Section 224 of the Companies Act, 2013
Section 224 of the Companies Act, 2013 – Actions to Be Taken in Pursuance of Inspector’s Report
📘 Overview:
Section 224 outlines the actions the Central Government may take after an investigation is conducted under Chapter XIV (Inspection, Inquiry, and Investigation), based on the inspector’s report.
✅ Key Provisions:
Once an inspector submits a report under Section 223 (based on investigation under Section 210, 212, or 213), the Central Government may take any of the following steps:
🔹 1. Prosecution or Proceedings [Section 224(1)]:
If the inspector’s report reveals:
An offence by the company or its officers, or
Any fraud or misconduct,
Then the Central Government may:
Prosecute the company or individuals responsible, or
Authorize any person to initiate legal proceedings before an appropriate authority or court.
🔹 2. Recovery of Damages or Property [Section 224(2)]:
If the report shows:
Misappropriation of property,
Misfeasance,
Negligence,
Then the Central Government may direct proceedings to:
Recover property or damages, or
Bring proceedings for recovery in the name of the company.
Such proceedings may be initiated by:
The company itself, or
A person authorized by the Central Government.
🔹 3. Costs of Investigation [Section 224(3)]:
If fraud is proved and convicted in prosecution:
The Central Government may recover the cost of investigation from:
The convicted person(s), or
From the company (in case of corporate fraud)
🧾 Related Sections:
Section 210 – Investigation by ROC or inspector
Section 212 – Investigation by Serious Fraud Investigation Office (SFIO)
Section 213 – Investigation into company’s affairs in other cases
Section 223 – Report by inspector
Section 447 – Punishment for fraud
🎯 Objective:
To ensure that:
Fraud and mismanagement found during investigation are punished
Company’s assets or losses are recovered
Legal proceedings are effectively initiated by the appropriate authority
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