Do Limited Companies Come Under RTI Act

This article discusses the meaning and requisites of a private and public company and also discusses the important definitions under the RTI Act. This paper discusses the relevant case laws to conclude if RTI Act is also applicable to private companies
Estimated Reading Time: 9 minutes

Introduction

In India there are two types of common companies which are private companies and others are public companies. These companies may be incorporated either as limited liability companies or as unlimited liability companies.

Limited liability companies may be limited by: –

  1. Companies limited by shares
  2. Companies limited by guarantee
  3. Companies limited by guarantee as well as shares

Statutory definition

Private Company

Private Company byvirtueof section 2(68), as amended by the Companies (Amendment) Act, 2015[1] means a company having a minimum paid-up share capital, as may be prescribed and by through its article of association:

  • Restricts the right to transfer the shares or
  • Restricts invitation to the public to subscribe for a security of the company

In view of the above definition, a private company mention these conditions in their article of association, incorporate the said restrictions, limitations, and prohibitions.

Public Company

Public Company by virtue of Section 2(71) of the Companies Act, 2013, as amended by the Companies (Amendment) Act, 2017 means a company which: –

  • Is not a private company
  • The company which has a minimum paid-up share capital, as may be prescribed [2]

Further, a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purpose of this act even where such subsidiary company continues to be a private company in its article. 

Difference between Private and Public Company

The differentiation between both is really vast but the basic difference on the basis of funding is given under: –

  1. There is restriction on transferring of shares through there article of association and in case of public limited companies there is no such restriction imposed.
  2. Minimum paid up capital in case of private companies is 1 Lakh rupees and in case of public company it is 5 Lakh rupees.
  3. Another major difference on the basis of funding is that private limited companies cannot issue prospectus to invite public for subscription of their shares, but public limited companies are free to issue prospectus on their own.
  4. In private companies there are no restriction on managerial remuneration but in the case of public company total managerial remuneration cannot exceed 11 per cent of the net profits.
  5. A public company is free to accept deposits from the public (subject to provision of section 76 of the act) and a private company are not allowed to accept deposits from the public. Instead, private companies are allowed to accept deposits from its members under section 73 of the act up to 100 per cent of its paid up capital and free reserves provided they inform ROC in the prescribed manner.

In simple words, the private limited company is a company which is formed by the minimum of two members voluntarily up to two hundred members taking joint holders as single member also not counting present or past employees who are members, but the number of debenture holders may exceed 200 with the only condition that invitation to public cannot be made. There must be a restriction on transferability of shares. Also, the private company is one which has restriction on inviting public to subscribe for securities.    

In simple words a public company is a company which is not a private company, a company which has a minimum paid up capital of Rs. 5 Lakh with no maximum restriction on members but minimum number of members which are needed are seven.  For funding members can invite public subscription.

RTI ACT 2005

The Right to Information (RTI) Act  was enacted in 2005 with an objective of transparency to the citizens. Under the preamble of RTI Act public authorities are mentioned in it which means that the objective of this act includes giving right to information a transparency and accountability to the citizens of India by public authorities.

Preamble of the Act 

“An Act to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority, the constitution of a Central Information Commission and State Information Commissions and for matters connected therewith or incidental thereto….”[3]

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Important Definitions

Public Authority is also defined under the act in Section 2(h) of the act

“Public authority” means any authority or body, or institution of self-government established or constituted—

  • by or under the Constitution;
  • by any other law made by Parliament;
  • by any other law made by State Legislature;
  • by notification issued or order made by the appropriate Government,

and includes any—

(i) body owned, controlled, or substantially financed;

(ii) non-Government organisation substantially financed,

directly or indirectly by funds provided by the appropriate Government;[4]

By reading preamble of the act the intent of legislatures is clearly understand as public authorities come under RTI Act as they necessarily need to disclose the information for the purpose of providing transparency and accountability. So, as per the RTI act public authorities come under RTI act and private limited companies does not come under the RTI Act. 

As the provision which is mentioned under the act only relate or mention about the Public authorities which means it only includes public limited companies and does not include private limited companies directly through the provisions of the act.

Right to information

Section 2(j) of RTI Act, 2005 defines “Right to information” which is given here under:-

“right to information” means the right to information accessible under this Act which is held by or under the control of any public authority and includes the right to—

  • inspection of work, documents, records;
  • taking notes, extracts or certified copies of documents or records;
  • taking certified samples of material;
  • obtaining information in the form of diskettes, floppies, tapes, video

cassettes or in any other electronic mode or through printouts where such information is stored in a computer or in any other device;[5]

The Right to Information as the basic definition of this act clearly mentions that the accessibility of information is of only public authorities under this act which again clarify that private limited companies are not included under this act directly but only public limited companies or any other unlimited public company are included directly through the provisions of this act.

The question is that is there no accessibility to information of private limited company in any case?

Answer for the above question is yes there is accessibility to the information of private limited company under Company Act, 2013 through its regulator but there is no provision under RTI Act, 2005 directly.

Information

Section 2(f) of RTI Act, 2005 defines information as: –

“information” means any material in any form, including records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law for the time being in force. [6]

According to this definition given under the Act it is clear that the information of any private limited company can be taken by a public authority but not under RTI Act in any other law which is in force.

The other law which is in force is Companies Act, 2013 for the purpose of taking information of private limited company.

Power to call for information, inspect books and conduct inquiries under Company law, 2013

Section 206(1) provides that if the registrar on a scrutiny of any document filed by a company or on any information received by him, is of the opinion that any further information or explanation or any further documents relating to the company is necessary, he may require the company to furnish in writing such information or explanation or to produce such documents. The registrar will give a legal notice to the company for that purpose specifying to provide the desired information or documents within a reasonable time.

The registrar may call upon another notice to call upon the company to produce further books of account, books, papers, and explanations.

The subject matter of inspection under Section 206 in sub-section (6) is ‘books and papers whereas the sub- section (7) the expression used is ‘books of account’. The definition of ‘books and paper’ as per Section 2(12) is much wider and include books of account, deeds, vouchers, writing, documents, minutes, and registers maintained on paper or electronic form.

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Under Section 206(3), the registrar is authorized to call for production of books of accounts, books, papers, and explanation as he may require. The expression ‘books’ and ‘books and account’ has been defined in Section 2(12) and 2(13) of the Act, respectively.

Investigation under Company Act 2013

Section 210(1) provides that the Central Government may order investigation into the affairs of a company on receipt of a report from the Registrar or inspector under Section 208 or where a company has passed a special resolution for the investigation of the affairs of the company or in public interest.

In three cases investigation can be initiated:

  1. The company, by passing special resolution [Section 210(1)(b)] – The Central Government may order investigation into affairs of a company on intimations of a special resolution passed by company that the affairs of the company ought to be investigated.
  2. The Court or Tribunal, by order [Section 210(2)] – This makes it mandatory for the Central Government to order an investigation into the affairs of the company if there is an order by the court or the tribunal directing that the affairs of the company must be investigated.
  3. In Public Interest- Under sub-clause(c) of section 210(1) the Central Government has discretion to order an investigation into the affairs of the company ‘in public interest’.

Under Section 211 of the act the Central Government shall by giving notification establish a Serious Fraud Investigation Office to investigate frauds relating to the company.

Under Section 213 of the act states that the tribunal may pass an order to appoint an inspector by Central Government to investigate the affairs of the company. Also, Section 215 disallows the appointment of a firm, body or corporate or other association as an inspector. Thus, only individual or individual(s) may be appointed as an inspector(s).

Foreign Companies are also subject to the provision of this chapter under Section 228 of the act.

Also, there is an exemption under the act, which is given under Sections 8 and 9, as these exempts certain categories of information from disclosures.

Landmark Case Laws

In M.P. Varghese Vs. Mahatma Gandhi University[7], it was decided by the Honourable Judge of Kerala High court that who gives the meaning of public authority clearly, they put emphasis to the RTI Act 2005 under which organisations which are receiving funding and financial aid from the Government or the State comes under the ambit of public authority and for further clarification on word State it was stated that it is mentioned under Article 12 of Constitution.

In Jitendra Singh vs. State of U.P.[8], under this case the emphasis is made on the legislation which brings the sense of devotion by the public authorities to their work and duty. They must realize that any wilful breach of the rules and norms of their laws will lead them to breach of their duty and they will attract punishment with punitive action against them with provisions mentioned under RTI Act, 2005.  

Conclusion

In conclusion, Private entities are covered under RTI Act only in case where they are registered through Public Authorities. Example:- Co-operative societies and banks registered through RBI. Otherwise, private companies can be investigated and inspected under Companies Act, 2013 and not by RTI act, 2005. On the other, hand public authorities are governed completely through RTI Act, 2005 with an objective to maintain transparency and accountability.

Hence, it is clear from the above information that in the present law and circumstances only Public Authorities and Public limited companies are governed by RTI Act, 2005 and not private limited companies but there information can be taken from any other law, in force in the given time.


[1] Minimum paid up share capital requirement of Rs. 1 Lakh has been omitted under the Companies(Amendment) Act, 2015

[2] Minimum Capital requirement of Rs. 5 Lakh has been omitted under the Companies(Amendment) Act, 2015

[3] The Right to Information Act, 2005 No. 22 of 2005

[4] The Right to Information Act, 2005 No. 22 of 2005

[5] The Right to Information Act, 2005 No. 22 of 2005

[6] The Right to Information Act, 2005 No. 22 of 2005

[7] AIR 2007 Ker 230

[8] 2008 (2) AWC 2067 (All)

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