Pranav B Prem

The National Company Law Tribunal (NCLT), Ahmedabad Bench has held that the investigative jurisdiction conferred under Section 213 of the Companies Act, 2013 is not designed to be used as a mechanism for recovery of commercial dues. The tribunal clarified that a petition under Section 213(b) must establish a prima facie case that the affairs of the company are being conducted with intent to defraud creditors, members or any other persons, or for a fraudulent or unlawful purpose. Where the allegations pertain primarily to monetary disputes and dishonoured cheques, the appropriate recourse lies before civil and criminal courts rather than invoking Section 213.

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A Bench comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma dismissed a petition filed by creditor Amit N Kapadia seeking an investigation into the affairs of United Petrofer Limited, holding that the petition was an impermissible attempt to use the statutory investigative process for the purpose of debt recovery. The tribunal noted that “the adjudication of dishonoured cheques and monetary recovery necessarily lie within the exclusive jurisdiction of appropriate civil and criminal fora, including courts dealing with negotiable instruments and contractual disputes,” and further held that using Section 213(b) for the purpose of recovery rather than genuine investigation into fraudulent affairs is not permissible.

Kapadia alleged that the company and its directors had manipulated statutory records, filed false forms on the MCA portal, failed to appoint auditors as per law, and engaged in activities designed to evade compliance with mandatory provisions of the Companies Act. He further relied on multiple complaints filed before ICAI and ICSI, issuance of dishonoured cheques acknowledging supply of goods, non-payment of dues, and statutory filings made without mandatory attachments to contend that a prima facie case of fraud was established. The petitioner maintained that these circumstances demonstrated fraudulent intention on the part of the company and its directors, warranting an investigation under Section 213(b).

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After examining the pleadings and material placed on record, the tribunal found that the core allegations were related to non-compliance in filing statutory forms, contradictions in certifications by professionals, and failure to conduct annual general meetings within prescribed timelines. The bench noted that while such lapses may attract regulatory consequences under the Companies Act, they do not by themselves establish fraudulent conduct. According to the tribunal, “the allegations primarily revolve around non-compliances in filing and certifications, which do not prima facie establish a systematic fraud targeting creditors or members.”

The tribunal also considered the petitioner's reliance on dishonoured cheques but held that the mere dishonour of cheques, though reflecting unpaid dues, could not be conclusively linked to fraudulent intent within the meaning of Section 213(b). It observed that the petitioner appeared to have invoked the provision as a means of ensuring payment recovery rather than seeking investigation into fraudulent affairs. The order records that Section 213(b) “is not intended to serve as a substitute or alternative recovery forum for disputed debts or commercial claims.”

After reviewing the supporting documents, affidavits and submissions, the tribunal held that the materials placed before it did not satisfy the statutory threshold required for ordering an investigation under Section 213(b). The Bench concluded that the grievances raised by the petitioner fall within the realm of contractual and commercial disputes and do not establish the oppressive or fraudulent conduct necessary to trigger an investigation under the provision.

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Ultimately, the NCLT dismissed the petition, holding that the plea filed under Section 213(b) was not maintainable. The tribunal clarified that the petitioner is at liberty to pursue other appropriate civil or criminal remedies for recovery of debts and enforcement of payments, subject to limitation and legal requirements, but cannot resort to Section 213(b) for that purpose.

Appearance

For Petitioner: Advocate Dhiren Dave

Cause Title: Amit N. Kapadia vs. United Petrofer Limited & Ors

Case No: CP/15(AHM)2024

Coram: Judicial Member Shammi Khan, Technical Member Sanjeev Sharma