It was explained already that the central government, on its own or on the recommendation of the tribunal (for the time being the company law board till the tribunal is established). It shall appoint one or more inspectors to investigate the affairs of the company which may be in response to the report of the registrar of companies.
Investigation on ownership
The central government may, where there is good reason to do so, appoint one or more inspectors to investigate and report on the ownership of the company for the purpose of determining
(a) who are financially interested in the success or failure of the company
(b) who control or financially influence the policy of the company
The central government may form that opinion on receipt of complaints from shareholders or creditors.
Report of investigation
The central government is not bound to send a copy of the report to the company or to any other person if there is good reason for not divulging the contents of the report, except that copy of the report will be given to CLB if the investigation was ordered at the instance of the CLB.
Restrictions on shares and debentures and prohibitions on transfers
Where the tribunal in respect of any investigation under section 247 or on receipt of a compliant made by any person, is of the view that it is necessary to find out the facts about any shares (whether issued or to be issued), it may by order direct that the shares shall be subject to the following restrictions.
(a) Any share of those shares shall be void.
(b) If those shares are to be issued including a right issue, any issue or transfer of those shares shall be void.
(c) No voting right shall be exercised in respect of those shares
(d) No dividend or return of capital shall be made on those shares except in liquidation.
(e) Where as a result of a proposed transfer, a change in the composition of the board of directors is likely to take place which would be prejudicial to the public interest, the Tribunal (CLB for the time being) may by order direct that the transfer of shares in the company.
Power to rescind the order
The tribunal (CLB for the time being) may at any time rescind its order made under sub-section (1) or (3).
Default to comply with restrictions
Where any restriction on the transfer of or voting on shares or debentures is subsisting, the person who acts in violation of the restrictions.
Provisions apply to debentures also
The restrictions that may be placed by the CLB on shares shall apply in relation to debentures also.
Provisions of sections 247 and 250
In the light of the provisions explained above, it will be observed that the provisions of sections 247 and 250 are inter-connected. In terms of section 247 of the central government may appoint inspectors to investigation. It may be necessary to consider whether restriction on transfer and voting of shares is warranted under section 250.
Investigation of persons holding small shareholding not agreed
In Bala Construction Company Private Limited v Gopal Breweries Ltd, it was held that no case was made out for ordering investigation on ownership of shares as the powers holding the shares could not be said to influence the policies of the company in any way.
Transfer of shares effected or proposed as per section 250
The complaint holding 200 shares out of a total of 10,27,207 shares complained against the company and some shareholders and sought for an investigation to find out the facts about shares recorded in the names of certain respondents and for an order to restrain the voting in respect of those shares.
Powers of Tribunal under section 397 or 398
Section 402 vests with the tribunal (CLB for the time being) extensive powers to investigate the complainants made to it under section 397 and 398.
to provide for the regulation of the company’s affairs in future,
to provide for the purchase or interest of any members of the company by other members and to give option for their exit from the company
the purchase of the shares by the company and provide for the reduction of capital of the company
termination or setting aside or modification of agreement between the company and of the following persons :
- Managing Director
- any other director
termination, setting aside or modification of any other agreement with other parties after due notice to the parties and their consent for the modification. Any other matter on which the tribunal may find it just or equitable to make provision.
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