Difference between Inspection and Investigation

Inspection of books of accounts and other books and papers of the company is authorised under Section 209A of the Companies Act, while investigation can be ordered under Section 235 or 237 or 239 of the Act.

Inspection of books of account and other books and papers is not an investigation though it may lead to investigation in case anything wrong or objectionable is found during inspection. Its object is to ensure that there is nothing objectionable to the books of account and other books and papers. Investigation into the affairs of the company is wider in scope. It includes investigation of all the business affairs, profit and loss, assets including goodwill, contracts and transactions, investment and other property interests and control of subsidiary, holding and other related companies too. Inspection can be done either by the Registrar or by an officer authorised by the Central Government. But Investigation can be conducted by only competent persons appointed as Inspectors by the Central Government. Inspectors may be appointed by the Government from the officers of the Government or persons from outside the Government.

Under Section 209-A, to inspect books of account and other books and papers the inspecting authority need not assign any reason. Further, no prior notice of inspection to company is necessary. The object of inspection is to keep a watch over the <,:ompanies to ensure that the statutory books and papers are maintained and the business of the company is being managed at proper level of efficiency. But investigation may be ordered by the Central Government under Section 235(1) on the report of the Registrar or it must be ordered by. the Central Government under Section 235(2) if a declaration to this effect is made by the Company Law Board on a petition by specified number of members of the company. Under Section 237(a) the Central Government is bound to order investigation into the affairs of the company if the company by special resolution or the Court by order declares that the affairs of the company ought to be investigated. Clause (b) of Section 237, however, gives discretionary power to the Government to order investigation, if in the opinion of the Company Law Board there are circumstances suggesting that the affairs of the company are being conducted with a view to defraud members or.other persons or for fraudulent or unlawful purpose or in manner oppressive of any members or the managerial personnel are guilty of fraud, misfeasance or other misconduct towards the company or any of its members or the members have not been given all the information about the affairs of the company. Investigation of ownership of the company may also be ordered by the Central Government under Section 247. The Supreme Court in Barium Chemicals Ltd. Vs. Company Law Board (1966) 2 Compo L.J. 151 has held that unless the circumstances under Section 237(b) exist it cannot order investigation. Inspection, however, can be ordered without disclosing any grounds as there are no grounds specified under the Act.