S.206 Companies Act Does Not Preclude Registrar From Initiating Parallel Proceedings Upon Discovery of Additional Material Warranting Inquiry: Calcutta HC

The Calcutta High Court on Friday dismissed a writ petition challenging the capacity of the Registrar of Companies to initiate multiple/ parallel proceedings under Section 206 of the Companies Act, 2013.Sections 206-210 contain provisions relating to inspection, inquiry and investigation of companies. Section 206(4) empowers the Registrar to institute inquiry against the company if it is satisfied that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of the Act.The Single Judge Bench of Justice Moushumi Bhattacharya observed: "The contention that the respondents are statutorily precluded from initiating a proceeding under section 206(4) after the impugned inquiry report dated 13th April, 2021 is mis-reading the relevant provisions referred to above. Sections 206-210 of the Act do not contain a bar on the Registrar calling for information or conducting an inspection or inquiry if the Registrar comes across additional material warranting the second proceeding under section 206. The presumption that the impugned report dated 13th April, 2021 should be stayed since a parallel inquiry has been initiated in July, 2022 is not borne out from the relevant statutory provisions."The primary contention raised by the petitioners in the instant proceeding was that the ROC could not initiate multiple proceedings against a company under Section 206(4) of the Act in respect of the identical alleged contraventions. Furthermore, the petitioners argued that an inquiry report pursuant to the initiation of proceedings under Section 206 could only have been made under Section 208 of the Act upon completion of inspection and inquiry. Within the factual matrix of the instant case, the ROC had made such inquiry report under Section 206(4), which the petitioners accordingly contended as erroneous. Counsels for the respondents argued that the initiation of separate proceedings under Section 206(4) were necessitated upon discovery of additional financial irregularities in the business of the petitioners.On the procedural imperative of the ROC to comply with all requirements under Sections 206-210 of the Act prior to submitting its enquiry report to the Central Government under Section 208, the Court observed: "A careful perusal of the provisions relating to inspection, inquiry and investigation of companies under sections 206-210 of the Companies Act, 2013 indicates that the sequential steps required to be taken by the ROC must be followed before the ROC submits the report in writing to the Central Government for further investigation into the affairs of the company if necessary. The stage of filing a report comes only after inspection of books of accounts or conducting inquiry under sections 206 and 207 of the Act. Section 210 is the culmination of this batch of provisions relating to inspection, inquiry and investigation into the affairs of the company where the Central Government may investigate into the affairs of a company if it is of the opinion that it is necessary to do so and on fulfillment of the conditions under section 210(1)(a)-(c). To the extent of the steps taken by the respondents including the order under section 206(4) dated 4th July, 2022, the summons issued thereafter, the hearing given to the petitioners and the acceptance of the petitioners' response, there is little doubt that the respondents must follow the step-wise compliance of sections 206-210 of the Act." As winding up proceedings had already commenced before the NCLT, the Court refused to interfere with the impugned inquiry report on the basis that Section 273 of the Act, which granted wide powers to the Tribunal to pass such interim orders as it thinks fit, entitled the petitioners to seek appropriate interim reliefs before the Tribunal in respect of the impugned inquiry report. The writ petition was accordingly disposed of. Case: Shree Radhe Tea Plantation Private Limited & Anr. v. Registrar of Companies, West Bengal & Ors., W.P.A 23115 of 2022 Date: 18.11.2022. Citation: 2022 LiveLaw (Cal) 339 Click Here To Read/Download Order

S.206 Companies Act Does Not Preclude Registrar From Initiating Parallel Proceedings Upon Discovery of Additional Material Warranting Inquiry: Calcutta HC

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S.206 Companies Act Does Not Preclude Registrar From Initiating Parallel Proceedings Upon Discovery of Additional Material Warranting Inquiry: Calcutta HC

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