Inspection of Books of Accounts

Inspection of Books of Accounts
Section 209(4) provides that books of account shall be open to inspection by any
Director during business hours.
Further, Sec. 209-A’ provides that books of account shall be open to inspecti,)n by:
(i) the Registrar; or
(ii) such officer of Government as may be au thorised by the Central Government
in this behalf.
(iii) by such officers of the Securities and Exchange Board of India as may be
authorised by it.
Further, Section 209A provides that such inspection may be made without giving
any prior notice to the company or any officer thereof.
The inspection by SEBI shall be made in respect of matters covered under Sections referred to in Section 55A of the Companies Act, 1956 as amended by Companies (Amendment) Act, 2000. Section 55A, in this regard, provides as follows:
The provisions contained in Sections 55 to 58, 59 to 84,108,109, 110,112,113,116 117,118,119,120, 121, 122,206,206 A and 207, so far as they relate to issue and transfer of securities and non-payment of dividend shall:
(a) in case of listed public companies;
(b) in case of those public companies which intend to get their securities listed on
any recognised stock exchange in India, be administered by the Securities and
Exchange Board of India. .
Under Sec. 45-N of the Reserve Bank of India Act, books of account of non-banking companies may also be inspected by the Reserve Bank of India for the purpose of verifying the correctness or completeness of any statement, information or particulars furnished to the Bank or for the purpose of obtaining any information of particulars which the non-banking institution has failed to furnish on being called upon to do so.
© Can a Director make an Inspection through an Agent?
Generally, a Director should exercise right of inspection of books of accounts personally. However, in N.V. Vakharia Vs. Supreme General Film Exchange Co. Ltd. (1948) 18 Compo Cas. 34, it was held that a director is entitled to make inspection of accounts personally or through an agent provided that there is no reasonable objection to the person chosen and the agent undertakes not to utilise the information obtained by him for any purpose other than the purpose of his principal.
In the aforesaid case, inspection through an agent was allowed because of the
physical inability of the Director to inspect books of accounts personally.
As the right of inspection is a statutory right given under Section 209, a Director
who is prevented from or is refused inspection, may enforce his right through Court.
The right of inspection, however, is not an absolute right. Where on the facts and circumstances it is clear in any case that there is reason to believe that the inspection is sought for supplying information to a rival in business of the company or for any purpose which is prejudicial or injurious to the interest of the company, the inspection may properly be refused.(d) Right of a Shareholder to Inspect Books of Account