Section 459 of the Companies Act, 2013
Section 459 – Power of the Central Government to Conduct Inquiry in Certain Cases
Text (Simplified):
This section gives the Central Government the authority to inquire into the affairs of a company in specific circumstances where there are serious concerns about management, fraud, or oppression.
Key Points of Section 459
Who can act:
The Central Government or an officer authorized by it can exercise these powers.
This is usually done through the Ministry of Corporate Affairs (MCA).
When it can be used:
When there are reasonable grounds to believe that:
The company is acting against public interest, or
There is oppression or mismanagement, or
Fraudulent activities are being conducted by the company or its officers.
Power to Conduct Inquiry:
The government can:
Call for documents and information,
Examine accounts, registers, and records,
Investigate contracts, agreements, and transactions.
Basically, it allows a detailed inquiry into company affairs.
Inspection vs. Inquiry:
Inspection (like under Section 457) is routine or periodic,
Inquiry under Section 459 is more serious, usually triggered by allegations of fraud or public interest concerns.
Compliance:
The company and its officers are obliged to cooperate.
Failure to comply can attract penalties and legal action.
Purpose:
To protect stakeholders like shareholders, creditors, and the public.
To ensure companies do not abuse their powers or engage in fraudulent activities.
To enable corrective or regulatory action by the government.
Illustration / Example
Suppose a company is suspected of misappropriating funds and its management is oppressing minority shareholders.
The Central Government initiates an inquiry under Section 459.
The company must provide:
Financial statements,
Register of members,
Details of transactions,
Minutes of meetings.
Based on the inquiry, the government can take further action, including directing investigations or filing complaints.
Significance of Section 459
Strong regulatory tool: Helps government act against serious corporate misconduct.
Protects stakeholders: Minority shareholders, creditors, and public interest are safeguarded.
Ensures accountability: Company officers cannot escape scrutiny when there are allegations of mismanagement or fraud.
Summary in Simple Words
Who: Central Government or its authorized officer
What: Can inquire into a company’s affairs in serious cases
When: When there are reasonable grounds of fraud, mismanagement, or oppression
Effect: Companies must cooperate; non-compliance can lead to penalties or further action
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