Section 240 – The Companies Act,1956

The Companies Act, 1956

240. Production of documents and evidence.

240. Production of documents and evidence. 1[(1) It shall be the duty of all officers and other employees and agents of the company, and where the affairs of any other body corporate are investigated by virtue of section 239, of all officers and other employees and agents of such body corporate

(a) to preserve and to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to, the company or, as the case may be, or of relating to the other body corporate, which are in their custody or power; and

(b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give.]

2 [(1A) The inspector may, with the previous approval of the Central Government, require any body corporate [other than a body corporate referred to in sub-section (1)] to furnish such information to, or produce such books and papers before him or any person authorised by him in this behalf 3 [with the previous approval of that Government] 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.

(1B) The inspector may keep in his custody any books and papers produced under sub-section (1) or sub-section (1A) for six months and thereafter shall return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers are produced

Provided that the inspector may call for the books and papers if they are needed again:

Provided further that if certified copies of the books and papers produced under sub-section (1A) are furnished to the inspector, he shall return those books and papers to the body corporate concerned.]

4 [(2) An inspector may examine on oath

(a) any of the persons referred to in sub-section (1); and

(b) with the previous approval of the Central Government, any other person,

in relation to the affairs of the company,5 [other body corporate] and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally.

(3) If any person fails without reasonable cause or refuses

(a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which is his duty under sub-section (1) or sub-section (1A) to produce; or

(b) to furnish any information which it is his duty under sub-section (1A) to furnish; or

(c) to appear before the inspector personally when required to do so under sub-section (2) or to answer any question which is put to him by the inspector in pursuance of that sub-section; or

(d) to sign the notes of any examination referred to in sub-section (5),

he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 6 [twenty thousand rupees], or with both, and also with a further fine which may extend to 7 [two thousand rupees] for every day after the first during which the failure or refusal continues.]

8 [***]

(5) Notes of any examination under sub-section (2) 9 [***] shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(6) In this section

(a) the expression “officers”, in relation to any company or body corporate, includes any trustee for the debenture-holders of such company or body corporate;

(b) the expression “agent”, in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporate or person; and

(c) any reference to 10 [officers and other employees], agents or partners shall be construed as a reference to past as well as present 10[officers and other employees], agents or partners, as the case may be.

COMMENTS

A general enquiry and investigation into the affairs of a company cannot be regarded as an investigation which starts with an accusation as contemplated in Article 20(3) of the Constitution of India. Section 240 of the Companies Act, therefore, does not offend Article 20 (3) of the Constitution; 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 53 of 2000, sec. 117, for sub-section (1) (w.e.f. 13-12-2000).

2. Ins. by Act 31 of 1965, sec. 25 (w.e.f. 15-10-1965).

3.Ins. by Act 34 of 1966, sec. 2 (w.e.f. 1-4-1967).

4. Sub-sections (2), (3) and (3A) subs. by Act 31 of 1965, sec. 25, for sub-sections (2), (3), (3A) and (4) (w.e.f. 15-10-1965).

5. Subs. by Act 53 of 2000, sec. 117, for “other body corporate, managing agent, secretaries and treasurers or associate,” (w.e.f. 13-12-2000).

6. Subs. by Act 53 of 2000, sec. 117, for “two thousand rupees” (w.e.f. 13-12-2000).

7. Subs. by Act 53 of 2000, sec. 117, for “two hundred rupees” (w.e.f. 13-12-2000).

8. See foot-note 4 above.

9.The word, brackets and figure “or (4)” omitted by Act 31 of 1965, sec. 25 (w.e.f. 15-10-1965).

10.Subs. by Act 65 of 1960, sec. 75, for “officers” (w.e.f. 28-12-1960).

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