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

Mehta Textiles Ltd is under investigation by an inspector appointed under section 210. The inspector finds that Mehta Textiles' wholly owned subsidiary, Mehta Yarns Pvt Ltd, handled several suspect transactions. Which statement is correct about extending the investigation to the subsidiary?

The inspector may investigate the subsidiary if he considers it necessary for the investigation, but only with the prior approval of the Central Government. The inspector has no independent power to extend the probe, and no Tribunal order is required for this step.

  1. AThe inspector may investigate the subsidiary on his own, with no approval needed
  2. BThe inspector may investigate the subsidiary if he considers it necessary, subject to prior approval of the Central GovernmentCorrect
  3. CThe inspector may investigate the subsidiary only if the Tribunal orders it
  4. DThe inspector cannot investigate any body corporate other than the company for which he was appointed

Explanation

Section 219 lets an inspector investigate a subsidiary or holding company of the company under investigation when he considers it necessary. This is subject to prior approval of the Central Government. The option saying no approval is needed ignores that condition.

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