In conducting the affairs of a company, the Directors are found guilty of delay, bungling and faulty planning, which have resulted in losses and fall in prices of the shares of the company. Members holding 1/10th of the voting power in the company apply to the Central Government for investigation on the ground that the circumstances establish fraud on the part of the Directors. Is the appointment of an Inspector justified under the circumstances?
.f2l.ns. In situations where Directors or other officers of the company are suspected to be guilty of misconduct or misfeasance in the affairs of the company, Section 235 empowers the Central Government to appoint an Inspector to investigate into the affairs of the company on request from the shareholders. In accordance with Section 235, such an application by shareholders must be made by at least 200 members or members holding at least 1/10th of the total voting power in the case of a company having a share capital. Thus, since this requirement of 1/10th of the shareholders is satisfied in the given case and the matter relates to misconduct and misfeasance, the appointment of the Inspector is justified.
