Taxmann's Compliance Management Audit & Due Diligence (CMADD/Due Diligence) | CRACKER

Chapter-wise Marks Distribution

S. No.

Chapter Name

2019

2020

2021

2022

2023

J

D

D

J

D

J

D

J

D

Average

10

1

Compliance Framework

5

5

10

10

5

5

5

5

6.67

2

Documentation & Maintenance of Records

5

5

15

5

10 10 10

5

10

8.33

3

Signing and Certification

10 15

5

10 13

10 10

5

9.22

4

Legal Framework Governing Company Secretaries

5

Values Ethics and Professional Conduct

3

3

3

6

Non-Compliances, Penalties 21 12 and Adjudications

29

33 24 16 12 26

7

Reliefs and Remedies

28 26

20

20 23 12

8

12

8

Concepts of Various Audit

10 21

10

13 24 15

8

15 23 15.44

9

Audit Engagement

3

5

8

5

10

3

5

4.89

10

Audit Principles and Tech15 niques

8

5

8

5

10 10

7.11

11

Audit Process and Documentation

3

5

5

5

5

4.56

12

Forming an Opinion & Reporting

3

5

5

10 10

5

10

5.67

13

Secretarial Audit

11

13

8

3

5

10

6.67

14

Internal Audit

5

15

Peer Review and Quality Review

16

Due Diligence

5

0.00 5

5 3

10

6

5 3 13

5

5

3.33 19.22

9

17.56

5

10

8

5

5

8

5

5

6.22

3

10

5

5

3

8

5

5

4.89

10 30

5

15 10

5

10 11

5

11.22

Note : J : June; D : December

I-5

Chapter-wise Comparison with Study Material Ch. No.

ICSI Study Material Chapter

Chapter Name

PART-I COMPLIANCE MANAGEMENT (40 Marks) 1.

Compliance Framework

1

2.

Documentation and Maintenance of Records

2

3.

Signing and Cetification

3

4.

Legal Framework Governing Company Secretary

4

5.

Values, Ethics and Professional Conduct

5

6.

Non-Compliances, Penalties and Adjudiactions

6

7.

Relief and Remedies

7

PART-II AUDIT AND DUE DILIGENCE (60 Marks) 8.

Concepts of Various Audits

8

9.

Audit Engagement

9

10.

Audit Principles and Techniques

10

11.

Audit Process and Documentation

11

12.

Forming an Opinion & Reporting

12

13.

Secretarial Audit

13

14.

Internal Audit & Performance Audit

14

15.

Peer Review and Quality Review

15

16.

Due Diligence

16

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Contents PAGE

Chapter-wise Marks Distribution

I-5

Chapter-wise Comparison with Study Material

I-7

PART I COMPLIANCE MANAGEMENT Chapter 1 1.3

COMPLIANCE FRAMEWORK

Chapter 2 DOCUMENTATION & MAINTENANCE OF RECORDS

2.1

Chapter 3 3.1

SIGNING AND CERTIFICATION

Chapter 4 LEGAL FRAMEWORK GOVERNING COMPANY SECRETARIES

4.1

Chapter 5 VALUES, ETHICS AND PROFESSIONAL CONDUCT

5.1

Chapter 6 NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.1

Chapter 7 7.1

RELIEF AND REMEDIES

I-9

I-10

CONTENTS PAGE

PART II AUDIT & DUE DILIGENCE Chapter 8 CONCEPTS OF VARIOUS AUDITS

8.3

Chapter 9 AUDIT ENGAGEMENT

9.1

Chapter 10 AUDIT PRINCIPLES AND TECHNIQUES

10.1

Chapter 11 AUDIT PROCESS AND DOCUMENTATION

11.1

Chapter 12 FORMING AN OPINION & REPORTING

12.1

Chapter 13 SECRETARIAL AUDIT

13.1

Chapter 14 INTERNAL AUDIT & PERFORMANCE AUDIT

14.1

Chapter 15 PEER REVIEW AND QUALITY REVIEW

15.1

Chapter 16 DUE DILIGENCE

16.1

REGULATORY FRAMEWORK The Companies Act, 2013 The Companies (Adjudication of Penalties) Rules, 2014 The SEBI Act, 1992 The Securities Contracts (Regulation) Act, 1956 The FEMA Act, 1999

UNDER COMPANIES ACT, 2013 Q1. “Companies Act is mixture of both Civil as well as Criminal law.”

Comment briefly.

[Dec. 2019 (4 Marks)] Ans. The Companies Act, 2013 is mixture of both civil as well as criminal provisions.

The civil and criminal provisions under the Companies Act, 2013 can be identified by observing the language used by Act for consequences or non-compliances /contravention of its provisions.

The words “liable to penalties” denote civil nature of non-compliances whereas the words “punishable with fine and/or imprisonment and/or both” denote criminal nature of non-compliances.

The Act has clearly laid down the mechanism and the forum for speedy and smooth administration of judicial activities under the Act. The power of adjudication of civil non-compliances (defaults liable for penalties) is being vested with the ROC and the power of adjudication of criminal noncompliances (offences punishable with fine/ imprisonment) is being vested with the special courts with sub-delegation of power of compounding of offences to Regional Director and NCLT. Thus, the statement given in the question that “Companies Act, 2013 is mixture of both civil law well as criminal law” is correct.

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

Q2. Outline the Difference between Civil Law and Criminal Law. [Scoring Question] Ans. The following are the difference between civil and criminal law.

Particulars Deals with

Objective

Power of Court

Civil Law Private disputes or defaults.

To resolve or redress and to make good the loss or damages suffered by one party on account of any act or omission by other party.

The court in such cases can only pass judgement to compensate for damage done to the aggrieved party.

Criminal Law Offences that are committed against the society.

To punish the offender and is reflection of the public policy of a country.

In these cases the court is empowered to charge a fine, imprison the guilty of a crime, or discharge the defendant.

NON-COMPLIANCES UNDER COMPANIES ACT, 2013 Q3. Outline the Difference between Fine and Penalty.

[Scoring Question]

Ans.

FINE

PENALTY

A fine is a penalty of money that a court of law or other authority decides has to be paid as punishment for a crime or other offense.

Penalty is “a punishment imposed for breaking a law, rule, or contract.”

It is imposed by an appropriate authority when a person has not complied with the law but have not committed any offence.

Penalty has been used to indicate civil defaults.

Penalty may be imposed even by an administrative officer.

Penalty is imposed as a compensatory measure or for breach of civil obligation.

Fine has been used as punished for criminal offence.

Fine can be imposed only by a court of law.

Fine is imposed as a punitive measure.

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TYPES OF OFFENCES Q4. Write a short note on ‘Cognizable’ and ‘Non-Bailable’ offences under the Companies Act, 2013?

[Dec. 2020 (4 Marks)] Ans. Cognizable and non-bailable offence under Companies Act, 2013 NON-COGNIZABLE OFFENCE: A non-cognizable offence as per section 2(l) of the CrPC means an offence for which, a police officer has no authority to arrest without a warrant.

In terms of Sec 439 of the Companies Act, 2013, Notwithstanding anything in the Code of Criminal Procedure, 1973, every offence under this Act except the offences referred to in sub-section (6) of section 212 shall be deemed to be non-cognizable within the meaning of the CRPC, 1973.

However, no court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of: the Registrar, a shareholder or a member of the company, or a person authorised by the Central Government in that behalf: Provided that the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the SEBI. COGNIZABLE OFFENCE: As per Section 2(c) of the code, “cognizable offence” means an offence for which, and a police officer may, in accordance with the 1st Schedule or under any other law for the time being in force, arrest without warrant; Section 212(6) provides that, offences covered under Section 447 of 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(a) The Public Prosecutor has been given an opportunity to oppose the application for such release; and (b) 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: Provided that a person, who, is under the age of 16 years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs:

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by (a) The Director, Serious Fraud Investigation Office [SFIO]; or (b) Any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.

Q5. ‘De-criminalisation of most offences under the Companies Act, 2013 is key to e-adjudication framework’ — Elaborate highlighting recent developments in this context.

[Dec. 2020 (4 Marks)] Ans. Ministry of Corporate Affairs (MCA) seeks to review offences under the Companies Act, 2013 as some of the offences may be required to be decriminalised and handled through an in-house mechanism, where a penalty could be levied in the events of default, which would also reduce the burden on the trail courts by allowing them to pay more attention on offences of serious nature.

The Key Recommendations of the MCA Committee on Review of Penal Provisions of Companies Act 2013 are as under: (i) Restructuring of Corporate Offences to relieve Special Courts from adjudicating routine offences: (a) re-categorization of 16 out of the 81 compoundable offences by shifting them from the jurisdiction of special courts to an in-house e-adjudication framework wherein defaults would be subject to levy of penalty by the authorised adjudicating officer (Registrar of Companies); (b) remaining 65 compoundable offences to continue under the jurisdiction of special courts due to their potential misuse; (c) similarly, status quo recommended in respect of all non-compoundable offences, which relate to serious corporate offences; (d) instituting a transparent online platform for e-adjudication and e-publication of orders; and (e) necessitating a concomitant order for making good the default at the time of levying penalty, to achieve better compliance.

The decriminalisation of the offence paved the way for e-adjudication framework.

The system has become effective as the offences are decriminalised and the minor offences are dealt by e-adjudication framework.

Q6. In the Annual General Meeting (AGM) of Jollydays Limited, the matter of reappointment of Mr. Jolly, the Executive Director (ED) came up for voting.

During such discussion, allegations of fraud and financial irregularities were

CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.5

levelled against him by some members, which resulted in chaos in the meeting.

The situation was normal only after the Chairman promised to initiate an inquiry against Mr. Jolly. The resolution at AGM to reappoint Mr. Jolly as ED, was not passed. The matter was published in the newspapers next day. Under the Companies Act, 2013, can a Court take cognizance of the matter and suo moto initiate action against Mr. Jolly based on the media reports?

[Dec. 2019 (4 Marks)] Ans. Section 439 of the Companies Act, 2013 provides that: (1) Notwithstanding anything in the Code of Criminal Procedure, 1973, every offence under this Act except the offences referred to in sub-section (6) of section 212 shall be deemed to be non-cognizable within the meaning of the said Code.

(2) No court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, a shareholder or a member of the company, or of a person authorised by the Central Government in that behalf.

Further, the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India.

Thus, in the given situation, a Court shall not initiate any suomoto action against Mr. Jolly without receiving any complaint in 'writing of the Registrar of Companies, a shareholder of the company or a members or of a person authorized by the Central Government in this behalf.

Q7. Nikki joined a retail store run by Jain Daily Needs Ltd. as Manager. After some time she manipulated the accounts of the branch and thus made illegal money amounting to Rs. 15 lakh. The fraud was unearthed during the regular inspection of accounts and stock check. The Area Manager complained to the Corporate Office of the company and Nikki was put under suspension by the competent authority.

What penal action can be taken against Nikki under the provisions of the Companies Act, 2013? What would be your answer, if the fraud amount is Rs. 5 lakhs only?

[June 2023 (4 Marks)] Ans. Where the amount involved is at least Rs. 10 Lakhs.

According to section 447 of the Companies Act, 2013, without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud involving an amount of

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

at least Rs. 10 lakhs or 1 % of the turnover of the company, whichever is lower shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud: However, 1st proviso of section 447 of the Act provides that where the fraud in question involves public interest, the term of imprisonment shall not be less than 3 years.

Since the fraud amount exceeds Rs. 10 Lakh in the given situation, Nikki can be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud i.e. Rs. 45 Lakh.

Where the amount is less than Rs. 10 Lakhs Proviso 2 of section 447 of the Act provides that that where the fraud involves an amount less than Rs. 10 lakhs or 1% of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to 5 years or with fine which may extend to Rs. 50 lakhs or with both.

Since the fraud amount is Rs. 5 Lakh in other situation and does not exceed Rs. 10 Lakh, Nikki can be punishable with imprisonment for a term which may extend to 5 years or with fine which may extend to Rs. 50 lakhs or with both.

Q8. X, a director of PQR Private Limited, is authorised by Board of directors to prepare and file returns, reports or other documents to Registrar of Companies (ROC) on behalf of the Company. He files all the required documents with ROC, despite being aware of material discrepancies in them.

Subsequently, it was found that the documents filed with ROC contained materially false details. Explain the penal provisions under the Companies Act, 2013 for this offence.

[June 2019 (4 Marks)] Ans. According to section 448 of the Companies Act, 2013, if any person makes a statement which is false in any material particulars, knowing it to be false or omits any material facts, knowing it to be material, such person shall be liable under section 447 of the Companies Act, 2013.

As per Section 447, any person who is found to be guilty under this section shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less

CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.7

than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud. Provided that, where the fraud involves public interest, the term of imprisonment shall not be less than 3 years. Hence, X, director of PQR Private Limited shall be punishable with imprisonment and fine as mentioned above.

Q9. Mr. Ze, a Company Secretary has recently set up a Practice. Mr. Almora a businessman reached out to Mr. Ze, to incorporate a Company. Mr. Ze assisted him with the list of information required and also extended his professional services for incorporation of the Company. When Mr. Ze was reviewing the documents provided to him, for uploading the forms, he noticed that the documents contained false information. Mr. Ze was apprehensive to go ahead with the incorporation of the Company. Advise Mr. Ze. [Dec. 2019 (4 Marks)] Ans. Section 7 of the Companies Act, 2013 deals with the documents to be filed with the concerned Registrar of Companies (ROC) for incorporation of a company. While dealing with the requirements, under Section 7(5) of the Companies Act, 2013 it has been stated that if a person furnishes false information or incorrect particulars or suppresses material information then the person is liable for action under Section 447 of the Companies Act, 2013.

Further, Section 7(6) also provides that the promoters, the first directors and the fiduciaries viz, the Chartered Accountant, the Company Secretary in practice or the Cost Accountant or the Advocate, the Managing Director or the Secretary of the Company who have given a declaration in the prescribed format shall also be liable for action under Section 447 of the Companies Act, 2013. Thus the penal provision extends to the professionals also apart from the officers of the company.

Hence, Mr. Ze should take note of the aforementioned provisions and shall go for incorporation of the company with the correct information only otherwise, he should not go ahead with the incorporation of the Company, knowing that the documents provided contains false information.

Q10. Adjudication Officer under the Companies Act, 2013 has sent notice to the Alaya Ltd alleging that the Company had committed certain offences under the Companies Act. The provisions referring the offences as alleged by Adjudication Officer do not contain any penal provisions. The Management of Alaya Ltd contends that, as no punishment is prescribed under the Act, there is no violation by the Company. Is the contention of the Company valid?

[Dec. 2021 (4 Marks)] OR

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

Q11. SOS the Company Secretary of Stup Ltd., was providing orientation to directors who were appointed recently. In one such sessions, where SOS was explaining the overview of penal provisions under the Companies Act, 2013 one of the Directors asked if the penal liability can be escaped in case no specific penalty or punishment is provided for such contravention of the provisions of Act or rules made thereunder. Can a director or officer in default escape from liability if no specific penalty or punishment is provided for contravention of provisions of the Act? Comment.

[June 2022 (4 Marks)] Ans. According to section 450 of the Companies Act, 2013, provides for the punishment for non-compliances of those provisions of the Act where no specific Penalty or Punishment is provided.

According to said section, if a company or any officer of a company or any other person contravenes any of the provisions of the Companies Act, 2013 or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in the Companies Act, 2013, the company and every officer of the company who is in default or such other person shall be liable to a penalty of Rs. 10,000, and where the contravention is continuing one, with a further penalty of Rs. 1,000 for each day after the first during which the contravention continu es, subject to a maximum of Rs. 2 lakhs in case of a company and Rs. 50,000 in case of an officer who is in default or any other person.

Hence, the contention of the company is not valid.

Q12. During the previous year, Alfa Limited could not conduct its Annual General Meeting (AGM) within the timelines as per the Companies Act, 2013 due to some internal and operational issues. In the current year also, the Company could not conduct its AGM within stipulated time, thereby committing the same default in the current year as well. What would be the penal provisions for such default?

[Dec. 2019 (4 Marks)] Ans. As per the provisions of Section 99 of the Act, if the Company has defaulted in holding a meeting in accordance with Section 96 or Section 97, then the Company and every officer would be liable to fine upto Rs. 1 Lakh and further fine upto Rs. 5000 for each day of continuing default.

As per Section 451 of the Companies Act, 2013, If a company or an officer of a company commits an offence punishable either with fine or with imprisonment and

CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.9

where the same offence is committed for the second or subsequent occasions within a period of 3 years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence.

Hence. Alfa Limited would be liable to twice the fine as mentioned above, as it has committed the same default within a period of 3 years.

Q13. There have been internal family issues between the directors of Sak Ltd., who also hold the majority shares in the Company. Due to these internal issues, the Annual General Meetings were not held for more than two years now. The advisor informed the management that it would result in continuing offence being committed by the Company and it could face penal actions. Explain briefly, what are continuing offences and the factors constituting such offences.

[June 2022 (4 Marks)] Ans. Continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arise out of a failure to obey or comply with a rule or its requirement and which involves penalty, the liability for which continues until the rule or its requirement is obeyed or complied with.

Non-filling of Annual return, Financial Statements, Special Resolution etc. are few examples of continuing offences. An analysis of the above meaning and decisions show that the following are the basic factors for constituting a continuing offence: The effect of commission of an offence should continue to prevail for any number of days after the date on which it is first committed.

The effect should be understood from the point of view of intention of the legislation.

The statute should have made the compliance requirement a compulsory one.

The language used in the statute should be given due weight.

The penal clause should provide for a penalty, which is liable to be levied during the period of continuance of the offence.

Q14. Vara was appointed as Company Secretary and Compliance Officer in Aaradhya Textiles Ltd. (ATL). As per the terms of offer, she was provided with a rent free furnished accommodation of 3BHK flat in Borivali (East), Mumbai for her use exclusively, with a condition to surrender the flat to the company within a month after the cessation of service. Since Vara was unmarried, she kept her friend Anushka, as paying guest in the company provided flat for which Vara charged ` 15,000 per month from Anushka.

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

The company came to know that Vara has kept her friend as paying guest and is also charging rent, which was not meant for subletting. The company issued a show cause notice to Vara, which she did not reply and also remained absent from the company. The company terminated her service and served a legal notice to hand over the possession of the flat. However, Vara did not vacete the flat and alleged wrongful dismissal from service. In light of the above facts, whether the company can move an application before the National Company Law Tribunal against Vara for wrongful withholding of a property of the company? Also refer to relevant provisions of the Companies Act, 2013.

[June 2023 (4 Marks)] Ans. According to section 452(1) of the Companies Act, 2013, If any officer or employee of a company – (a) wrongfully obtains possession of any property, including cash of the company; or (b) having any such property including cash in his possession, wrongfully withholds it or knowingly applies it for the purposes other than those expressed or directed in the articles and authorised by this Act, he shall, on the complaint of the company or of any member or creditor or contributory thereof, be punishable with fine which shall not be less than Rs. 1 lakh but which may extend to Rs. 5 lakh.

Further, according to section 452(2) of the Act, The Court trying an offence under subsection (1) may also order such officer or employee to deliver up or refund, within a time to be fixed by it, any such property or cash wrongfully obtained or wrongfully withheld or knowingly misapplied, the benefits that have been derived from such property or cash or in default, to undergo imprisonment for a term which may extend to 2 years.

Provided that the imprisonment of such officer or employee, as the case may be, shall not be ordered for wrongful possession or withholding of a DWELLING UNIT, if the court is satisfied that the company has not paid to that officer or employee, as the case may be, any amount relating to(a) provident fund, pension fund, gratuity fund or any other fund for the welfare of its officers or employees, maintained by the company; (b) compensation or liability for compensation under the Workmen’s Compensation Act, 1923 in respect of death or disablement.

In the given situation, Vara was provided a furnished flat for her personal and exclusive use, but the property was sub-let, which amounts to its use for a purpose other than that for which it was given and Vara was making profit by sub-letting it. Thus, the company can move an application before National Company Law Tribunal against Vara for wrongful withholding of a property of the Company.

CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.11

Q15. The Board of Directors of All India Tyre Manufacturers Association Ltd., passed a resolution to the effect that no member who is indulging in activities detrimental to the interests of the Company be permitted to examine the records or obtain certified copies thereof. A member of the Company who is also a member of the rival association demands inspection of the register of members, minutes of general meetings and certified copies thereof. The Company refuses the inspection, on the basis of resolution passed by its Board of Directors. Examine the validity of refusal by the Company in the light of the provisions of the Companies Act, 2013 and the remedial action, if any, available to the aggrieved member.

[June 2022 (5 Marks)] OR Q16. G is the General Manager (HR) of XYZ Limited. He wrongfully withholds the flat of the Company and also lets it out on rent to someone. XYZ Limited has filed a complaint against G. What are the penalties for such a conduct under the Companies Act, 2013.

[June 2019 (4 Marks)]

Ans. For provision Refer Section 452 in above question No. 14 Accordingly, the company may file a complaint against Gaj under section 452(1) of the Act and he may be punished in accordance with section 452(2) along with proviso thereto.

Q17. The Company Secretary of a Company was allotted quarters during the tenure of his employment. He has retired on 31st March, 2019. As per the terms of his employment, he is required to vacate his quarters within one month of his ceasing to be in employment. i.e. by 30th April, 2019. He seeks one year to vacate the premises on the ground of his children’s education. The Company wants him to vacate as it has to allot it to the new Company Secretary. What would be your advice to the Company under the given circumstances?

[Dec. 2020 (4 Marks)] Ans. For provision Refer Section 452 in above Question No. 14 Accordingly, in this case, the company can file a case against the retired Company Secretary to deliver up the quarters within a time fixed by court.

He may also be asked to pay reasonable rent to the company for staying beyond the specified period. The retired Company Secretary will have no option but to leave the quarters within the time fixed by the court. He will also be liable to pay, as may be decided by the court.

Further, the Court may also order such officer or employee to undergo imprisonment for a term which may extend to 2 years.

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CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

COMPLAINT BY REGISTRAR AND SFIO Q18. HGV, is a Senior Partner in Supreme & Co. LLP, Practising Company Secretaries. The firm has good repute in handling corporate related matters including investigations and other representations. PRO, Company Secretary of Mano Lifesciences Ltd. is a professional acquaintance of HGV and has reached out to him for advice on investigation initiated on the Company. PRO has requested HGV to meet the Board of Directors of Mano Lifesciences Ltd. And make a presentation on various statutory aspects involved in investigation.

Prepare a detailed note, explaining the provisions of investigation into affairs of a Company under Section 212 of the Companies Act, 2013.

[June 2022 (8 Marks)] Ans. The provision of investigation under section 212 of the Companies Act, 2013 (the Act) is in addition of the provision of investigation under Section 210 of the Act. Accordingly, the Central Government may by order assign investigation into the affairs of a company(a) On receipt of a report of the Registrar or inspector under Section 208; (b) On intimation of a Special Resolution passed by a company that its affairs are required to be investigated; (c) In the public interest, or (d) On request from any department of Central Government or State Government. the Central Government may, by order, assign the investigation into the affairs of the said company to SFIO and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.

According to section 212(2) of the Act, Where, any case has been assigned by the CG to the SFIO for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation and all existing investigation shall also be transferred to the SFIO. According to section 212(3) of the Act, Where the investigation into the affairs of a company has been assigned by the Central Government to SFIO, it shall conduct the investigation in the manner and follow the procedure specified in Chapter XIV and the SFIO shall submit its report to the CG within such period as may be specified in the order.

According to section 212(4) of the Act, the Director, SFIO shall cause the affairs of the company to be investigated by an Investigating Officer who shall have the power of the inspector under section 217 of the Act.

CH. 6: NON-COMPLIANCES, PENALTIES AND ADJUDICATIONS

6.13

According to section 212(5) of the Act, the company and its officers and employees, who are or have been in employment of the company shall be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation.

According to section 212(6) of the Act, notwithstanding anything in the Code of Criminal Procedure, 1973 (CrPC) the provisions of offence covered under section 447 of the Act 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.

It has been provided that A person, who, is under the age of 16 years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.

It has further been provided further that the Special court shall not take cognizance of any office except only upon a complaint in writing made by – (a) The Director, Serious Fraud Investigation Office; or (b) Any officer of the Central Government authorized by a general or special order in writing in this behalf.

According to section 212(7) of the Act, the limitation on granting of bail specified in sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail.

According to section 212(8) of the Act, if any officer not below the rank of Assistant Director of SFIO authorised by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under section 447, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.

According to section 212(9) of the Act, the officer authorised under section 212(8) of the Act shall, immediately after arrest of such person, forward a copy of the order, along with the material in his possession, to SFIO in a sealed envelope, in prescribed manner and SFIO shall keep such order and material for such period as may be prescribed.

COMPLIANCE MANAGEMENT AUDIT & DUE DILIGENCE (CMADD/DUE DILIGENCE) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION

: Ankush Bansal : TAXMANN : FEBRUARY 2024

EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : :

2024 EDITION 9789357789721 226 PAPERBACK

Rs. 250

DESCRIPTION This book is prepared exclusively for the Professional Level of Company Secretary Examination requirement. It covers the questions (topic) & detailed answers strictly as per the new syllabus of ICSI. The Present Publication is the Latest 2024 Edition for the CS-Professional | New Syllabus | June 2024 Exam. This book is authored by CS Ankush Bansal, with the following noteworthy features: • As Per the New Syllabus of the ICSI • Coverage of this book includes o Fully-Solved Questions of Past Exams; Topic-wise, including: - Solved Paper | Dec. 2023 | Suggested Answers • [Updated & Amended] The answers are fully updated as per relevant provisions and case laws • [Marks Distribution] Chapter-wise marks distribution from June 2019 onwards • [ICSI Study Material Comparison] is provided chapter-wise

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