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CS Executive · Setting Up of Business, Industrial and Labour Laws · Corporate Entities - Companies

An inspector investigating Delta Infra Ltd finds that Zenith Builders Ltd was never a subsidiary or holding company of Delta Infra and has no common managing director. However, Zenith's Board is accustomed to act on the directions of one of Delta Infra's directors. Which is the correct position?

Zenith can be investigated with prior Central Government approval. The provision covers a body corporate whose Board is accustomed to act on the directions of the company or any of its directors, so no holding or subsidiary relationship is needed, provided the results are relevant to the main investigation.

  1. AZenith cannot be investigated because no holding or subsidiary link exists
  2. BZenith can be investigated, with prior Central Government approval, because its Board is accustomed to act on the directions of a director of Delta InfraCorrect
  3. CZenith can be investigated only if its Board comprises nominees of Delta Infra and not otherwise
  4. DZenith can be investigated without approval if the inspector is satisfied of relevance

Explanation

Section 219(c) covers a body corporate whose Board comprises nominees of the company or is accustomed to act on the directions or instructions of the company or any of its directors. So a holding or subsidiary link is not needed. Prior Central Government approval is still required, and the inspector reports only so far as the results are relevant to the company's investigation.

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