THE COMPANIES ORDINANCE, 1972

Inspections and Investigations

183.—(1) The Registrar may appoint one or more competent inspectors to investigate the affairs of a company, and to report thereon in such manner as the Registrar may direct, on the application either of not less than fifty persons being shareholders or debenture holders of the company (or of a company which belongs to the same group of companies as the company, or of an associated company of the company) or on the application of persons who hold at least one tenth of the issued and outstanding shares carrying unrestricted voting rights of any such company as aforesaid.

(2)  The Registrar may, of his own motion or at the request of any person, appoint one or more competent inspectors as aforesaid if it appears to him that there are circumstances relating to a company which give cause to suspect ; —

(a)   that the company was formed for a fraudulent or unlawful purpose ; or

(b)   that its affairs are being, or have been, conducted with intent to defraud its creditors or the creditors of any other person, or otherwise for a fraudulent or unlawful purpose ; or

(c)   that its affairs are being or have been conducted in a manner which is unfairly prejudicial to any section of its shareholders or debenture holders; or

(d)   that persons concerned with the formation or management of the company have in connection therewith been guilty of the breach of any duty imposed on them by this Ordinance or by the memorandum or articles, or have otherwise been guilty of misconduct;

(e)   that shareholders and debenture holders of the company have not been given all the information with regard to its affairs to which they are entitled under this Ordinance or the memorandum or articles of the company.

(3)  Any application or request for the appointment of an inspector shall be supported by such evidence as the

Registrar may require for the purpose of showing that the applicants have good reason for applying for or requesting the investigation, and the Registrar may, before appointing an inspector, require the applicants to give security, to an amount not exceeding one thousand rupees or such larger sum as may be prescribed, for payment of the costs of the investigation.

(4)  Without prejudice to his powers under the foregoing subsections, the Registrar shall appoint one or more competent inspectors as aforesaid if the court makes an order declaring that the affairs of the company should be investigated by an inspector appointed by the Registrar.

(5)  The court may exercise its power under the last foregoing subsection, either of its own motion in the course of or at the conclusion of any proceedings, whether civil or criminal, and whether the company is a party to the proceedings or not, or on the application of any person who has previously applied to or requested the Registrar to appoint an inspector, and i-n that case the court may take into account a written statement by the Registrar of his reasons for not acceding to the application or request :

Provided that the court shall not exercise its power under the last foregoing subsection without giving the directors of the company an opportunity to be heard by it.

(6)  This section and sections 184 to 191 shall not come into operation until a date appointed by the Governor in Council by notice in the Gazette.

184.—(1) In order to determine whether to appoint an inspector or inspectors to investigate the affairs of a company, the Registrar shall have power to give directions to : —

(a)   that company;

(b)   any company or body corporate which belongs to the same group of companies as the company, or which is an associated company of the company or any such other company or body corporate ;

(c)   a company or body corporate whose affairs appear to the Registrar to be so connected with those of such a body as is mentioned in paragraph (a) or (b) above as to affect materially the question whether or not that body is insolvent :

requiring the company or body corporate, at such time and place as may be specified in the directions, to produce such books or papers as may be so specified.

(2)  An officer of the Registrar duly authorised in that behalf shall have power, on producing (if required so to do) evidence of his authority, to require any such company or body corporate as aforesaid to produce to him forthwith any books or papers which the officer may reasonably require for the purpose of the foregoing subsection.

(3)  Where by virtue of the foregoing provisions of this section the Registrar, or an officer of the Registrar, has power to require the production of any books or papers from any company or body corporate, the Registrar or officer shall have the like power to require production of those books or papers from any person who appears to the Registrar or officer to be in possession of them ; but where any such person claims a right to detain books or papers produced by him, the production shall be without prejudice to that right.

(4)  Any power conferred by this section to require a company, body corporate or other person to produce books or papers shall include power-Co) if the books or papers are produced—

(i) to take copies of them or extracts from them ; and

(ii) to require that person, or any other person who is a present or past officer of, or is employed by, the company or body corporate, to provide an explanation of any of them ;

(b) if the books or papers are not produced, to require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.

(5)  If a requirement to produce books or papers, or provide an explanation, or make a statement, which is imposed under this section is not complied with, the company, body corporate or other person on whom the requirement was so imposed shall be guilty of an offence punishable by a fine not exceeding one thousand rupees ; but where a person is charged with an offence under this subsection in respect of a requirement to produce any books or papers, it shall be a defence to prove that they were not in his possession or under his control, and that it was not reasonably practicable for him to comply with the requirement.

185.—(1) If the court or a magistrate is satisfied on information on oath laid by an officer of the Registrar, or laid under the authority of the Registrar, that there are reasonable grounds for suspecting that there are on any premises any books or papers of which production has been required under section 184 and which have not been produced in compliance with that requirement, the court or the magistrate may issue a warrant onthorising any police officer, together with any other persons named in the warrant and any other police officers, to enter (he premises specified in the information (using such force as is reasonably necessary for the purpose) and to search the premises and take possession of any books or papers appearing to be such books or papers as aforesaid, or to take, in relation to any books or papers so appearing, any other steps which may appear necessary for preserving them and preventing interference with them.

(2)  Every warrant issued under this section shall continue in force until the end of the period of one month after the date on which it is issued.

(3)  Any books or papers of which possession is taken under this section may be retained for a Deriod of three months or, if within that period there are commenced any proceedings for an offence under this Ordinance to which they are relevant, until the conclusion of those proceedings.

(4)  A person who obstructs the exercise of a right of entry or search conferred by virtue of a warrant issued under this section, or who obstructs the exercise of a right so conferred to take possession of any books or papers, shall be guilty of an offence punishable by a fine not exceeding one thousand rupees ; but where a person is charged with an offence under this subsection in respect of a requirement to produce any books or paper, it shall be a defence to prove that they were not in his possession or under his control, and that it was not reasonably practicable for him to comply with the requirement.

186.—(1) No information or document relating to a body which has been obtained under section 184 or 185 shall, without the previous consent in writing of that body, be published or disclosed, except to the Registrar or an officer of his department or an inspector appointed by the Registrar under section 183, unless the publication or disclosure is required—

(a)   with a view to the institution of, or otherwise for the purposes of, any criminal proceedings pursuant to, or arising out of, this Ordinance ;

(b)   for the purpose of enabling the Registrar to consider whether or not he should exercise with respect to the body a power conferred on him by this Ordinance ;

(c)   for the purposes of complying with any requirement. or exercising any power, imposed or conferred by this Ordinance with respect to reports made by inspectors appointed as aforesaid; or

(d)   with a view to the institution by the Registrar of proceedings in the name of any company or body corporate for the recovery of any property or damages or for any other relief whatsoever, or for the presentation by the Registrar of a petition for the winding up of any company or body corporate or a petition under section 201 in respect of the affairs of any company.

(2) A person who publishes or discloses any information or document in contravention of this section shall be guilty of an offence punishable by a fine not exceeding ten thousand rupees or by imprisonment for a period not exceeding two years, or to both such fine and such imprisonment.

187. If an inspector appointed under section 183 to investigate the affairs of a company thinks it necessary for the purposes of his investigations to investigate also the affairs of any other company or body corporate which is or has at any relevant time been—

(a) the company's holding company or subsidiary; or

(b) a subsidiary of a company which is or has at any relevant lime been the company's holding company ;

(c)   a company which is or has at any relevant time been the holding company of a company which has at any relevant time been the company's subsidiary ; or

(d)   a company which or has at any relevant time been an associated company of any company falling within paragraph (a), (b) or (c);

he shall have power so to do, and shall report on the affairs of the other body corporate so far as he thinks the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.

188.—(1) It shall be the duty of all officers and agents of the company and of all officers and agents of any other company or body corporate whose affairs are investigated under, section 187 to produce to the inspector all books a#4. documents of or relating to the company or, as the ca^e may be, the other company or body corporate, which are in their custody or power, and otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give.

(2)  An inspector may examine on oath the officers and agents of the company or such other company or body corporate in relation to its business, and may administer an oath accordingly.

(3)  If any officer or agent of the company or such other company or body corporate refuses to produce to the inspector any book or document which it is his duty under this section so to produce, or refuses to answer any question which is put to him by the inspector with respect to the affairs of the company or other company or body corporate, as the case may be, the inspector may certify the refusal under his hand to the court, and the court may thereupon inquire into the case, and after hearing any witnesses who may be produced against or on behalf of the alleged offender, and after hearing any statement which, may be offered in defence, punish the offender in like manner as if he had been guilty of contempt of the court.

(4)  If an inspector thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be so examined, he may apply to the court, and the court may, if it sees fit, order that person to attend and be examined on oath before it on any matter relevant to the investigation, and on any such examination—

(a)   the inspector may take part therein either personally or by attorney or counsel;

(b)   the court may put such questions to the person examined as the court thinks fit;

(c)   the person examined shall answer all such questions as the court may put or allow to be put to him, but may at his own cost employ a barrister or attorney who shall be at liberty to put to him such questions as the court may deem just for the purpose of enabling him to explain or qualify any answers given by him ;

and notes of the examination 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 :

Provided that, notwithstanding anything in paragraph (c) of this subsection, the court may allow the person examined such costs as in its discretion it may think fit, and any costs so allowed shall be paid as part of the expenses of the investigation.

(5) In this section, any reference to officers or to agents shall include past, as well as present, officers or agents, as the case may be, and for the purposes of this section the expression "agents", in relation to a company or other body corporate shall include the auditors, bankers and legal advisers of the company or other body corporate, whether those persons are or are not officers of the company or other body corporate.

189.—(1) The inspector may, and if so directed by the Registrar shall, make interim reports to the Registrar, and on the conclusion of the investigation shall make a final report to the Registrar.

Any such report shall be written or printed, as the Registrar directs.

(2) The Registrar shall—

(a)   forward a copy of any report made by the inspectors to the registered office of the company ; and

(b)   furnish a copy thereof on request and on payment of the prescribed fee to any other person

who is a shareholder, debenture holder or creditor of the company or of any other company or body corporate whose affairs have been investigated under section 187 ; and may also cause the report to be printed and published.

190.—(1) If from any report made under section 189 it appears to the Registrar that any person has, in relation to the company or to any other company or body corporate whose affairs have been investigated by virtue of section 187, been guilty of an offence for which he is criminally liable, the Registrar shall refer the matter to the Attorney-General for consideration of the question whether a prosecution should be instituted.

(2)  If, where any matter is referred to the Attorney-General under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall institute proceedings accordingly, and it shall be the duty of all officers and agents of the company or other company pr body corporate as aforesaid (other than the defendant in the proceedings) to give him all assistance in connection with the prosecution which they are reasonably able to give.

Section 188(5) shall apply for the purposes of this subsection as it applies for the purposes of that section.

(3)  If, in the case of any company or body corporate liable to be wound up under this Ordinance, it appears to the Registrar, from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in paragraphs (a) to (d) inclusive of section 183(2), the Registrar may, unless the company or body corporate is already being wound up by the court, present a petition for it to be so wound up on the ground that it is just and equitable that it should be wound up, or, in the case of a company, a petition for an order under section 201, or both.

(4)  If from any such report as aforesaid it appears to the Registrar that proceedings ought, in the interest of shareholders, debenture holders or creditors of any such company or body corporate, tc be brought for the recovery of any property or damages or for any other relief whatsoever, he may bring proceedings for that purpose in the name of the company or body corporate, and shall have sole control over the conduct of such proceedings, including power to discontinue them, or to enter into a compromise or make a settlement which shall be binding on the company or body corporate, but the Registrar shall indamnify the company or body corporate against all costs and expenses incurred by it in or in connection with such proceedings.

191.—(3) The expenses of and incidental to an investigation by an inspector appointed by the Registrar under the foregoing provisions of this Ordinance shall be defrayed in the first instance by the Registrar, but the following persons shall, to the extent mentioned, be liable to indemnify the Registrar, that is to say : —

(a)   any person who is convicted on a prosecution instituted as a result of the investigation by or on behalf of the Registrar, or against whom judgment is given in any proceedings brought by the Registrar under section 190(4), may in the the same proceedings be ordered by the court to pay the said expenses to such extent as may be specified in the order :

(b)   any company or body corporate in whose name proceedings are brought as aforesaid shall be liable to the amount or value of any sums or property recovered by it as a result of those proceedings ; and

(c)   unless, as a result of the investigation, a prosecution is instituted by or on behalf of the Attorney-General : —

(i) any company or body corporate dealt with by the report, where the inspector was appointed otherwise than under section 183(2), shall be liable, except so far as the Registrar otherwise directs ; and (ii) the applicants for the investigation, where the inspector was appointed under section 183(1) ?ha!I be liable to such extent (if any) as the Registrar may direct; and any amount for which a company or body corporate is liable by virtue of paragraph (b) of this subsection shall be a first charge on the sums or property mentioned in that paragraph.

(2) The report of an inspector appointed otherwise than under section 183(2) may, if he thinks fit, and shall, if the Registrar so directs, include a recommendation as to the directions (if any) which he thinks appropriate, in the light of his investigation, to be given under paragraph (c) of subsection (1).

(3)  For the purposes of this section, any costs or expenses incurred by the Registrar in or in connection with proceedings brought under section 190(4) shall be treated as expenses of the investigation giving rise to the proceedings.

(4)  Any liability to indemnify the Registrar imposed by paragraphs (a) and (b) of subsection (1) of this section shall, subject to satisfaction of the Registrar's right to repayment, be a liability also to indemnify all persons against liability under paragraph (c) thereof, and any such liability imposed by the said paragraph (a) shall, subject as aforesaid, be a liability also to indemnify all persons against liability under the said paragraph (b); and any person Ijable under the said paragraph (a) or (b) or either subpara,graph (i) or (ii) of the said paragraph (c) shall be entitled to a contribution from any other person liable under the same paragraph or sub-paragraph, as the case may be, according to the amount of their respective liabilities thereunder.

192.—(1) Where it appears to the Registrar that there is good reason so to do, he may of his own motion, or at the request of any person, appoint one or more competent inspectors to investigate and report on the ownership of beneficial interests (whether vested, absolute, contingent or conditional or not, and whether in respect of capital or income or voting rights) in any shares or debentures of any company, and otherwise with respect to the company for the purpose of determining the persons who are or have been financially interested in the success or failure (real or apparent) of the company, or able to control or materially to influence the policy of the company.

(2)  The appointment of an inspector under this section may define the scope of his investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular may limit the investigation to matters connected with particular shares or debentures.

(3)  Where an application for an investigation under this section with respect to particular shares or debentures of a company is made to the Registrar by members of the company, and the number of applicants or the amount of the shares held by them is not less than that required for an application for the appointment of an inspector under section 183(1), the Registrar shall appoint an inspector to conduct the investigation unless he is satisfied that the application is vexatious, and the inspector's appointment shall not exclude from the scope of his investigation any matter which the application seeks to have included therein, except insofar as the Registrar is satisfied that it is unreasonable for that matter to be investigated.

(4)  Subject to the terms of an inspector's appointment his powers shall extend to the investigation of any circumstances suggesting the existence of an arrangement or understanding which, though not legally binding, is or was observed or likely to be observed in practice and which is relevant to the purposes of his investigation.

(5)  The Registrar shall appoint one or more competent inspectors under this section if the court makes an order declaring that an investigation thereunder should be made into any matter specified by the court in the order, and section 183(5) except the proviso thereto shall apply in relation to such an order.

(6)  For the purposes of any investigation under this section, sections 184 to 189 inclusive shall apply with the necessary modifications of references to the affairs of the company or to those of any other company or body corporate, so, however, that—

(a) the said sections shall apply in relation to all persons who are or have been, or whom the inspector has reasonable cause to believe to be or to have been, financially interested in the success or failure or the apparent success or failure of the company, or of any other company or body corporate the beneficial ownership of whose shares or debentures is investigated with that of the company, or able to control or materially to influence the policy thereof, including persons concerned only on behalf of others, as they apply in relation to officers and agents of the company or of the other body corporate, as the case may be ; and

(b) the Registrar shall not be bound to furnish the company or any other person with a copy of any report by an inspector appointed under this section, or with a complete copy thereof, if he is of opinion that there is good reason for not divulging the contents of the report or of parts thereof, unless the court otherwise orders on an application made to it for the purpose.

(7) This section and sections 193 to 195 inclusive shall come not into operation until a date appointed by the Governor in Council by notice in the Gazette, and the Governor in Council may for the purpose of bringing those sections into operation, also bring into operation sections 184 to 189 inclusive insofar as they are applied by subsection (6).

193.—(1) Where it appears to the Registrar that there is good reason to investigate the ownership of beneficial interests (whether vested, absolute, contingent or conditional or not, and whether in respect of capital or income or voting rights) in any shares or debentures of a company and that it is unnecessary to appoint an inspector for the purpose, he may require any person whom he has reasonable cause to believe—

(a)   to be or to have been interested in those shares or debentures ; or

(b)   to act or to have acted in relation to those shares or debentures as the legal adviser or agent of someone interested therein ;

to give to the Registrar any information which that person has or can reasonably be expected to obtain as to present and past interests in those shares or debentures, and as to the names and addresses of the persons who have or have had any such interests and of any persons who act or halve acted on their behalf in relation to the shares or debentures.

(2) Without prejudice to the generality of the expression "interest", a person shall be deemed to have an interest in a share or debenture if he has a derivative interest therein, or any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof, or if his consent is necessary for the exercise of any of the rights of other persons interested therein, or if other persons interested therein can be required or are accustomed to exercise their rights in accordance with his instructions.

(3) Any person who fails to give any information required of him under this section, or who in giving any such information makes any statement which he knows to be false in a material particular, or recklessly makes any statement which is false in a material particular, shall be guilty of an offence punishable by a fine not exceeding ten thousand rupees or by imprisonment for not more than two years, or to both such fine and such imprisonment.

194.—(1) Where in connection with an investigation under sections 192 or 193 it appears to the Registrar that there is difficulty in finding out the relevant facts about any shares or debentures (whether issued or to be issued), and that the difficutly is due wholly or mainly to the unwillingness of the persons concerned or any of them to assist the investigation as required by this Ordinance, the Registrar may by order direct that the shares or debentures shall until further order be subject to the restrictions imposed by this section.

(2)  So long as any shares or debentures are directed to be subject to the restrictions imposed by this section—

(a)   any transfer of those shares or debentures, or in the case of unissued shares or debentures, any transfer of the right to be issued therewith and any issue thereof, shall be void ;

(b)   no voting rights shall be exercisable in respect of those shares or debentures ;

(c)   no further shares or debentures shall be issued in right of those shares or debentures, or in pursuance of any offer made to the holder thereof;

(d)   except in a winding up, no payment shall be made of any sums due from the company on those shares or debentures, whether in respect of capital, principal, dividends, interest or otherwise.

(3)  Where the Registrar makes an order directing that shares or debentures shall be subject to the said restrictions, or refuses to make an order directing that shares or debentures shall cease to be subject thereto, any person aggrieved thereby may apply to the court, and the court may, if it sees fit, direct that the shares or deben tures shall cease to be subject to the said restrictions.

(4) If the Registrar makes an order under subsection (1) in respect of registered shares or debentures, he shall give notice thereof to the company together with a copy of the order, and thereupon section 110 shall apply as though the notice were a notice of interest under that section and the Registrar had a derivative interest in the shares or debentures :

Provided that unless the Registrar notifies the company within the period of fourteen days mentioned in section 110(5) that it may register a transfer of shares or debentures, the same consequences shall follow as if the court had made an order enjoining the registration of the transfer at the expiration of that period and that order were not subject to appeal.

(5) Nothing in this section shall affect the validity and effectiveness of a transfer for valuable consideration of shares or debentures represented by a bearer share certificate or a bearer debenture to a person who has no actual knowledge of an order made in respect of the shares or debentures under subsection (1).

(6)  Any order (whether made by the Registrar or the court) which directs that shares or debentures shall cease to be subject to restrictions imposed under subsection (1), may, if the order is expressed to be made with a view to permitting a transfer of those shares or debentures, continue the restrictions mentioned in paragraph (c) of subsection (2), either in whole or in part, so far as they relate to any right acquired or offer made before the transfer.

(7)  Any person who—

(a) exercises or purports to exercise any right to dispose of any shares or debentures which, to his knowledge, are for the time being subject to restrictions imposed under subsection (1), or of any right to be issued with any such shares or debentures ; or

(b) votes at any general meeting or any meeting of a class of shareholders or debenture holders in respect of any such shares or debentures, whether as holder of the shares or debentures or as a proxy, or appoints a proxy to vote in respect thereof at such a meeting ; or

(c) being the holder of any such shares or debentures, fails to give notice that they are subject to restrictions imposed under subsection (1) to any person whom he docs not know to be aware of that fact but does know to be entitled, apart from the said restrictions, to vote in respect of those shares or debentures as a transferee thereof, or as a person in whom the right to vote vests by operation of law, or under an order of any court; shall be guilty of an offence punishable by a fine not exceeding ten thousand rupees.

(8) Where shares or debentures in any company nre issue:' in contravention of the said restrictions, every officer of the company who is in default shall be guilty of an oflencc punishable by a fine not exceeding ten thousand rupees.

195. A legal adviser or a bank shall not be exempted from the duty to give evidence, produce documents or provide information under sections 192 or 193 by reason of any professional or other privilege, or by reason of any contractual or other obligation to a client or customer, and a legal adviser or bank who gives evidence, produces documents or gives evidence as aforesaid shall not be liable to any client or customer for having done so.