Chapter XIV - Inspection, Inquiry and Investigation
Section 225
Section 225: expenses of investigation
Section 225 decides who ultimately bears the cost of an investigation by an inspector appointed by the Central Government. The Government pays first and is then reimbursed by the persons listed in the section.
On this page
Need advice on Section 225?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The expenses of, and incidental to, an investigation by an inspector appointed by the Central Government under this Chapter other than expenses of inspection under section 214 shall be defrayed in the first instance by the Central Government, but shall be reimbursed by the following persons to the extent mentioned below, namely:—(a) any person who is convicted on a prosecution instituted, or who is ordered to pay damages or restore any property in proceedings brought, under section 224, to the extent that he may in the same proceedings be ordered to pay the said expenses as may be specified by the court convicting such person, or ordering him to pay such damages or restore such property, as the case may be; (b) any company or body corporate in whose name proceedings are brought as aforesaid, to the extent of the amount or value of any sums or property recovered by it as a result of such proceedings; (c) unless, as a result of the investigation, a prosecution is instituted under section 224,—(i) any company, body corporate, managing director or manager dealt with by the report of the inspector; and (ii) the applicants for the investigation, where the inspector was appointed under section 213, to such extent as the Central Government may direct. (2) Any amount for which a company or body corporate is liable under clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause.
Introduction
The section does not cover the expenses of an inspection under section 214. It commenced on 1 April 2014 under S.O. 902(E). The India Code text shows no amendment and matches the 2013 Gazette.
Key takeaways
Government pays first
Expenses of and incidental to the investigation are defrayed in the first instance by the Central Government.
Convicted persons
A person convicted, or ordered to pay damages or restore property, in proceedings under section 224 reimburses to the extent the court orders.
Company recovering money
A company in whose name proceedings are brought reimburses up to the amount or value it recovers, and that liability is a first charge on the recovery.
No prosecution
If no prosecution follows, the company, body corporate, managing director or manager dealt with in the report, and applicants under section 213, reimburse as the Central Government directs.
Reimbursement by persons proceeded against
Under sub-section (1)(a), any person convicted on a prosecution instituted under section 224, or ordered to pay damages or restore property in proceedings brought under that section, reimburses the expenses to the extent the convicting or ordering court specifies in the same proceedings.
Reimbursement by the company
Under sub-section (1)(b), a company or body corporate in whose name proceedings are brought reimburses up to the amount or value of the sums or property it recovers. Sub-section (2) makes that amount a first charge on the sums or property recovered.
Where no prosecution is instituted
Under sub-section (1)(c), unless a prosecution is instituted under section 224 as a result of the investigation, the expenses are reimbursed, to the extent the Central Government directs, by (i) any company, body corporate, managing director or manager dealt with by the report, and (ii) the applicants for the investigation where the inspector was appointed under section 213.
Practical preparation
Before applying for an investigation under section 213, factor in that applicants may be asked to bear expenses if no prosecution follows; if your company is being investigated, provide for a possible reimbursement claim; and where the company recovers money in proceedings brought in its name, remember the first charge in sub-section (2).
Procedure, forms, fees and timelines for applications under this provision are set out in rules made under the Act and in the Tribunal’s procedure; check the current text of those rules, and any exemption notification for your class of company, before relying on this guide.
Practical checklist
Do
- Weigh the cost exposure in clause (c)(ii) before applying to the Tribunal under section 213.
- Track recoveries made in proceedings brought in the company’s name, since they carry a first charge for expenses.
Avoid
- Do not assume inspection expenses under section 214 are governed by this section; they are excluded.
Illustrative example
Hypothetical: minority applicants and costs
Minority members obtain an investigation under section 213. The inspector’s report criticises management, but no prosecution is instituted.
Government pays
The Central Government first meets the investigation expenses.
Direction
It may direct the company, the managing director dealt with in the report, and the applicants to reimburse to the extent it decides.
Outcome
- Applicants should treat a possible share of costs as part of the decision to seek an investigation.
Glossary
- Defray in the first instance
- Pay the cost initially, subject to later reimbursement by others.
- First charge
- A claim that has priority over other claims on the specified money or property.
Frequently asked questions
Who pays if the investigation leads to no prosecution?
The company, body corporate, managing director or manager dealt with by the report, and the applicants where the inspector was appointed under section 213, to the extent the Central Government directs.
Does the company always have to reimburse?
Not always. The section lists different persons for different outcomes, and the extent is decided by the court or the Central Government as the section provides.
Need help applying this provision to your situation?
Contact BizeneedLast updated 12 October 2026