Section 239 – The Companies Act,1956

The Companies Act, 1956

239. Power of inspectors to carry investigation into affairs of related companies or of managing agent or associate etc.

1[239. Power of inspectors to carry investigation into affairs of related companies or of managing agent or associate etc.

(1) If an inspector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of

(a)any other body corporate which is, or has at any relevant time been the company’s subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary;

2[(b)any other body corporate which is, or has at any relevant time been managed by any person as managing director or as manager, who is, or was, at the relevant time, the managing director or the manager of the company; or]

(c)any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of directors comprises of nominees of the company or is accustomed to act in accordance with the directors or instructions of

(i)the company; or

(ii)any of the directors of the company; or

(iii)any company of whose directorships is held by the employees or nominees of those having the control and management of the first-mentioned company; or

3[(d)any person who is or has at any relevant time been the company’s managing director or manager,]

4[the inspector shall, subject to the provisions of sub-section (2) have power so to do and shall report on the affairs of the other body corporate or of the managing director, or manager, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.]

(2) In the case of any body corporate or person referred to in clause (b) (ii), (b) (iii), (c) or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto:

Provided that before according approval under this sub-section, the Central Government shall give the body corporate or person a reasonable opportunity to show cause why such approval should not be accorded.]

comments

(i) Where the financial interest of a large number of citizens is left in charge of persons who manage the affairs of the companies, it would be legitimate to treat such companies and their managers as a class by themselves and to provide for necessary safeguards and checks against a possible abuse of power vesting in the managers; Raja Narayan Lal Bansi Lal v. Maneck Phiroz Mistry, 1960 (30) Comp. Cas. 644: AIR 1961 SC 29.

(ii) The relevant provisions of the Companies Act dealing with enquiries and investigations of the affairs of the companies contained in section 239 or section 240 do not violate Article 14 of the Constitution of India; Raja Narayan Lal Bansi Lal v. Maneck Phiroz Mistry, 1960 (30) Comp. Cas. 644: AIR 1961 SC 29.

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1. Subs. by Act 65 of 1960, sec. 74, for section 239 (w.e.f. 28-12-1960).

2. Subs. by Act 53 of 2000, sec. 116, for clause (b) (w.e.f. 13-12-2000).

3. Subs. by Act 53 of 2000, sec. 116, for clause (d) (w.e.f. 13-12-2000).

4. Subs. by Act 53 of 2000, sec. 116, for certain words (w.e.f. 13-12-2000).

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