Appellate tribunal NCLAT has clarified that the National Company Law Tribunal (NCLT) can order an investigation into the affairs of a company by probe agencies in cases related to the Insolvency & Bankruptcy Code by exercising its power under the Companies Act. The NCLAT order came on May 15 over a plea filed by Max Publicity & Communication which had challenged an NCLT order. The Mumbai bench of NCLT, on January 21, 2025, while rejecting an insolvency plea against Max Publicity & Communication, issued a direction to forward a copy of the order to investigative agencies, including the Serious Fraud Investigation Office (SFIO) and Economic Offences Wing (EOW). This was challenged before NCLAT by Max Publicity submitting that no opportunity was given to it to have its say on various adverse observations made against it in the impugned order, which was violation of principle of natural justice. The insolvency plea was filed in NCLT by Max Publicity & Communication’s operational creditor claiming debt and default. The NCLAT (National Company Law Appellate Tribunal) in its latest order, however, said that such orders passed by NCLT under section 213 of the Companies Act, for investigations, can be passed only after complying with preconditions. “The Adjudicating Authority, while exercising jurisdiction under Section 9 of the IBC, also exercise jurisdiction of NCLT under the Companies Act, 2013,” said the three-member NCLAT bench, which also comprised Chairperson Justice Ashok Bhushan. Under the IBC (Insolvency & Bankruptcy Code), NCLT is termed as the Adjudicating Authority for resolution and liquidation proceedings. “Adjudicating Authority (NCLT) in exercise of powers under Section 213 of the Companies Act, 2013 can direct for investigation, but the said investigation can be directed after complying with the precondition, i.e. affording a reasonable opportunity to the parties concerned,” said NCLAT while modifying the NCLT’s order. The appellate tribunal further said that NCLT can also exercise its jurisdiction under Rule 11 of the National Company Law Tribunal Rules, 2016, where it is of the view that a copy of the order needs to be forwarded to the relevant statutory authorities for investigations. “The direction under Section 212 to carry out any investigation of the company’s affairs by SFIO can be made only in accordance with the statutory provisions of Section 212 and the Adjudicating Authority, while exercising jurisdiction under the Companies Act 2013, cannot issue any direction to SFIO for carrying out investigation,” the NCLAT said. Section 212 of the Companies Act says the central government can direct the SFIO for an investigation into the affairs of a company either on receipt of a report of the registrar or inspector, or on intimation of a special resolution passed by a company that its affairs are required to be investigated. It can also be directed in the public interest or on request from any department of the central government or a state government. Section 213 of the Companies Act, 2013, empowers the NCLT to investigate the affairs of a company if there are grounds to suspect fraud, mismanagement, or oppressive acts. The NCLAT modified the January 21 order of NCLT, saying, “Observations and directions made in paragraphs 65 and 66 are not to be treated any direction for carrying out any investigation by the statutory authorities referred to therein.” “There was no occasion to make any observation or referring the matter to EoW or SFIO to investigate and reference of EoW and SFIO in paragraph 65 stands deleted. The direction in paragraph 66 to forward the copy of the order to statutory authorities for taking appropriate steps under the Companies Act, 2013 are upheld,” it added.
Appellate tribunal NCLAT has clarified that the National Company Law Tribunal (NCLT) can order an investigation into the affairs of a company by probe agencies in cases related to the Insolvency & Bankruptcy Code by exercising its power under the Companies Act. The NCLAT order came on May 15 over a plea filed by Max Publicity & Communication which had challenged an NCLT order. The Mumbai bench of NCLT, on January 21, 2025, while rejecting an insolvency plea against Max Publicity & Communication, issued a direction to forward a copy of the order to investigative agencies, including the Serious Fraud Investigation Office (SFIO) and Economic Offences Wing (EOW). This was challenged before NCLAT by Max Publicity submitting that no opportunity was given to it to have its say on various adverse observations made against it in the impugned order, which was violation of principle of natural justice. The insolvency plea was filed in NCLT by Max Publicity & Communication’s operational creditor claiming debt and default. The NCLAT (National Company Law Appellate Tribunal) in its latest order, however, said that such orders passed by NCLT under section 213 of the Companies Act, for investigations, can be passed only after complying with preconditions. “The Adjudicating Authority, while exercising jurisdiction under Section 9 of the IBC, also exercise jurisdiction of NCLT under the Companies Act, 2013,” said the three-member NCLAT bench, which also comprised Chairperson Justice Ashok Bhushan. Under the IBC (Insolvency & Bankruptcy Code), NCLT is termed as the Adjudicating Authority for resolution and liquidation proceedings. “Adjudicating Authority (NCLT) in exercise of powers under Section 213 of the Companies Act, 2013 can direct for investigation, but the said investigation can be directed after complying with the precondition, i.e. affording a reasonable opportunity to the parties concerned,” said NCLAT while modifying the NCLT’s order. The appellate tribunal further said that NCLT can also exercise its jurisdiction under Rule 11 of the National Company Law Tribunal Rules, 2016, where it is of the view that a copy of the order needs to be forwarded to the relevant statutory authorities for investigations. “The direction under Section 212 to carry out any investigation of the company’s affairs by SFIO can be made only in accordance with the statutory provisions of Section 212 and the Adjudicating Authority, while exercising jurisdiction under the Companies Act 2013, cannot issue any direction to SFIO for carrying out investigation,” the NCLAT said. Section 212 of the Companies Act says the central government can direct the SFIO for an investigation into the affairs of a company either on receipt of a report of the registrar or inspector, or on intimation of a special resolution passed by a company that its affairs are required to be investigated. It can also be directed in the public interest or on request from any department of the central government or a state government. Section 213 of the Companies Act, 2013, empowers the NCLT to investigate the affairs of a company if there are grounds to suspect fraud, mismanagement, or oppressive acts. The NCLAT modified the January 21 order of NCLT, saying, “Observations and directions made in paragraphs 65 and 66 are not to be treated any direction for carrying out any investigation by the statutory authorities referred to therein.” “There was no occasion to make any observation or referring the matter to EoW or SFIO to investigate and reference of EoW and SFIO in paragraph 65 stands deleted. The direction in paragraph 66 to forward the copy of the order to statutory authorities for taking appropriate steps under the Companies Act, 2013 are upheld,” it added. Economic Times
