Security is a specific investigation requirement
Section 214 of the Companies Act, 2013 empowers the Central Government, in the stated section 210(1)(b) or Tribunal-ordered section 213 circumstances, to require applicant security before the specified inspector appointment, subject to the ₹25,000 statutory ceiling and prescribed framework. It is not a universal flat ₹25,000 fee payable whenever a company receives an inspection notice.
Read the applicable text: Official Companies Act text hosted by NCLT: section 214 MCA: Companies (Inspection, Investigation and Inquiry) Rules, 2014, Rule 5.
Apply Rule 5’s actual bands
Rule 5 of the Companies (Inspection, Investigation and Inquiry) Rules, 2014 addresses the security requirement before appointment under section 210(3). Its criteria use turnover as per the previous-year balance sheet: up to ₹50 crore, security ₹10,000; more than ₹50 crore and up to ₹200 crore, ₹15,000; more than ₹200 crore, ₹25,000. The exact boundaries matter, and there is no separate ₹20,000 band in this table.
Verify the proceeding and actual direction
Retain the investigation order, applicant identity, relevant appointment route and security communication. Read section 214’s scope and Rule 5’s wording together; do not mechanically treat the table as a self-generated payment instruction for every company proceeding. Resolve a direction that appears inconsistent with the applicable framework through the appropriate process rather than silently substituting an internal figure.
Use the specified turnover evidence
Identify the previous-year balance sheet and the supported turnover figure. Do not automatically replace it with current-year estimates, group consolidated revenue, asset value or the proposed claim amount. The examples assume the correct company, period and figure are established; they test the bands and reconciliation only.
Track the prosecution-linked refund
Section 214 and Rule 5 provide refund of the security to the applicant if the investigation results in prosecution. Preserve evidence of the qualifying outcome, amount deposited and refund status. Do not equate that stated condition with conviction, or invent a universal processing deadline, interest entitlement or automatic refund merely because the applicant asks.
Separate security from other outlays
Maintain the security deposit, professional fees and other costs in distinct records. The security ceiling is not a cap on every expense arising in the matter. A refund working should identify the security itself and any separate legal basis for other claims. Reconcile the deposit and refund to bank records without presenting an unsupported gross recovery.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: At the first boundary
Assume the requirement is properly invoked and previous-year balance-sheet turnover is exactly ₹50 crore. Rule 5 places it in the up-to-₹50-crore band: ₹10,000 security. Applying the next ₹15,000 band would differ by ₹5,000.
Illustrative example 2: Just above the first boundary
Supported turnover is ₹50.01 crore. It is more than ₹50 crore and not above ₹200 crore, giving ₹15,000 rather than ₹10,000. The ₹0.01 crore difference crosses the stated band boundary; it is not rounded away for this example.
Illustrative example 3: At the second boundary
Turnover is exactly ₹200 crore. It remains in the more-than-₹50-crore and up-to-₹200-crore band, giving ₹15,000. Applying ₹25,000 would overstate the table amount by ₹10,000.
Illustrative example 4: Above the second boundary
Turnover is ₹200.01 crore, giving ₹25,000 security on the assumed valid requirement. That is ₹10,000 above the preceding band, and no more than the statutory ₹25,000 ceiling.
Illustrative example 5: Do not substitute a current forecast
Previous-year balance-sheet turnover is ₹180 crore and the current forecast ₹230 crore. The prescribed prior-year input gives ₹15,000. Substituting the forecast would select ₹25,000, a ₹10,000 difference unsupported by that substitution.
Illustrative example 6: Refund only the identified security in this working
An applicant paid security ₹25,000 and separate professional fees ₹60,000. If the investigation results in prosecution, the identified security-refund amount is ₹25,000 under this rule, not the combined ₹85,000. Any further recovery needs its own legal basis.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the investigation route | Section 210/213 order and scope. |
| 2 | Identify the applicant | Legal identity and payment responsibility. |
| 3 | Read the security direction | Actual requirement and appointment stage. |
| 4 | Confirm Rule 5 applicability | Statute-and-rule memorandum. |
| 5 | Obtain the previous-year balance sheet | Correct reporting period and entity. |
| 6 | Verify turnover | Supported financial-statement figure. |
| 7 | Apply the precise band | ₹50 crore and ₹200 crore boundaries. |
| 8 | Reconcile the deposit | Amount, receipt and bank evidence. |
| 9 | Track the qualifying outcome | Prosecution evidence and refund request trail. |
| 10 | Separate other costs | Security and unrelated outlay ledger. |
Sixteen practitioner FAQs
1. Is ₹25,000 always payable?
No. It is a ceiling; the applicable requirement and bands matter.
2. Which rule provides the turnover table?
Rule 5 of the 2014 Inspection, Investigation and Inquiry Rules.
3. Which turnover period is identified?
Turnover as per the previous-year balance sheet.
4. What is the up-to-₹50-crore amount?
₹10,000.
5. What applies above ₹50 crore through ₹200 crore?
₹15,000.
6. What applies above ₹200 crore?
₹25,000.
7. Where does exactly ₹50 crore fall?
The ₹10,000 band.
8. Where does exactly ₹200 crore fall?
The ₹15,000 band.
9. Is there a ₹20,000 band in this table?
No.
10. Can a current forecast replace the specified figure?
Do not make that substitution without legal basis.
11. Does every inspection notice require this deposit?
No. Establish the proceeding and actual requirement.
12. Is security the same as a professional fee?
Keep their legal and accounting purposes separate.
13. What refund condition is stated?
The investigation resulting in prosecution.
14. Does the wording require conviction before that stated condition?
Do not substitute conviction for prosecution.
15. Does the deposit ceiling cap all costs?
No. It addresses this security requirement.
16. What closes the record?
Applicable band, deposit evidence, outcome and refund status reconcile.
Official sources
Official Companies Act text hosted by NCLT: section 214 MCA: Companies (Inspection, Investigation and Inquiry) Rules, 2014, Rule 5
India Code: Companies Act, 2013, section 214
ICSI statutory text: Rule 5 security bands
Official Gazette: Companies (Inspection, Investigation and Inquiry) Rules, 2014