[Opinion] Probing the Pulse of the Company Under Company Law Investigations

CS Neha Dangayach & Sumit Patel – [2026] 182 taxmann.com 45 (Article)

1. Introduction

The Companies Act, 2013 provides a comprehensive regulatory framework designed to ensure that companies in India operate with transparency, accountability, and proper corporate governance. To enforce these principles, the Act empowers various authorities- primarily the Registrar of Companies (ROC), the Ministry of Corporate Affairs (MCA), and the Serious Fraud Investigation Office (SFIO)-to review, examine, and scrutinise the affairs of companies. While inspection functions as a preliminary compliance-checking mechanism, investigation is a deeper examination initiated only when serious violations, mismanagement, or fraudulent practices are suspected. Together, these mechanisms help maintain discipline in corporate operations and protect the interests of shareholders, creditors, and the general public.

2. Inspections and Investigation under Companies Act, 2013

Under the Companies Act, 2013, the power to initiate and conduct inspection lies primarily with the ROC, whereas the power to order a formal investigation lies with the MCA, the National Company Law Tribunal (NCLT), or SFIO depending on the nature of the case. The process typically begins when the ROC issues a notice under Section 206(1) asking a company to furnish specific information, explanations, or documents. If the ROC finds the company’s response inadequate or inconsistent, or if the information supplied raises concerns of possible wrongdoing, the ROC may escalate the matter by ordering an inspection under Section 206(4). Once an inspection is initiated, ROC officers are empowered under Section 207 to examine books of account, statutory records, agreements, registers, and other documents that relate to the company’s affairs.

After completing the inspection, the ROC prepares a detailed report under Section 208 and submits it to the Central Government. If the report reveals significant irregularities- such as mismanagement, diversion of funds, non-disclosure of liabilities, fraudulent transactions, or violations of the Act- the MCA may order a full investigation. Such an investigation may be conducted under Section 210 by inspectors appointed by the Government, under Section 212 by the SFIO in cases of serious fraud, or under Section 213 by the NCLT upon application from shareholders or complainants. Thus, inspection often acts as the first step that triggers a full-scale investigation when deeper scrutiny is required.

3. Companies Covered Under These Powers

The powers of inspection and investigation apply broadly to all companies registered under the Companies Act, irrespective of their size, nature, or structure. This includes private companies, public companies (both listed and unlisted), One Person Companies, Section 8 not-for-profit entities, and subsidiaries of foreign companies operating in India. The Act does not provide any major exemption for any class of companies from being inspected or investigated. As long as an entity is incorporated under the Act, it remains subject to regulatory oversight.

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