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Companies to be given reasonable right to be heard before the registrar goes for inspection and investigation of the company: Delhi HC

Recently, in case in Delhi High Court, it was held that the registrar should give the company an opportunity to be heard and inform them of the allegation before calling for information, inspect book, and conduct inquiries. According to the facts of the case, a company Axis Ispat Private Limited has filed the petition seeking quashing of the 37 show cause notices against it by the Ministry of Corporate Affairs under Companies Act, 2013. Further, it was submitted by the petitioners that Section 206 of the companies’ act gives power to the Registrar of the companies to conduct inquiry, call for information, inspect the books, however, the Registrar would have to first call upon the petitioner to give an explanation and also provide them a reasonable opportunity of being heard before the registrar before issuing the show cause notice.

On this, the Respondents stated that when the preliminary finding were raised, sufficient time was given to the petitioners to file the reply but the petitioners filed the late reply which was considered by the authority. It was also submitted that the sufficient time was given even after sending the show cause notices. After considering all the argument form both the parties the court held that that there is no doubt that the section 207 of the companies Act, 2013, statements of the directors of the company have been recorded. However, under these circumstances, the petitioner ought to give reasonable opportunity to be heard. In the present case, the preliminary finding was issued in September 2020, and owing to the belated reply, the authorities have proceeded further, to issue the said show cause notices and it is not clear if the reply submitted was considered or not.

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