Companies that must be given adequate rights to be heard before the registrar inspects and investigates the company: Delhi HC

A recent case before the Delhi Supreme Court ruled that the registrar should give the company an opportunity to be heard and inform them of the allegation before soliciting information, inspecting books and conducting investigations. As a result, one company, Axis Ispat Private Limited, has filed a motion to repeal the 37 charges made against it by the Department of Corporate Affairs under the Companies Act 2013. It was also submitted by the petitioners of this section. 206 of the Company Act gives the Registrar of Companies the power to investigate, obtain information and consult the books. However, the registrar would first have to ask the petitioner to make a statement and also to give him a reasonable opportunity to be heard in front of the registrar before the notice is issued.

On this issue, respondents indicated that when the provisional determination was made, the petitioners were given sufficient time to submit the response, but that the petitioners submitted the late response which was considered by the Authority. It was also alleged that sufficient time was given even after the show Cause Notices was posted. After examining all of the arguments of both parties, the court found that there was no doubt that statements made by directors of the company were recorded under Section 207 of the Companies Act 2013. In these circumstances, however, the petitioner should give a reasonable opportunity to be heard. In the case at hand, the provisional determination was made in September 2020 and due to the late response, the authorities have taken further steps to issue the above notices of exhibition reasons and it is not clear whether the response submitted has been taken into account or not.

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