SECTION 209A

INSPECTION OF BOOKS OF ACCOUNT

Whether inspecting officer can have access to books of account of firm in which the company is partner

Query : Whether the inspecting officer, during the course of inspection of a company, can have access to the books of account and other books and papers of a firm in which the company is a partner?

Answer : Yes, it has been advised that when a company becomes a partner in the firm, it gets right under section 12 of the Indian Partnership Act to inspect and copy any of the books of the firm. In view of this, the company has a right to get the accounts of the firm and to make them available to the inspecting officer under section 209A. Thus, the inspecting officer has a right to examine any office of the company so as to ascertain such information.

* LETTER NO.7/9/74-CL-II, DATED 24.1.1976.

Whether inspecting officer can seek information about company's joint ventures with other bodies that are not companies

The matter regarding inspection of books of account, etc., of joint ventures in which the company inspected is a partner, during the course of inspection of any such company has been examined. It would appear that the phrase "books of account of every company" occurring in sub-section (4A) of section 209, only carries forward the subject-matter of section 209, which requires the maintenance of some books by a company and indicates the specific period for which they should be preserved. That phrase in its context does not give rise to the question whether it would extend to other books not required as such to be maintained by company but nonetheless belonging to it on account of its interest in joint venture with some one else. the new section 209A has been formulated with a new subject-matter as denoted by its different marginal heading. The power of the Government and the Registrar is also expressed in relation to "the books of account and other books and papers of every company" a phrase not to be found in sub-section (4) of section 209 as it stood prior to the Amendment Act. The intention is to provide as much of relevant information as possible to the Government as to the fortunes and failures of any company. Therefore, an inspecting officer can seek information about company's joint ventures with other bodies that are not companies.

* CIRCULAR NO.25/75, DATED 19.11.1975.

Whether inspection can be extended to documents in connection with appointment of former managing agents.

The managing agency system was abolished with effect from 3.4.1970. It has been noticed that after the abolition, the former managing agents have been getting remuneration from the companies previously managed by them in one form or other by getting themselves appointed as technical consultants, advisers, etc., and also for performing a host of other services like management, economic, financial, statistical and marketing services. With a view to ensure that the former managing agents do not get themselves so appointed, especially where the so-called services are not really needed by the companies, the amended provisions of section 209A provide restrictions on the appointment of former managing agents or secretaries and treasures to any office in the company except with the previous approval of the company in general meeting as well as of the Central Government. It has come to the notice of the Department that some appointments made in this regard are only a cover for the contribution of the managing agency system. It is, therefore, necessary to ensure that the new appointments are not just a change of name or label for the old managing agents. For this purpose, it has been decided that while carrying out the inspection of the books of account of the company under section 209A either by the Registrar of Companies or by the officers of the Inspection Wing, a detailed examination of the relevant documents and other materials connected with the appointment of the former managing agents should be made to see that the company really needed such technical services and such services have in fact been performed. It is also necessary to see that the former managing agents, etc., have the necessary personnel to be able to render any meaningful services and the remuneration paid is commensurate with the services rendered.

* CIRCULAR NO.18/75, DATED 12.9.1975.