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Corporate Legal Framework

Notes 10.6.2 Mandatory Powers

Section 237 provides that the Central Government must appoint (independently of its powers
under s.235) one or more competent inspectors to investigate the affairs of a company, and to
report thereon as the Central Government directs, if either the company by special resolution or
the Court by order, declares that its affairs ought to be so investigated.

10.6.3 Powers of the Inspectors

1. Under s.239, the inspector, appointed under s.235 or 237, is empowered to investigate
the affairs of any other body corporate which is, or has at any relevant time been: (a) the
company’s subsidiary or holding company or a subsidiary of its holding company, or a
holding company of its subsidiary; (b) managed by any person as managing director or
manager or who is, or was at the relevant time either the managing director or manager
of the company; (c) managed by the company or whose Board of Directors comprises of
nominees of the company or is accustomed to act in accordance with the directions or
instructions of: (i) the company, or (ii) any of the directors of the company, or (iii) any
company, any of whose directorships is held by the employees or nominees of those having
the control and management of the first mentioned company; (d) the company’s managing

director or manager.
2. The inspector may require any officer and other employees to preserve and produce to him

or any person authorised by him all books and papers of, or relating to the company, which
are in their custody or power.
3. The inspector may, with the prior approval of the Central Government, require anybody
corporate to furnish or produce such books and papers as he may consider necessary if the
furnishing of such information or the production of such books and papers is relevant or
necessary for the purposes of his investigation. The inspector is further empowered to keep
such books in his custody for 6 months.
4. An inspector is also empowered to examine on oath: (a) any offi cers or employees of the
company; (b) any other person provided prior approval of the Central Government has
been obtained.

10.6.4 Inspector’s Report (S. 241)

The inspector may and if so directed by the Central Government shall make interim reports

to that Government and on the conclusion of the investigation shall make a final report to the
Central Government. The report may be written or printed, as the Central Government direct.
The Central Government – (a) shall forward a copy of any report (other than the interim report)

made by the inspectors to the company at its registered office and also to any body corporate dealt

within the report by virtue of s.239; (b) may, if it thinks fit, furnish a copy thereof, on request and
on payment of the prescribed fee, to any person – (i) who is a member of the company or other
body corporate dealt within the report; (ii) whose interests as a creditor of the company, or other
body corporate aforesaid appear to the Central Government to be affected; (c) shall, on request,
furnish a copy to the applicants for investigation; (d); shall, where appointed at the instance of
the Company Law Board, furnish a copy to it; (e); may also cause the report to be published.

10.6.5 Investigation of Ownership of a Company (Ss. 247-248)

The Central Government, if satisfied that there is a good reason, may appoint one or more

inspectors to investigate and report on the membership of any companies, for the purpose of
determining who are the persons financially interested in its success or failure or are able to

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