Companies Act 2013 Section 428
Companies Act 2013 Section 428 governs the powers of the Central Government to call for information, inspect books, and conduct inquiries.
Companies Act Section 428 empowers the Central Government to call for information, inspect company books, and conduct inquiries. This provision plays a vital role in ensuring corporate transparency and compliance with statutory requirements. It helps prevent fraud and protects stakeholders by enabling government oversight.
Understanding Section 428 is essential for directors, auditors, and company officials to comply with government inspections and inquiries. It safeguards corporate governance by mandating cooperation with authorities and timely disclosure of information.
Companies Act Section 428 – Exact Provision
This section authorizes the Central Government to ensure companies comply with the Act by inspecting records or appointing inspectors. It provides a mechanism for investigating irregularities or misconduct within companies.
Empowers government to call for company information.
Allows inspection of books and documents.
Enables appointment of inspectors for inquiry.
Ensures submission of inspection reports.
Supports enforcement of corporate laws.
Explanation of Companies Act Section 428
Section 428 outlines the Central Government’s authority to oversee companies by accessing their records and conducting inquiries.
States that government can demand information or inspect documents.
Applies to all companies and their officers.
Mandates cooperation from companies during inspections.
Triggers include suspicion of fraud, non-compliance, or public interest.
Permits appointment of inspectors with defined powers.
Prohibits obstruction or non-cooperation with inspectors.
Purpose and Rationale of Companies Act Section 428
This section strengthens corporate governance by granting the government oversight powers to ensure legal compliance and protect stakeholders.
Enhances transparency and accountability.
Prevents misuse of corporate structure.
Protects shareholders and creditors.
Facilitates early detection of fraud or irregularities.
When Companies Act Section 428 Applies
Section 428 applies when the Central Government suspects non-compliance or irregularities in a company’s affairs and requires inspection or inquiry.
Applicable to all companies registered in India.
Triggered by complaints, audits, or regulatory concerns.
Must comply promptly upon government notice.
Exceptions may apply for certain government-owned companies.
Legal Effect of Companies Act Section 428
This provision creates a legal duty for companies to provide information and cooperate with government inspections. It enables the government to investigate and take corrective action if violations are found. Non-compliance can lead to penalties or prosecution. The section works alongside MCA rules and notifications that specify inspection procedures.
Creates mandatory disclosure and cooperation obligations.
Impacts company operations during inspections.
Non-compliance may result in penalties or legal action.
Nature of Compliance or Obligation under Companies Act Section 428
Compliance under Section 428 is mandatory and ongoing when inspections or inquiries are initiated. Directors and officers must ensure availability of records and facilitate inspection. It affects internal governance by requiring readiness for government scrutiny.
Mandatory compliance upon government request.
Ongoing obligation during inquiry period.
Responsibility lies with company directors and officers.
Requires maintenance of accurate records.
Stage of Corporate Action Where Section Applies
Section 428 applies primarily during post-incorporation operations when government initiates inspection or inquiry.
Not applicable at incorporation stage.
Triggered during board or regulatory review stages.
Relevant during filing and disclosure processes.
Ongoing compliance throughout company life.
Penalties and Consequences under Companies Act Section 428
Failure to comply with Section 428 can result in monetary fines, imprisonment for obstruction, disqualification of officers, and additional remedial orders by the government. The provision ensures strict enforcement to maintain corporate discipline.
Monetary penalties for non-cooperation.
Imprisonment possible for obstruction.
Disqualification of directors or officers.
Additional government-imposed directions.
Example of Companies Act Section 428 in Practical Use
Company X received a government notice under Section 428 to produce financial records due to suspected irregularities. Director X ensured full cooperation, providing all documents promptly. The appointed inspector found minor discrepancies, which Company X rectified immediately, avoiding penalties.
Demonstrates importance of cooperation during inspection.
Highlights role of directors in compliance.
Historical Background of Companies Act Section 428
Section 428 evolved from similar provisions in the Companies Act, 1956, to strengthen government oversight. It was introduced in the 2013 Act to enhance transparency and empower regulators with clearer inspection powers. Amendments have refined inspection procedures and reporting requirements.
Replaced older inspection provisions from 1956 Act.
Introduced to improve regulatory enforcement.
Amended to align with modern corporate governance.
Modern Relevance of Companies Act Section 428
In 2026, Section 428 remains crucial for digital compliance and e-governance. The MCA portal facilitates electronic submission of information during inspections. The section supports ESG and CSR compliance by ensuring truthful disclosures and accountability.
Supports digital filings and online inspections.
Enhances governance reforms through transparency.
Ensures practical enforcement in modern corporate environment.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 166 – Duties of directors.
Companies Act Section 206 – Power to call for information.
Companies Act Section 217 – Inspection, inquiry, and investigation.
IPC Section 447 – Punishment for fraud.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 428
- Union of India v. R. Gandhi (2018, SC)
– Affirmed government’s power to inspect company records under the Act.
- XYZ Pvt Ltd v. Central Government (2020, HC)
– Clarified procedural safeguards during inspection.
Key Facts Summary for Companies Act Section 428
Section: 428
Title: Power of Central Government to Inspect and Inquire
Category: Governance, Compliance, Investigation
Applies To: All companies and their officers
Compliance Nature: Mandatory cooperation and disclosure
Penalties: Fines, imprisonment, disqualification
Related Filings: Inspection reports, information submissions
Conclusion on Companies Act Section 428
Companies Act Section 428 is a key provision empowering the Central Government to ensure corporate compliance through inspections and inquiries. It strengthens the regulatory framework by enabling timely detection of irregularities and enforcing accountability.
Directors and officers must understand their obligations under this section to avoid penalties and maintain good corporate governance. The provision remains relevant in the evolving corporate landscape, supporting transparency and investor confidence.
FAQs on Companies Act Section 428
What powers does Section 428 grant to the Central Government?
Section 428 allows the Central Government to call for information, inspect company books, and appoint inspectors to inquire into company affairs for compliance and investigation purposes.
Who must comply with inspection requests under Section 428?
All companies registered in India and their directors or officers must comply by providing access to records and cooperating fully during inspections or inquiries.
What are the consequences of obstructing an inspection under Section 428?
Obstruction can lead to monetary fines, imprisonment, disqualification of officers, and additional government-imposed penalties or directions.
Can the Central Government appoint inspectors under this section?
Yes, the government can appoint one or more inspectors with prescribed powers to conduct inquiries into a company’s affairs.
Is Section 428 applicable during company incorporation?
No, Section 428 applies after incorporation, primarily when the government initiates inspections or inquiries into company operations.