Section 213 of CA 2013 : Section 213: Investigation Into Company?S Affairs In Other Cases

Explanation using Example

Imagine a scenario where XYZ Pvt. Ltd. has been performing poorly, and there are rumors that the directors are siphoning off funds. A group of 150 shareholders, who collectively hold 12% of the company's total voting power, are concerned about the company's management. They believe the directors are defrauding the members and possibly engaging in unlawful activities.

The shareholders gather evidence suggesting financial misconduct and submit an application to the Tribunal under Section 213 of the Companies Act, 2013. They request an investigation into the affairs of XYZ Pvt. Ltd. to protect their interests and the integrity of the company.

The Tribunal reviews the application and the evidence provided. It finds that there are indeed circumstances that suggest potential fraud and mismanagement within the company. Consequently, the Tribunal orders an investigation, and inspectors are appointed by the Central Government to thoroughly examine XYZ Pvt. Ltd.'s affairs.

If the inspectors find proof of fraud or unlawful activities during their investigation, the officers of the company, including the directors involved in the wrongdoing, may face penalties as outlined in Section 447 of the Companies Act for committing fraud.