Calcutta, Nov. 13: The Department of Company Affairs (DCA) is seriously considering a move to rope in outside professionals to beef up inspection of companies under Section 209A of the Companies Act, 1956.
The move will enable DCA strengthen the prosecution process and benefit investors as well.
“With corporate governance rules becoming more stringent it has become necessary to give a re-look to the inspection procedure. So we have felt the need to rope in professional investigating officers. A lot needs to be done,” DCA sources said.
DCA has also appointed an expert committee comprising Shardul Shroff, convenor and Salil Bhandari, Amarjit Chopra and Virendra Ganda to look into Section 209A of the Companies Act which deals with the inspection of companies. The committee will also suggest ways and means to improve the inspection procedure.
Inspection of companies under Section 209A of the Companies Act is ordered mainly on the basis of complaints received by the DCA or its field offices about mismanagement, delay in transfer of shares, debentures or issue of dividend warrants, suggestions of regional directors due to qualifications in the auditors’ report, other violations or irregularities noticed on scrutiny of documents filed in the offices of Registrar of Companies, references received from government departments and agencies pointing out violation of provisions of the Act or other irregularities.
DCA had carried an inspection of the books of accounts of 199 companies during the first nine months of 2001-02 ending December 2001, sources said. It inspected the accounts of 221 companies during 2000-01 while in 1999-2000 about 230 companies were inspected.
“DCA launches prosecution on the basis of findings in the inspection reports. Besides cases involving non-compliance of the Companies Act, 1956 including inadequate maintenance of statutory records are taken up with companies for remedial action,” a senior official said.
The official further added that during 2001-02, Sebi investigated the affairs of various companies involved in the stock market scam 2001. Based on the preliminary investigation report of Sebi, the DCA ordered inspection of the books and other relevant records of 98 companies under section 209A of the Companies Act
Prosecution of a number of companies and their directors and officers in default were ordered for violation of the various provisions of the Companies Act as reported in the inspection report.