NCLAT Rules, NCLT Can Exercise Inherent Powers To Forward A Copy Of Its Order To Relevant Statutory Authorities For Necessary Action
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Arun Baroka and Mr. Barun Mitra (Technical Members), held that while the National Company Law Tribunal (NCLT), acting as the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC), does not have the jurisdiction to direct an investigation under Section 212 of the Companies Act, 2013, it may, in exercise of its inherent jurisdiction under Rule 11 of the NCLT Rules, 2016, forward a copy of its order to relevant statutory authorities for appropriate action under applicable laws.
The Appellate Tribunal, however, clarified that the forwarding of such an order does not amount to an investigation directive, and any investigation by the Serious Fraud Investigation Office (SFIO) must follow the procedure prescribed under Section 212 of the Companies Act.
Background
The appeal arose from an order passed on 21.01.2025 by the NCLT, Mumbai Bench (Court-III) in C.P. No. (IB) 303/MB/C-III/2022. The application under Section 9 of the IBC was filed by Enviro Home Solutions Pvt. Ltd., alleging default in payment of operational dues by the appellant, Max Publicity & Communication Pvt. Ltd.
While the Adjudicating Authority dismissed the Section 9 application, it made significant observations in paragraphs 63 to 66 of its order, expressing concerns about potential fraud in CSR transactions and directing the Registry to forward a copy of the order to various statutory bodies, including the Ministry of Corporate Affairs (MCA), Registrar of Companies (ROC), Income Tax Department, and GST authorities.
Aggrieved by these directions, Max Publicity filed an appeal before the NCLAT, asserting that such directions exceeded the jurisdiction of the NCLT and violated principles of natural justice.
Appellant’s Contentions
Senior Advocate Neeraj Malhotra, appearing for the appellant, argued that:
The NCLT, while rejecting a Section 9 application, had no jurisdiction to issue directions regarding investigation.
The impugned order effectively cast aspersions and made adverse findings without providing the appellant an opportunity to be heard.
Any direction for investigation into affairs of a company must comply with the scheme under Sections 212 and 213 of the Companies Act, including providing the concerned party an opportunity of being heard.
The NCLT’s act of forwarding the order to agencies like SFIO amounted to a de facto directive for investigation without following due process.
Respondent’s and Amicus Curiae’s Submissions
Senior Advocate Abhijeet Sinha, appearing as Amicus Curiae, submitted that:
The NCLT did not issue a direct order for investigation but merely forwarded the copy of the order to statutory authorities for appropriate action.
Under Rule 11 of the NCLT Rules, 2016, the Tribunal possesses inherent powers to make such referrals in the interest of justice.
The language in paragraphs 65 and 66 of the NCLT order did not amount to a binding directive for investigation, especially under Section 212.
The NCLT, being a Tribunal under the Companies Act as well, can act in aid of statutory mechanisms by notifying competent authorities if the facts so warrant.
NCLAT’s Observations and Decision
The Appellate Tribunal closely examined the impugned paragraphs. Paragraph 65 of the NCLT order suggested that the matter be “left open” for appropriate statutory authorities, including the SFIO and Economic Offences Wing (EOW), to investigate potential CSR-related frauds. Paragraph 66 directed the Registry to forward the order to statutory bodies for taking steps under applicable laws.
The NCLAT held:
The order did not direct any statutory authority to carry out an investigation; it merely left the matter open and forwarded the judgment for any action the authorities deemed fit.
Such forwarding of orders is permissible under Rule 11 of the NCLT Rules as part of the Tribunal’s inherent powers.
However, any formal investigation, particularly by the SFIO, must be initiated by the Central Government under the conditions specified in Section 212 of the Companies Act, which the NCLT cannot bypass.
Even under Section 213, where the Tribunal may recommend an investigation, it must first offer the parties a reasonable opportunity of being heard—which had not occurred in the present case.
Thus, the Tribunal ruled that paragraphs 65 and 66 could not be construed as a directive for investigation and directed that references to SFIO and EOW in paragraph 65 be deleted. However, the forwarding of the order to the Ministry of Corporate Affairs, ROC, and tax authorities in paragraph 66 was upheld as a legitimate exercise of inherent jurisdiction.
The NCLAT relied on several precedents, including:
Lagadapati Ramesh v. Ramanathan Bhuvaneshwari [2019 SCC OnLine NCLAT 1153], where it was held that the NCLT may refer matters for investigation under Section 213 only after following due process.
M. Srinivas v. Smt. Ramanathan Bhuvaneshwari [Company Appeal (AT) (Insolvency) No.498 of 2019], which affirmed that NCLT possesses inherent powers under Rule 11 to refer matters to the Central Government.
Neeta Shrinivas Zanvar v. Nagarjuna Agro Chemicals Pvt. Ltd [2021 SCC OnLine NCLAT 135], where it was clarified that NCLT cannot directly order investigation by the ROC or SFIO in violation of the Companies Act.
Final Order
The NCLAT disposed of the appeal with the following directions:
Paragraphs 65 and 66 of the NCLT order shall not be treated as a direction for investigation.
Reference to SFIO and EOW in paragraph 65 was deleted.
Forwarding of the order to statutory authorities under paragraph 66 was upheld, clarifying that such action does not fetter the authorities’ discretion under law.
The appeal was thus partly allowed to the extent of modifying paragraph 65, while the rest of the order was sustained.
Appearance
For Appellant: Mr. Neeraj Malhotra, Sr. Advocate with Mr. Lakshmeesh S. Kamath, Mr. Rajesh Khandelwal, Ms. Samriti Ahuja, Ms. Aditi Prakash, Mr. Nimish Kumar, Mr. Rohit Patil, Advocates.
For Respondent: Mr. Abhijeet Sinha, Sr. Advocate for Amicus Curiae.
Cause Title: Max Publicity & Communication Pvt. Ltd. Versus Enviro Home Solutions Pvt. Ltd.
Case No: Company Appeal (AT) (Insolvency) No. 456 of 2025
Coram: Justice Ashok Bhushan [Judicial Member], Mr. Arun Baroka [Technical Member], Mr. Barun Mitra [Technical Member]
[Read/Download order]
