Section 237 – The Companies Act,1956

The Companies Act, 1956

237. Investigation of company’s affairs in other cases.

Without prejudice to its powers under section 235, the Central Government

(a)shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if

(i)the company, by special resolution; or

(ii)the Court, by order,

declares that the affairs of the company ought to be investigated by an inspection appointed by the Central Government; and

(b)may do so 1[in its opinion or in the opinion of the Tribunal] there are circumstances suggesting

(i)that the business of the company 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;

(ii)that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or

(iii)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, 2[***] or the manager, of the company.

comments

(i) Under section 237 (b) the power conferred on the Central Government is a discretionary power whereas under section 237(a) the Central Government is bound to appoint one or more competent persons as inspectors to investigate the affairs of a company; Rohtas Industries Ltd. v. S.D. Aggarwal, 1969 (39) Comp. Cas. 781: (1969) 1 Com LJ 350: AIR 1969 SC 707.

(ii) The provisions of section 237 (b) of the Companies Act are not violative of Articles 14 and 19(1)(g) of the Constitution of India; Barium Chemicals Ltd. v. Company Law Board, 1966 (36) Comp. Cas. 639: 1966 (2) Com LJ 151: AIR 1967 SC 295.

—————————-

1. Subs. by Act 11 of 2003, sec. 30, for “if in the opinion of the Company Law Board”.

2. The words “the managing agent, the secretaries, and treasurers” omitted by Act 31 of 1988, sec. 38 (w.e.f. 31-5-1991).

Previous | Next

The Companies Act, 1956

Indian Laws – Bare Acts

MyNation

Leave a Comment

Your email address will not be published. Required fields are marked *