Regulatory Action – Resolution of Corporate Disputes, Non-Compliances & Remedies Important Questions

Question 1.
PSU Bank Limited, a public sector bank has detected a fraud being committed by one of its large corporate customers. The alleged fraud seems to have been perpetrated over a period of time, by diverting the funds received from the Bank to offshore tax havens by the promoter group. A forensic audit was ordered to examine the details of such transactions. Meanwhile, the Central Government has asked the Central Bureau of Investigation (CBI) to investigate the fraud. Discuss which division of CBI would investigate this case.
Answer:
Central Bureau of Investigation (CBI) has grown into a multidisciplinary investigation agency over a period of time.

Today it has the following three divisions for investigation of crime :
i. Anti-Corruption Division – For investigation of cases under the Prevention of Corruption Act, 1988 against Public officials and the employees of Central Government, Public Sector Undertakings, Corporations or Bodies owned or controlled by the Government of India – it is the largest division having presence almost in all the States of India.

ii. Economic Offences Division – For investigation of major financial scams and serious economic frauds, including crimes relating to Fake Indian Currency Notes, Bank Frauds and Cyber Crime.

iii. Special Crimes Division – For investigation of serious, sensational and organized crime under the Indian Penal Code and other laws on the requests of State Governments or on the orders of the Supreme Court and High Courts.

The laws under which CBI can investigate Crime are notified by the Central Government under section 3 of the Delhi Special Police Establishment Act, 1946.

According to section 3, The Central Government may, by notification in the Official Gazette, specify the offences or classes of offences which are to be investigated by the Delhi Special Police Establishment.
As the fraud in PSU Bank is a major financial scam. It would be investigated by the Economic Offences division of CBI.

Question 2.
Write a note on the Anti-Competitive Agreement.
Answer:
Section 3(1) of the Competition Act 2002, provides that no enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. As per provisions of section 3(3) of Competition Act, 2002, examples of anti-competitive agreements include fixation of purchase/sale price, limiting production/supply of goods, bid-rigging etc.

The agreements falling in section 3(3) shall be presumed to have appreciable adverse effect on Z competition and thereby they are construed as deemed restrictive agreements. Agreements covered under section 3(3) are horizontal agreements. § The onus to prove otherwise lies on defendant.

The agreements falling in section 3(4) are basically vertical agreements. These shall be judged by rule of Reason and the onus lies on the prosecutor to prove its appreciable adverse effect on competition. In other words, in case of agreements covered under section 3(4), there is no legal presumption of being anti-competitive.

Section 4(1) of the Competition Act provides that No Enterprise or group shall abuse its dormant position.
Section 19(2) of the Competition Act states the Additional Powers relating to Inquiry for Competition Commission of India and shall include the powers and functions specified in sub-sections (3) to (7).

Section 19(3) of Competition Act, 2002 prescribe factors to decide whether an agreement has an ‘appreciable adverse effect’ on competition. It provides for negative and positive factors.

Negative factors:

  • Creation of barriers to new entrants in the market;
  • Driving existing competitors out of the market;

Positive factors

  • Accrual of benefits to consumers
  • Improvements in production or distribution of goods or provision of services; and
  • Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

Generally, only when the negative effects of the vertical arrangement overcome the positive effects can the agreement be deemed anti-competitive. The factors specified above by no means constitute an exhaustive list, and the competition authorities are free to look beyond them.

Question 3.
Distinguish between Relevant Geographical Market and Relevant Production Market
Answer:
Distinction between Relevant Geographical Market and Relevant Production Market provided below:
Relevant Geographic Market Section 2(s) of the Competition Act, 2002 defines “relevant geographic market” means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas.

The Relevant Geographic Market is not broad in sense. It could be drawn as narrowly as one metropolitan area or as broad as the nation as a whole. It is the geographic area in which a sole supplier of the product could profitably increase its price without causing outside suppliers to sell in that particular area.

The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the following factors, namely:-

  • regulatory trade barriers
  • local specification requirements
  • national procurement policies
  • adequate distribution facilities
  • transport costs
  • language
  • consumer preferences and
  • need for secure or regular supplies or rapid after-sales services.

Relevant Product Market:
Section 2(f) of the Competition Act, 2002 defines “relevant product market” means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; The Commission shall while determining the “relevant product market”, have due regard to all or any of the following factors, namely:-

  • physical characteristics or end-use of goods;
  • price of goods or service;
  • consumer preferences;
  • exclusion of in-house production;
  • existence of specialised producers; and
  • classification of industrial products.

Question 4.
What are the factors which the Competition Commission of India will take into consideration in determining whether an agreement has an appreciable adverse effect on competition.
Answer:
Section 19(3), the Competition Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors, namely:-

  • creation of barriers to new entrants in the market
  • driving existing competitors out of the market
  • foreclosure of competition by hindering entry into the market
  • accrual of benefits to consumers
  • improvements in production or distribution of goods or provision of services or
  • promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

Question 5.
State the duties of the Director-General under the Competition Act, 2002
Answer:
The Act provides that the Director-General when so directed by the Commission is to assist the Commission in investigation into any contravention of the provisions of this Act. The Director-General is bound to comply with such a direction to render requisite assistance to the Commission.

The Director-General, in order to effectively discharge his functions, has been given the same powers as are conferred upon the Commission under section 36(2). Under section 36(2) the Commission is having same powers as are vested in Civil Court under the Code of Civil Procedure (1908) while trying a suit, in respect of the following matters, namely:-

  • summoning and enforcing the attendance of any person and examining him on oath
  • requiring the discovery and production of documents;
  • receiving evidence on affidavits;
  • issuing commissions for the examination of witnesses or documents;
  • subject to the provisions of sections 123and 124 of the Indian Evidence.

Act, 1872, requisitioning any public record or document or copy of such record or document from any office;
Without prejudice to the above powers, the provisions of Companies Act, 2013, so far as may be, shall apply to an investigation made by the Director-General or by a person authorised by him, as they apply to an inspector under the Companies Act, 2013.

This power includes search and seizure of the record of any person in respect of which an investigation has been directed by the Commission. It has also been provided that wherever the approval of the Central Government is required, the same shall be given by the Commission.

Question 6.
The Competition Act, 2002 does not prohibit dominance but the abuse of dominant position. Discuss?
Answer:
Section 4 of the Competition Act, 2002 prohibits any enterprise or group from abusing its dominant position. A dominant position is a position of strength enjoyed by an enterprise or a group in the relevant market in India. An enterprise having a dominant position enjoy the following benefits –
(a) It can operate independently of competitive forces prevailing in the relevant market, or
(b) It can affect its competitors or consumers or the relevant market, in its favour.

Factors to be considered for determining existence of Dominant Position:

  • Market share of enterprise (however, market share is one of the indicators of dominance, and it cannot be seen in isolation to give a conclusive finding of dominance),
  • Size and resources of enterprise,
  • Size and importance of competitors,
  • Economic power of the enterprise, including commercial advantages over competitors,
  • Vertical integration of the enterprise,
  • Dependence of consumers on the enterprise,
  • Monopoly or dominant position acquired as a result of a statute, Govt, company etc.
  • Degree of entry barriers like regulatory barriers, financial risk, high cost of entry, technical barriers,
  • Market structure and size of market etc.

“Creating a dominant position is permitted, but abuse of dominant position is prohibited.” Abuse of dominant position shall be construed in the following cases –

  • An enterprise (directly or indirectly) imposes unfair or discriminatory conditions in purchase or sale of goods or services, or
  • An enterprise (directly or indirectly) imposes unfair or discriminatory prices (including predatory prices) in purchase or sale of goods or services, or
  • An enterprise or group restricts the production of goods or provision of services, or
  • An enterprise or group restricts technical or scientific development relating to goods or services to the injustice of consumers, or
  • A person engages in practices resulting in denial of market access in any manner, or
  • A person enters into contracts for supplementary obligations, unrelated to the main product or service,
  • A person uses dominant position in one relevant market to enter into other relevant markets.

Predatory Price has been defined as the sale of goods or provision of ser-vices, at a price which is below the cost of production of goods or provision of services, with a view to reduce competition or eliminate competition.

Question 7.
Duties of Director-General to investigate contravention.
Answer:
According to section 41(1), the Director-General shall when so directed by the Commission, assist the Commission in investigating into any contravention of the provisions of this Act or any rules or regulations made thereunder.

Powers of Director-General:
According to section 41(2), the Director-General shall have all the powers as are conferred upon the Commission under sub-section (2) of section 36.

According to section 36(2), the Commission shall have, for the purposes of discharging its functions under this Act, the same powers as Eire vested in a Civil Court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely:-

  • summoning and enforcing the attendance of any person and examining him on oath
  • requiring the discovery and production of documents;
  • receiving evidence on affidavit;
  • issuing commissions for the examination of witnesses or documents;
  • requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 any public record or document or copy of such record or document from any office.

Question 8.
Distinguish between Inspection and Investigation
Answer:
Inspection Section 206(3), (5) and 6) of the Companies Act, 2013 states the three circumstances, where inspection may be ordered by:

  • By the registrar under section 206(3);
  • By the Regional Director under power delegated to it by Central Gov¬ernment under section 206(5); and
  • By Central Government by a general or special order.

The objectives of conducting such inspections are provided below:
1. To detect concealment of income by falsification of accounts.

2. To secure knowledge about the mismanagement of the business of a company and transactions entered into with an intent to defraud creditors, shareholders or otherwise for fraudulent or unlawful purposes.

3. To ascertain whether the statutory auditors have discharged their functions and duties in certifying the true and fair view of a company’s accounts and their proper maintenance.

4. To enable the Government to ascertain the quantum of profits accrued but not adequately accounted for.

5. To detect misapplication of funds leading a company to a state of perpetual financial crisis.

6. To keep a watch on performance of a company.

7. To detect misuse of fiduciary responsibilities by the company’s management for personal aggrandizement. Inspection is intended to be a routine and not ad hoc or special affair. However, if sufficient evidence suggests that of the company’s affairs are being mismanaged and/ or managed in fraudulent way, then inspection can lead to orders for investigation into the affairs of the company. In these paragraphs, we will discuss inspection, inquiry and investigation in contest of the corporate law.

Investigation
The Companies Act, 2013 provides for carrying out the following kinds of
investigation:

  • Investigation of the affairs of the company if it is necessary to investigate into the affairs of the company in public interest (Section 210);
  • Investigation of the affairs of related companies (Section 219);
  • Investigation about the ownership of a Company (Section 216),
  • Investigation of foreign companies (Section 228)
  • Investigation by Serious Fraud Investigation Office directed by Central government under (Section 212)
  • Investigation on the order of Tribunal. (Section 213).

Question 9.
Can the Registrar of Companies seize the books and documents of a company? Explain.
Answer:
Section 209 of the Companies Act provides for Search and Seizure Where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that the books and papers of a company, or relating to :

  • the key managerial personnel; or
  • any director; or
  • auditor; or
  • company secretary in practice if the company has not appointed a company secretary are likely to be destroyed, mutilated, altered, falsified or secreted,

The Registrar or inspector may, after obtaining an order from the Special Court for the seizure of such books and papers –

  • enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
  • seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.

The Registrar or inspector shall return the books and papers seized to the company as soon as may be but note later than 180 days after such seizure. These books and papers may however be called again for a further period of 180 days if they are needed again.

Registrar or inspector may, therefore returning such books and papers, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the same in such other manner as he considers necessary. The provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures shah apply, mutatis mutandis, to every ‘search and seizure.

Question 10.
List out the kind of investigations carried out under the Companies Act, 2013
Answer:
Kinds of investigation under the Companies Act, 2013 provides for the following kinds of investigation:

  • Investigation of the affairs of the company if it is necessary to investigate into the affairs of the company in public interest (Section 210);
  • Investigation of the affairs of related companies (Section 219)
  • Investigation about the ownership of a Company (Section 216)
  • Investigation of foreign companies (Section 228)
  • Investigation by Serious Fraud Investigation Office directed by Central government under (section 212)
  • Investigation on the order of Tribunal. (Section 213).

Question 11.
One of the major creditors of Joy Ltd. is of the opinion that an investigation in the affairs of the company needs to be undertaken in the interest of the company and the creditors. Can he make an application for investigation of Joy Ltd. to the National Company Law Tribunal?
Answer:
Applicability for investigation to the Tribunal by a Creditor:
A creditor is not entitled to make an application for the investigation in the affairs of company to Tribunal.

An investigation can be conducted into affairs of the company in the following situations:
As per order of Central Government:

  • Where the Central Government is of the opinion that it is necessary to investigate into the affairs of the company;
  • On the receipt of report of the ROC or inspector under section 208;
  • On intimation of special resolution passed by a company that the affairs of the company ought to be investigated; or
  • In public interest; or
  • Where an order is passed by NCLT in any proceedings before it that the affairs of a company ought to be investigated.

Central Government may appoint one or more inspectors to investigate the affairs of the company. These inspectors shall report on the affairs of the company in such manner as the central government may direct.
Hence, keeping the above provisions in mind, the creditors of Joy Ltd. cannot make an application to the NCLT for investigation into the affairs of the company.

Question 12.
Mrs. Geeta is a Managing Director of HEL Ltd. She has been arrested for an offence covered under section 447 of the Companies Act, 2013 on a complaint made by the Director of Serious Fraud Investigation Office. Geeta seeks your legal advice to know the conditions under which she can be released on bail. Advice Geeta
Answer:
According to section 212(6) of Companies Act, 2013, notwithstanding anything contained in the Code of Criminal Procedure, 1973, offence covered under section 447 of the Companies Act, 2013 shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless-
i. the Public Prosecutor has been given an opportunity to oppose the application for such release; and
ii. where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

A person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail if the Special Court so directs.

The Special court shall not take cognizance of any offence except only upon a complaint in writing made by –

  • The Director, Serious Fraud Investigation Office; or
  • Any officer of the Central Government authorized by a general or special order in writing in this behalf.

In the given case, Geeta has been arrested for an offence covered under section 447 of the Act on a complaint made by the Director, SFIO. Geeta may be released (on the grounds of being a woman) on bail if the Special Court so directs.

Question 13.
P is an employee of ABC Limited and he is being investigated under the provisions of Companies Act, 2013. The Company wants to terminate P on the ground that an investigation is going on against him. They have filed the application to Tribunal for approval of termination. Company has not received any reply from the Tribunal within 30 days of filling the application. The Company considers it as a deemed approval and terminates him. Is the contention of Company valid in law?
Answer:
Yes, the termination of P made by the company is totally valid. Company can assume that deemed approval of Tribunal is received if no reply is received within 30 days.

Section 218 of the Companies Act, 2013 states that the company is required to take approval of the tribunal before taking action against the employee if there is any pendency of any proceedings against any person concerned in the conduct and management of the affairs company.

The company shall require approval for:

  • discharge or suspension of an employee, or
  • punishment to an employee by dismissal, removal, reduction in rank or otherwise, or
  • change in the terms of employment to the disadvantage of employees) The Tribunal shall notify its objection to the action proposed in writing.

If the company does not receive the approval of the Tribunal within 30 days of making the application, it may proceed to take the action proposed against the employee. That means it can be considered as a deemed approval by the tribunal.

Question 14.
What are the objective for conducting inspection and under what circumstances the inspection can be ordered by the Registrar of Companies?
Answer:
Provisions regarding inspection are given under sections 206(3); 206(5) and 206(6). Inspection may be ordered in the following circumstances:

  • By registrar under sub-section (3) of section 206;
  • By Regional Director under power delegated to it by Central Government under sub-section (5) of section 206; and
  • By Central Government by a general or special order.

Inspection Ordered By Registrar:
According to section 206(3), Inspection may be ordered by the Registrar, where

  • No information or explanation is furnished to the Registrar within the time specified under sub-section (1); or
  • The Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate; or
  • If the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required.

The Registrar may, by another written notice, call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as specified in the notice. In this written notice, the Registrar shall record his reason in writing for issuing the notice for inspection.

Question 15.
Describe the provisions relating to search and seizure under the Companies Act, 2013.
Answer:
Search and Seizure is provided under section 209 of the Companies Act, 2013.
The Registrar or inspector may, after obtaining an order from the Special Court for the seizure of such books and papers, –

  • enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
  • seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.

The Special court may order such seizure where, based on information available in its possession or otherwise, it has reasonable ground to believe that the books and papers of a company, or relating to the key managerial personnel or any director or auditor or company secretary in practice, are likely to be destroyed, mutilated, altered, falsified or secreted.

The Register or inspector shall return the books and papers within one hundred and eighty days after such seizure to the company from whose custody or power such books or papers were seized. These books and papers may be called for by the Registrar or inspector for a further period of one hundred and eighty days by an order in writing if they are needed again.

Registrar or inspector may, therefore returning such books and papers, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the same in such other manner as he considers necessary. The provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures shall apply, mutatis mutandis, to every search and seizure.

Question 16.
Under what circumstances the tribunal makes order for the investigation into the affairs of the company.
Answer:
Section 213 of the Companies Act provides for the investigation into the company’s affairs on Applications made by Members or other persons.

The Tribunal may order that affairs of a company ought to be investigated after giving a reasonable opportunity of being heard to the parties concerned. Where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company and to report thereupon.

The tribunal may make this order on an application made by –

  • not less one hundred members or members holding not less than one-tenth of the total voting power, whichever is less in case of a company having a share capital; or
  • not less than one-fifth of the persons on the company’s register of members, in case of company not having share capital and supported by evidence showing good reason for seeking an order for conducting an investigation into affairs of the company.

The Tribunal may also make such order on an application made to it by any other person or otherwise if it is satisfied that the circumstance suggests that-

  • the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose;
  • person concerned in the formation of the company or the management of its affairs have been guilty of fraud, misfeasance or other misconduct towards the company or towards its members; or
  • the members of the company have not been given all reasonable information including information relating to the calculation of com-mission payable to a managing or other director or the manager of the company.

If after investigation it is proved 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 that the company was formed for any fraudulent or unlawful purpose; or
  • any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud under section 447.

Question 17.
What are the preparatory steps for the company secretary to face investigation?
Answer:
Preparatory steps for the company secretary to face investigation: It is advisable for the Secretary to prepare a report touching upon various aspects of the activities of his company before an inspector commences investigation into the affairs of a company, particularly those transactions in respect of which fraud or misfeasance or mismanagement is alleged.

This exercise will enable the secretary to handle the investigation into the affairs of his company with courage and confidence.

The aspects which should be considered by the company secretary include:
1. Basic information about the company – Name of the company; date of incorporation; location of the registered office, branches, factories and other offices; status of the company – public or private; objects of the company – capital structure; voting rights attached to the shares shareholding pattern of the company.

2. Business activities – Nature of existing business, licensed and installed capacities, expansion programme and sources of finance, whether the company belongs to a particular group; if so the names of other companies falling within the same group.

3. Debentures, bank finance and deposits.

4. Foreign collaboration agreements.

5. Management – Brief history of past management set up; existing management set up; composition of Board of Directors; whether the terms and conditions of the appointment of managerial personnel are being adhered to; details regarding appointment of directors and their, relatives to an office or place of profit.

6. Whether all the statutory registers including minute’s books are being maintained up to date.

7. Whether the internal checks and internal control system is being properly followed?

8. Working results and financial position-General assessment of working of the company, evaluation of the level of performance and efficiency of the management, a review of the profits of the company, performance data, financial position of the company in the context of its working results for the last three years.

9. Compliance by the company and its officers with the provisions of the Companies Act, 1956/2013.
10. Compliance with the provisions of other Acts applicable to the company.
11. Whether the loans taken and loans advanced to Directors, the firms in which they are partners or companies in which they sire Directors -Eire in accordance with the provisions of the Act.

12. The investments made by the company.

13. Sole selling agency agreement.

14. Instance of mismanagement and other irregularities.

15. Acquisition/disposal of substantial assets.

16. A scrutiny of abnormal/heavy expenditure items.

17. Complaints, if any, against the company and its management and steps taken to redress them.

18. Brief particulars of the litigations against the company and the reasons thereof.

19. Management’s relations with the employees and labour.

20. Shareholders – Instance of oppression of minority shareholders, allegations of non-receipt of dividend, notices of meetings, accounts, share certificates, etc.; illegal forfeiture of shares, etc. and steps taken to redress Investors, complaints.

21. Auditors – Name and address of Statutory Auditors, Secretarial Auditor and Cost Auditor, compliance as per the provisions of Companies Act, 2013.

Question 18.
Write about brief history of Serious Fraud Investigation Office.
Answer:
The SFIO was set up by the Central Government in terms of the Government of India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July 2003. The SFIO was established as a multi-disciplinary organization under Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds.

The SFIO normally take up for investigation only such cases, which are characterized by:

  • complexity and having inter-departmental and multi-disciplinary ramifications;
  • substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of persons affected,
  • the possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures.
  • The SFIO shall investigate serious cases of fraud received from Ministry of Corporate Affairs.

Establishment of Serious Fraud Investigation Office (Section 211):
According to Companies Act, 2013, The Central Government shall, by notification, establish an office to be called the Serious Fraud Investigation Office to investigate frauds relating to a company:
Provided that until the Serious Fraud Investigation Office is established under sub-section (1), the Serious Fraud Investigation Office set-up by the Central Government in terms of the Government of India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious Fraud Investigation Office for the purpose of this section.

SFIO is a multi-disciplinary organisation under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, banking, law, information technology, investigation, company law, capital market and taxation etc. for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. The office shall be headed by a Director and consist of experts of following fields:

  • Banking,
  • Corporate Affairs,
  • Taxation
  • Forensic auditing,
  • Capital Market,
  • Information Technology,
  • Law, or
  • Other fields.

The Central Government may appoint persons having expertise in the fields of investigations, cyber forensics, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO) functions under the Act.

The Director shall be an officer not below to the rank of a Joint Secretary. He shall have knowledge and experience in dealing with matters relating | to corporate affairs. The Central Government may appoint such experts \ and other officers and employees in the Serious Fraud Investigation Office as it considers necessary for the efficient discharge of its functions under this Act.

Rule 4 of the Companies (Inspection, Investigation and Inquiry) Rules, 2014 prescribes the terms and conditions of service of Director, experts and other officers and employees of the Serious Fraud Investigation Office under subsection (5) of section 211 shall be as under-

Terms and conditions of appointment/service of Governed by
Director The deputation rules under the Central Staffing Scheme of Government of India;
Experts, other officers and employees from the Central Government or the State Government or Union territory Government, Public Sector Undertaking, Autonomous Bodies and such other organizations. The recruitment rules which may be duly notified by the Central Government under Article 309 of the Constitution of India.

The Central Government may appoint experts or consultants or other professionals or professional firms on contractual basis as per the scheme of engagement of experts or consultants which may be duly approved by the Central Government.

Question 19.
What are provisions regarding disgorgement under Companies Act, 2013?
Answer:
Disgorgement is the act of giving up something such as the profits obtained by illegal or unethical acts on demand or by legal compulsion. In case of fraud, undue advantage or benefit, the Central government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such assets, property, or cash. The Central Government may also file and application before the Tribunal for holding directors, key managerial personnel, officers or other person personally liable without any limitation of liability.

Court can order wrongdoers to pay back to prevent unjust enrichment. Disgorgement is a civil remedy and not a punishment or punitive civil action. The purpose of such a remedy, as in securities cases, is to deprive the wrongdoer of his or her ill-gotten gains and to deter violations of the law.

Question 20.
What are provisions regarding investigation of ownership of company?
Answer:
Section 216 provides that investigation of the ownership of the com¬pany may be ordered by the Central Government on grounds given in | section 216(1).
Where it appears to the Central Government that there is a reason so to do, it may appoint one or more inspectors to investigate and report on matters relating to the company, and its membership for the purpose of determining the true persons-

  • who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
  • who are or have been able to control or to materially influence the policy of the company; or
  • who have or had beneficial interest in shares of a company or who are or have been beneficial owners or significant beneficial owner of a company.

The Central Government shall appoint one or more inspectors if the Tribunal, in the course of any proceeding before it, directs by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating financial control or material influence to the company.

The Central Government may define the scope of the investigation and may limit the investigation to particular shares or debentures. The powers of inspector shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though not legally binding, is or was observed or is likely to be observed in practice and which is relevant for the purposes of his investigation.

Question 21.
What are provisions regarding freezing of assets of company on inquiry and investigation (Section 221)
Answer:

  • Where it appears to the Tribunal,
  • on a reference made to it by the Central Government or
  • in connection with any inquiry or investigation into the affairs of a company under this Chapter or
  • on any complaint made by such number of members as specified under sub-section (1) of section 244 or a creditor having

one lakh amount outstanding against the company or any other person having a reasonable ground to believe that the removal, transfer or disposal of funds, assets, properties of the company is likely to take place in a manner that is prejudicial to the interests of the company or its shareholders or creditors or in public interest, it may by order direct that such transfer, removal or disposal shall not take place during such period not exceeding three years as may be specified in the order or may take place subject to such conditions and restrictions as the Tribunal may deem fit.

In case of contravention of the order of the Tribunal, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Question 22.
What are provisions regarding investigation? Explain in brief investigation, inspection and inquiry.
Answer:
Investigation:
Shareholders have been vested with various rights including the right to elect directors under the Companies Act, 2013. However, shareholders are often ill-equipped to exercise effective control over the affairs of companies, and, particularly in companies whose shareholders are widely scattered and the affairs of such companies are managed to all intents and purposes, by its Board of directors to the exclusion of a pre-dominant majority of shareholders.

Such a situation leads to abuse of power by persons in control of the affairs of company. It became, therefore, imperative for the Central Government to assume certain powers to investigate the affairs of the company in appropriate cases particularly where there was reason to believe that the business of the company was being conducted with

  • the intent to defraud its creditors or members, or
  • for a fraudulent or unlawful purpose, or
  • in any manner oppressive of any of its members.

Sections 210 to 229 of the Companies Act, 2013, contain provisions relating p to investigation of the affairs of company.

Inquiry:
Section 206(4) of the Companies Act provides for Inquiry, Further the section states that The Registrar may initiate inquiry under sub-section (4) of section 206, if the Registrar is satisfied that the business of the company is being carried on-

  • for a fraudulent purpose;
  • unlawful purpose; or
  • not in compliance with the provision of this Act; or
  • investors grievances not being addressed.

The Registrar shall satisfy itself before order of such inquiry on the basis of-

  • information available with him; or
  • information furnished to him; or
  • on representation made to him by any person.

The order shall be made by the Registrar to carry out such inquiry as he deemed fit after giving the company a reasonable opportunity of being heard. The Registrar shall order inquiry after informing the company of the allegation made against it by a written order. In this order the Registrar will call on the company in writing any information or explanation within specified time.

Further, the Central Government may, on satisfaction that circumstance so warrant, direct the Registrar or Inspector for the purpose to carry out the inquiry under this subsection (4) of section 206. Where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud under section 447.

Inspection (Section 206):
There are three circumstances, where inspection may be ordered:

  1. By registrar under sub-section (3) of section 206;
  2. By Regional Director under power delegated to it by Central Government under sub-section (5) of Section 206; and
  3. By Central Government by a general or special order.

Inspection ordered by the Registrar:
According to Section 206(3), Inspection may be ordered by the Registrar, where-

  • No information or explanation is furnished to the Registrar within the prescribed time;
  • The Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate; or
  • The Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company.

The Registrar may by another written notice, call on the company to pro¬duce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as specified in the notice. In this written notice, the Registrar shall record his reason in writing for issuing the notice for inspection.

Inspection ordered by the Regional Director:
The Central Government may, on satisfaction that circumstance so warrant, direct inspection of books and papers of a company by an inspector appointed for the purpose.

However, this power of Central Government has been delegated to jurisdictional Regional Directors.

Inspection ordered by the Central Government:
The Central Government may by general or special order authorize any statutory authority to carry out the inspection of books of account of a company or class of companies. While issuing such general or special order, the Central Government will give consider the circumstances.

This sub-section gives wide powers to the central government. Such inspection may be carried out by any statutory authority including SFIO, ICSI, ICAI, SEBI, IRDA, CCI, TRAI, etc. depending upon the circumstances of the case.

Question 23.
Explain power of Inspector to Conduct Investigation into Affairs of related Companies.
Answer:
Section 219
An inspector shall subject to prior approval of the Centred Government, investigate the affairs of-
(a) Any other body corporate which is or has at any relevant time been the company’s subsidiary company or holding company or a subsidiary of its holding company;
(b) Any other body corporate which is or has any relevant time been managed by any person as managing director or as manager of the company;

(c) Any other body corporate whose Board of Directors comprises nom¬inees of the company or is accustomed to act in accordance with the directions or instructions of the company or any of its directors; or

(d) Any person who is or has at any relevant time been the company’s managing director or manager or employee. Such investigation should be in continuation of ongoing investigation under sections 210,212 and 213. Information, Inspection, Inquiries and Investigation of Foreign Company (Section 228). The provisions of this Chapter XIV shall apply mutatis mutandis to inspection, inquiry or investigation in relation to foreign companies.

Question 24.
What penalty has been prescribed under Companies Act, 2013 for false statement?
Answer:
Penalty for False Statement etc. (Section 229):
Where a person who is required to provide an explanation or make a statement during the course of inspection, inquiry or investigation, or an officer or other employee of a company or other body corporate which is also under investigation,-

  • destroys, mutilates or falsifies, or conceals or tampers or unauthorizedly removes, oris a party to the destruction, mutilation or falsification or concealment or tampering or unauthorized removal of, documents relating to the property, assets or affairs of the company or the body corporate
  • makes, or is a party to the making of, a false entry in any document concerning the company or body corporate; or
  • provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in section 447.

Question 25.
Creditors of Abraham Ltd. make a complaint to the ROC, Hyderabad alleging that the management of the company is indulging in destruction and falsification of the accounting records of the company. They request the Registrar to take immediate steps so that management may not be allowed to tamper with the records. The complaint was received at 10 A.M. on 1st September 2020 and the ROC entered the premises at 10.30 A.M. for the search. Examine the powers of the Registrar to seize the books of the company.
Answer:
According to the provisions, Registrar may enter and search the place where such books or papers are kept and seize them only after obtaining:
an order from the Special Court. Since in the given question, Registrar entered the premises for the search and seizure of books of the company without obtaining an order from the Special Court, he is not authorised to seize the books of the Mac Trading Limited.

Question 26.
What action lies against SEBI registered intermediaries in case of default/violation under the SEBI Act, 1992
Answer:
Investigations Procedure by SEBI under SEBI Act, 1992:
Section 11C of the Act provides that where SEBI has reasonable ground to believe that the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the rules or the regulations made or directions issued by SEBI thereunder, it may, at any time by order in writing, direct any person specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to SEBI.

It is the duty of every officer or employee of the company, intermediary and person associated with the securities market to preserve and to produce to the Investigating Authority, all the books, registers, other documents and records which are in their custody or power.

The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish information, or produce books, registers, other documents, or record before it as it may consider necessary.

The Investigating Authority may keep in its custody any books, registers, other documents and record produced for six months and thereafter shall return the same. The Investigating Authority may call for any book, or register, other document and record if they are needed again.

Further, if the person on whose behalf the books and records are produced requires certified copies of such books and records, it shall give certified copies to such person.

Any person, directed to make an investigation may, examine on oath, any manager, managing director, officer and other employees of any intermediary or any person associated with securities market in any manner, in relation to the affairs of his business and may administer an oath accordingly and for that purpose may require any of those persons to appear before it personally.

If any person fails to produce any record or fails to appear before the Investigating Authority personally when required to do so, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, which may extend to one crore rupees, or with both, and also with a further fine which may extend to five lakh rupees for every day after the first during which the failure or refusal continues.

The Act further lays down that notes of any 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.

The Act also lays down that wherein the course of an investigation, the Investigating Authority has reasonable ground to believe that the books and registers of any intermediary or any person associated with securities market may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Magistrate or Judge of such during noted court in Mumbai, as may be notified by the Central Government for an order for the seizure of such books, registers, other documents and records.

The person appointed by Investigating Authority may require the assistance of a police officer or any officer of Central Govt, for the purpose of above functions and it will be duty of such officer and police officer to provide assistance.

The Magistrate or Judge of the Designed Court, by order, authorize the investigating authority-

  • to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept,
  • to search that place or those places in the manner specified in the order, and
  • to seize books, registers and other documents and records, it considers necessary for the purpose of the investigation.

However, the Magistrate or Judge of the Designated Court shall not authorize seizure of books, registers, other documents and record of any listed public company unless such company indulges in insider trading or market manipulation.

Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and there¬after shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized.

The Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof. Every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures made under that Code.

Cease and Desist Proceedings:
Section 11 D deals with the cease and desist powers of SEBI. If SEBI finds that any person has violated, any provisions of this Act, or any rules or regulations made thereunder, it may pass an order requiring such person to cease and desist from committing or causing such violation.

SEBI shall not pass such order in respect of any listed public company or a public company which intends to get its securities listed on any recognized stock exchange unless SEBI has reasonable grounds to believe that such company has indulged in insider trading or market manipulation.

Power of the Board to order investigation (Regulation 5)
Where the Board, the Chairman, the member or the Executive Director (“appointing authority”) has reasonable ground to believe that-

  • the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market in violation of these regulations;
  • any intermediary or any person associated with the securities market has violated any of the provisions of the Act or the rules or the regulations,

it may, at any time by order in writing, direct any officer not below the rank of Division Chief (“Investigating Authority”) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market or any other person and to report thereon to the Board in the manner provided in section 11C of the Act.

Question 27.
What are the power of the Investigation authority under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
Answer:
Powers of Investigating Authority (Regulation 6)
The Investigating Authority shall have the following powers for the conduct of investigation, namely:-
1. to call for information or records from any person specified in section 11(2)(i) of the Act;
2. to undertake inspection of any book, or register, or other document or record of

  • any listed public company, or
  • a public company which intends to get its securities listed on any recognized stock exchange (not being intermediaries referred to in section 12 of the Act);

where the Investigating Authority has reasonable grounds to believe that such company has been conducting in violation of these regulations;

(3) to require any intermediary or any person associated with securities market to furnish such information, or produce such books, or registers, or other documents, or record before him in this behalf as he may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of the investigation;

(4) to keep in his custody any books, registers, other documents and records produced under this regulation for a maximum period of one month. This period of one month may be extended up to a period of six months by the Board. However, the Investigating Authority may call for any book, register, other document or record if the same is needed again. If the person on whose behalf the books, registers, other documents and record are produced requires certified copies of the books, registers, other documents and record produced before the Investigating Authority, the Authority shall give certified copies to such person.

(5) to examine orally and to record the statement of the person concerned or any director, partner, member or employee of such person and to take notes of such oral examination to be used as an evidence against such person However, said notes shall be read over to, or by, and signed by, the person so examined.

(6) to examine on oath any manager, managing director, officer or other employees of any intermediary or any person associated with securities market in any manner.

Question 28.
Power of the Investigating Authority to be exercised with prior approval (Regulation 7)
Answer:
The Investigating Authority may, after obtaining specific approval from the Chairman or Member also exercise all or any of the following powers, namely:-
1. to call for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation;

2. to make an application to the Judicial Magistrate of first-class haying jurisdiction for an order for the seizure of any books, registers, other documents and record, if in the course of investigation, the Investigating Authority has reasonable ground to believe that such books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted.

3. to keep in its custody the books, registers, other documents and record seized under these regulations for such period not later than the conclusion of the investigation as il may consider necessary and thereafter to return the same.

However, the Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof

4. save as otherwise provided in this regulation, every search or seizure made under this regulation shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures made under that Code.

Question 29.
What is the distinction in law between ‘Seizure’ and ‘Detention’ under GST Laws?
Answer:
Power to Search and Seizure:
According to Section 67(1), where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are concealed in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

Order not to remove:
Where it is not practicable to seize any such goods, the proper officer may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

Duration of Seizure:
The documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.

Return of documents not relied upon:
The documents, books or things which have not been relied upon for the issue of notice shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

Question 30.
Explain in brief power of Inspection, Search and Seizure under the Goods and Services Tax Act?
Answer:
Power of Inspection
According to section 67(1) of the CGST Act.
Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

He may authorize in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.

Power to Search and Seizure:
According to section 67(1), where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things

Question 31.
What are the provisions regarding adjudication under FCRA?
Answer:
According to section 28, any article, or currency or security seized shall be liable to confiscation if it has been adjudged under section 29 to have been received or obtained in contravention of the Act.

According to section 29(1), any confiscation referred to in section 28 may be adjudged

  • without limit, by the Court of Session within the local limits of whose jurisdiction the seizure was made; and
  • subject to such limits as may be prescribed, by such officer, not below the rank of an Assistant Sessions Judge, as the Central Government may, by notification in the Official Gazette, specify in this behalf.

When an adjudication u/s 29(1) is concluded by the Court of Session or Assistant Sessions Judge, as the case may be, the Sessions Judge or Assistant Sessions Judge may make such order as he thinks fit for the disposal by confiscation or delivery of seized article or currency or security, as the case may be, to any person claiming to be entitled to possession thereof or otherwise, or which has been used for the commission of any offence under this Act.

Section 29 dealing with adjudication of confiscation, provides that any confiscation article or currency or security which is seized may be adjudged without limit, by the Court of Session within the local limits of whose jurisdiction the seizure was made; and subject to such limits as may be prescribed, by such officer, not below the rank of an Assistant Sessions Judge, as the Central Government may, by notification in the Official Gazette.

Section 30 provides that no order of adjudication of confiscation shall be made unless a reasonable opportunity of making a representation against such confiscation has been given to the person from whom any article or currency or security has been seized.

Question 32.
What are penal provisions under Foreign Contribution (Regulation) Act, 2010?
Answer:
Any person who contravenes the provision or rules, regulations of the Act shall be punishable with imprisonment upto three years or fine or both. Additional fine can be imposed equivalent to the market value of the article or the amount of the currency. Further, the imprisonment can be extended upto five years.

Section 39 deals with offences by companies and provides that where an offence has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

However, such person shall not liable to any punishment if he proves that the offence was com¬mitted without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Further, in the case, an offence has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officers of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Question 33.
Explain the procedure of search and seizure under the Income-tax Act, 1961.
Answer:
Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession has reason to believe that-

  • any person to whom a summons was issued to produce any books of account or other documents has omitted or failed to produce such books of account or other documents as required by such summons or notice, or
  • any person to whom a summons or notice as aforesaid has been issued will not produce any books of account or other documents which will be useful for, or relevant to, any proceeding under Income Tax Act
  • any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed or would not be disclosed.

Question 34.
What are powers of the Inspector appointed under the Factories Act, 1948?
Answer:
According to section 9 of the Factories Act, 1948, an Inspector may exercise any of the following powers within the local limits for which he is appointed:
1. He can enter any place which is used or which, he has reasons to believe, is used as a factory.

2. He can make examination of the premises, plant, machinery, article or substance. Inquire into any accident or dangerous occurrence whether resulting in bodily injury, disability or not and take on the spot or otherwise statements of any person which he may consider necessary for such inquiry.

3. Require the production of any prescribed register or any other document relating to the factory. Seize, or take copies of any register, record of other document or any portion thereof.

4. Take measurements and photographs and make such recordings as he considers necessary for the purpose of any examination.

5. In case of any article or substance found in any premises, being an article or substance which appears to him as having caused or is likely to cause danger to the health or safety of the workers, direct it to be dismantled or subject it to any process or test (but not so as to damage or destroy it unless the same is in the circumstances necessary, for carrying out the purposes of this Act) and take possession of any such article or substance or a part thereof, and detain it for so long as is necessary for such examination.

Production of Documents:
The Factories Act requires the maintenance of certain registers and records. Inspectors have been empowered to ask for the production of any such documents maintained under law, and the non-compliance of this has been made an offence.

Power of Central Government to appoint Inquiry Committee:
According to Section 41D(1) of the Act, the Central Government may, in event of the occurrence of an extraordinary situation involving a factory engaged in a hazardous process, appoint an Inquiry Committee to inquire into the standards of health and safety observed in the factory with a view to finding out the causes of any failure or neglect in the adoption of any measures or standards prescribed for the health and safety of the workers employed in the factory.

The Committee appointed under sub-section (1) shall consist of a Chairman and two other members and the terms of reference of the Committee and the tenure of office of its members shall be such as may be determined by the Central Government according to the requirements of the situation. The recommendations of the Committee shall be advisory in nature.

Appeal Penalty and Punishment under the Foreign Contribution (Regulation) Act 2010:

  • Appeal section 31 deals with appeals and provides that any person aggrieved by any order made under section 29 may prefer an appeal,
  • where the order has been made by the Court of Session, to the High Court to which such Court is subordinate; or
  • where the order has been made by any officer specified, to the Court of Session within the local limits of whose jurisdiction such order of adjudication of confiscation was made,

within one month from the date of communication to such person of the order. Further the appellate court may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of one month, allow such appeal to be preferred within a further period of one month, but not thereafter. Every appeal preferred under this section shall be deemed to be an appeal from an original decree.

Question 35.
Procedure of Contravention by Companies under Foreign Exchange Management Act, 1999
Answer:
Section 42 of the Act deals with contravention of the provisions of the Act by the Companies and provides that where the person committing the contravention of the Act or Rules happened to be a company, every person who at the time the contravention was committed, was in charge of and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the contravention and liable to be proceeded against and punished accordingly.

However, no such persons shall be deemed to be guilty of committing any offence if he proves that such contravention took place without his knowledge or that he exercised adequate steps to prevent such contravention.

In case the contravention is committed by a company and it is proved that such contravention is committed with the knowledge or consent or is attributed to the neglect on the part of any director, manager or secretary or other officers of the company, they will also be deemed to be guilty of contravention and liable to be proceeded against and punished accordingly.

Resolution of Corporate Disputes Non-Compliances & Remedies Notes