1)].
(iii) On suggestion of the Tribunal. Section 237 provides that the Central Government may
appoint if, in opinion of the Tribunal, there are circumstances suggesting: (a) that the
company’s business is being conducted with intent to defraud its creditors, members or
any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner
oppressive of any of its members, or that the company was formed for any fraudulent or
unlawful purpose; or (b) that persons concerned in the formation or the management of its
affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct
towards the company or any of its members; or (c) that the members of the company have
not been given all the information with respect to its affairs which they might reasonably
expect, including information relating to the calculation of the commission payable to a
managing or other director or the manager of the company.

(iv) Where the company, by special resolution, resolves that the affairs of the company be
investigated by an inspector appointed by the Central Government (s.237).
(v) Where the court by order declares that the affairs be investigated by an inspector appointed
by the Central Government (s.237).

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