Internal and Forensic Audit · Audit and Investigations

Legal Framework for Investigation of Companies under Companies Act, 2013

Updated 11 October 2026 · Fact-checked

The Companies Act, 2013 lets the Registrar inspect a company (sections 206 to 209) and lets the Central Government, the Tribunal or the SFIO investigate its affairs (sections 210 to 213). To answer a question, identify who triggers the action, who conducts it, what powers apply, and what follows the report.

Understand Legal Framework for Investigation of Companies

A company's affairs are normally checked by its auditors and its own members. Sometimes that is not enough. The Companies Act, 2013 therefore gives the State a ladder of tools, from light to heavy: inquiry or inspection, then investigation, then investigation by the Serious Fraud Investigation Office (SFIO).

The first rung is in sections 206 to 209. The Registrar can call for information or an explanation and, if not satisfied, can inspect books and inquire into the company. Section 207 deals with how the inspection is conducted, section 208 with the report on inspection, and section 209 with search and seizure, which needs an order of the Special Court. Think of this rung as a fact-finding check by the Registrar.

The second rung is investigation. Section 210 lets the Central Government order an investigation by an inspector. It can do this on the Registrar's or inspector's report under section 208, on a special resolution of the company asking for it, or in the public interest. It must order one if a court or the Tribunal so directs. Section 213 is the route through the Tribunal. Members holding the prescribed strength (for a company with share capital, 100 members or members holding one-tenth of the voting power) can apply. The Tribunal orders an investigation if it is satisfied that the circumstances suggest fraud, an unlawful purpose, oppression or withheld information.

The third rung is the SFIO. Section 211 establishes it. Section 212 lets the Central Government assign an investigation to it when it opines the case needs the SFIO. The grounds are a report under section 208, a special resolution, the public interest, or a request from a Central or State Government department. Once the SFIO takes up a case, no other investigating agency proceeds with it, and that agency must hand over its records. SFIO officers get the powers of an inspector under section 217, and their reports can lead to prosecution before the Special Court. Fraud itself is punished under section 447.

So the topic is a chain: trigger, authority, powers, report, consequence. If you can place any fact pattern on that chain, you can answer almost any question.

Key rules to remember

Inspection and inquiry (sections 206 to 209): 206 call for information, inspect, inquire | 207 conduct | 208 report | 209 search and seizure; Led by the Registrar or an inspector. Search and seizure under section 209 needs a Special Court order.
Grounds for Central Government investigation (section 210): Report under 208 | Special resolution of company | Public interest | Order of court or Tribunal; The first three give the Central Government a power to order. For a court or Tribunal order, the Government must order the investigation.
SFIO assignment (section 212): Report under 208 | Special resolution | Public interest | Request from a Central or State Government department; The Central Government must first form the opinion that the SFIO should investigate. The SFIO cannot start on its own.
Tribunal route (section 213): Company with share capital: 100 members or members holding ≥ 1/10 of total voting power. Company without share capital: ≥ 1/5 of persons on the register of members; The application must be backed by evidence of good reason. The Tribunal can also act on other applications if the circumstances suggest fraud or unlawful conduct.
Priority once SFIO takes a case (section 212): SFIO case taken up → no other agency proceeds; records transferred to SFIO; Avoids parallel investigations into the same affairs.
Fraud and prosecution: Fraud punishable under section 447; trial before the Special Court; Offences under section 447 carry stricter arrest and bail conditions in section 212.

How to solve Legal Framework for Investigation of Companies questions

Use the same chain for every case-based question. It keeps your answer in the provision, analysis, conclusion format.

1Read the facts and note who is acting: Registrar, Central Government, members, Tribunal, a government department or the company itself.
2Classify the stage: inspection or inquiry (sections 206 to 209), investigation by inspector (sections 210 and 213), or SFIO investigation (sections 211 and 212).
3State the trigger. Name the exact ground, such as a report under section 208, a special resolution, public interest, a department's request or a Tribunal order.
4Check the conditions. For a members' application under section 213, test the 100 members or 10% voting power threshold. For a special resolution, check that it was passed as a special resolution.
5List the powers that follow: inspector's powers under section 217, seizure or search with Special Court order, SFIO officers' powers and the limits on arrest.
6State the outcome: the report, the Central Government's action on it, and prosecution before the Special Court where fraud under section 447 is found.
7Write a one-line conclusion that answers the question asked, and add one practical compliance point, such as preserving records and cooperating with the inspector.

Quickest way: Trigger-Authority-Outcome shortcut

When to use it: Use it for short notes, 5-mark questions and the first half of long case questions when time is tight.

Write the section range first: 206-209 inspection, 210 and 213 investigation, 211-212 SFIO.
Write the trigger in one line.
Write who conducts it and the main power they use.
Write the result: report, action, prosecution.
Add one exam-ready line on overriding effect: once the SFIO takes a case, other agencies stop.

Common mistakes in Legal Framework for Investigation of Companies

Treating inspection and investigation as the same thing.
Both involve looking at books and the sections sit close together.
Fix: Inspection is by the Registrar under sections 206 to 209 and is a fact-finding check. Investigation under sections 210 to 213 is ordered by the Central Government or the Tribunal and is deeper.
Saying the SFIO can start an investigation on its own.
Students remember its wide powers and forget the assignment step.
Fix: Section 212 needs a Central Government order. The Government must first form the opinion that the SFIO should investigate, on one of the stated grounds.
Missing the Tribunal route under section 213.
Students remember only the Central Government route.
Fix: Always list both: Central Government under sections 210 and 212, and the Tribunal on a members' application under section 213.
Quoting the wrong member threshold under section 213.
The numbers for companies with and without share capital get mixed up.
Fix: Learn it as a pair: 100 members or one-tenth of voting power for a company with share capital, and one-fifth of persons on the register for one without.
Ignoring what happens to other agencies once the SFIO starts.
Students stop at the SFIO's powers.
Fix: State that no other agency continues the investigation and that it must transfer its records to the SFIO.
Giving section numbers from memory when unsure.
There are many sections in the 206 to 229 range.
Fix: Quote only the sections you know, mainly 206 to 213, 217 and 447. If unsure of a number, describe the rule in words.

Worked examples

Example 1

Alpha Textiles Ltd, a company with share capital, has 2,000 members. Members holding 12% of the total voting power believe the directors diverted funds to related parties and have been refused information. They want the affairs investigated. Advise them.

Show the solution

Provision: section 213 lets the Tribunal order an investigation into the affairs of a company on an application by members of the required strength.
Threshold: for a company with share capital, the application needs 100 members or members holding at least one-tenth of the total voting power.
Analysis: 12% is more than 10%, so the threshold is met. The members must back the application with evidence showing good reasons for an investigation.
Grounds: diversion of funds suggests fraud or an unlawful purpose, and refusal of information fits the ground that members were not given all the information they could reasonably expect.
Conclusion: the members can apply to the Tribunal under section 213. If it is satisfied, it can order an investigation into the company's affairs.

Answer: Yes. The 12% holding meets the one-tenth voting power threshold, so the members can apply to the Tribunal under section 213, supported by evidence of the alleged diversion of funds and refusal of information.

Example 2

After an inspection, the Registrar reports serious irregularities in Beta Infra Ltd. The Central Government wants the SFIO to investigate. A State police agency has already begun its own inquiry into the same affairs. Explain the position.

Show the solution

Provision: section 208 covers the report on inspection, and section 212 lets the Central Government assign an investigation to the SFIO.
Trigger: a report of the Registrar under section 208 is one of the grounds for assignment. The Government must form the opinion that the SFIO should investigate.
Order: the Central Government passes an order assigning the investigation to the SFIO.
Effect on other agencies: once the SFIO takes up the case, no other investigating agency proceeds with the investigation into those affairs.
Records: the other agency must transfer the relevant documents to the SFIO.
Powers: SFIO investigating officers exercise the powers of an inspector under section 217. If fraud under section 447 is found, the matter can go to the Special Court.
Conclusion: the police inquiry on the same affairs stops and its records move to the SFIO.

Answer: The Central Government can assign the case to the SFIO under section 212 on the Registrar's report. After the SFIO takes up the case, the police agency stops its investigation and transfers its records to the SFIO.

Exam tips

Draw the three-rung ladder (inspection, investigation, SFIO) in your first line. It shows structure and earns marks quickly.
Case questions usually test the trigger. Name the exact ground and who must act.
Learn the section 213 thresholds as exact numbers and test them against the facts given.
Mention section 447 and the Special Court when fraud is involved, and keep the conclusion to one clear line.
If you are not sure of a section number, describe the rule precisely in words rather than guess.

Practice questions from Audit and Investigations

Legal Framework for Investigation of Companies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalInvestigation of Foreign Companies

Legal Framework for Investigation of Companies: frequently asked questions

What is the difference between inspection and investigation under the Companies Act, 2013?

Inspection and inquiry under sections 206 to 209 are carried out by the Registrar or an inspector as a fact-finding check. Investigation under sections 210 to 213 is ordered by the Central Government or the Tribunal and goes deeper into the company's affairs.

Who can order an SFIO investigation under section 212?

Only the Central Government, by an order, when it is of the opinion that the SFIO should investigate. The grounds are the Registrar's or inspector's report, a special resolution, the public interest, or a request from a Central or State Government department.

Can members ask for an investigation?

Yes. They can apply to the Tribunal under section 213. For a company with share capital, 100 members or members holding one-tenth of the voting power are needed, with evidence of good reasons. They can also pass a special resolution asking the Central Government to investigate.

What happens when the SFIO takes up a case?

No other investigating agency proceeds with the same matter and it must transfer its records to the SFIO. After the investigation, a report goes to the Central Government and prosecution can follow before the Special Court.