Search and Seizure Under Section 209, Companies Act

Search and seizure under section 209 of the Companies Act, 2013 is the one power in Chapter XIV the Registrar or an inspector must get a court order before exercising himself. Someone who believes a company's books are about to be destroyed has to obtain an order from the Special Court first. Seizure then starts a clock: the books go back by the one hundred and eightieth day, unless they are called for again in writing.

When is search and seizure under section 209 available?

Search and seizure under section 209 is not a routine step in an inspection. Section 209(1) opens where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that the books and papers are likely to be destroyed, mutilated, altered, falsified or secreted. Five verbs, and the belief has to be about a future act on the records, not about wrongdoing in the business.

The records in scope are wider than the company's own. The sub-section covers the books and papers of a company, or relating to the key managerial personnel or any director or auditor or company secretary in practice if the company has not appointed a company secretary. The conditional at the end attaches to the company secretary in practice: he comes into scope where the company has not appointed a company secretary of its own.

The gate sits in the middle of the sentence. The Registrar or inspector may act only after obtaining an order from the Special Court for the seizure of such books and papers. Nothing in section 209 lets him proceed on his own satisfaction, which is the opposite of how the notice powers in section 206 work. A court appears again in the Chapter, at section 217(11), and in the other direction: an inspector who believes evidence sits outside India applies to the competent court in India, and such court may issue a letter of request to a court or authority abroad. He cannot issue one himself, and that is a route to evidence rather than a permission to enter and seize.

What can be done under the order?

Two things, in clauses (a) and (b), and they are separate acts.

• (a) to enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and
• (b) to seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.

Clause (b) builds a copying right into the seizure itself. The company gets to take copies or extracts before the records leave, and it pays for that itself.

How long can the books be held?

Sub-section (2) states that the Registrar or inspector shall return the books and papers seized under sub-section (1), as soon as may be, and in any case not later than one hundred and eightieth day after such seizure, to the company from whose custody or power such books or papers were seized. Note how the consolidation prints the two periods differently: the outer limit is an ordinal, not later than one hundred and eightieth day after such seizure, while the extension in the proviso is a duration, a further period of one hundred and eighty days. Quote each as printed if you are computing a date from it.

The first proviso allows that extension: the books may be called for by the Registrar or inspector for a further period of one hundred and eighty days by an order in writing if they are needed again. The second lets him, before returning them, take copies of, or extracts from them or place identification marks on them or any part thereof or deal with the same in such other manner as he considers necessary.

Sub-section (3) then imports the criminal-procedure rules: the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures shall apply, mutatis mutandis, to every search and seizure made under this section.

How does section 209 differ from an inspector's seizure under section 220?

Chapter XIV carries two seizure powers, and they are not the same power written twice. Section 220 applies where in the course of an investigation under this Chapter an inspector has reasonable grounds to believe records are at risk.

Two differences do real work. The Special Court order is a section 209 requirement and is not written into section 220. And the custody clock is fixed in days under section 209 while section 220 ties it to the life of the investigation, which is why an investigation into a company's affairs can leave records with an inspector for as long as it runs. Both powers copy the second proviso idea: section 220(2) also lets the inspector take copies, take extracts or place identification marks before returning what he holds.

What if the records are destroyed anyway?

Section 209 is preventive, and section 229 is the answer to the thing it tries to prevent. Where a person required to provide an explanation or make a statement during an inspection, inquiry or investigation, or an officer or employee of a company under investigation, destroys, mutilates or falsifies, or conceals or tampers or unauthorised removes documents relating to the property, assets or affairs of the company, or makes a false entry, or provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in section 447.

That is the same routing the second proviso to section 206(4) uses. Chapter XIV does not carry its own fraud penalty; it sends the conduct to section 447.

Reading a search and seizure under section 209 therefore means checking four things: whether an order of the Special Court was obtained before the entry, whether the belief recorded was about destruction or alteration of records rather than about the business, whether the company was allowed its copies at the point of seizure, and when the one hundred and eightieth day after the seizure falls. The records at stake are the ones section 128 requires a company to keep, and whatever the inspection or investigation concludes lands in a report: a section 208 report for an inspection, or an inspector's report under section 223 for an investigation.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.