NCLT Can Exercise Inherent Powers To Forward A Copy Of Its Order To Relevant Statutory Authorities For Necessary Action: NCLAT

It further held that however, any investigation by the Serious Fraud Investigation Office (SFIO) under Section 212 of the Companies Act, 2013 (Companies Act) can only be initiated in accordance with the procedure prescribed under that provision. The Adjudicating Authority, while exercising its jurisdiction under the Companies Act, is not empowered to directly order an investigation by the SFIO.

Brief Facts:

An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) was filed by the Respondent, Enviro Home Solutions Private Limited, alleging a debt and default by the Appellant, who was arrayed as the Respondent in the Company Petition.

Although the Adjudicating Authority rejected the Section 9 application, it nevertheless directed that a copy of the order be forwarded to the Central Government through the Ministry of Corporate Affairs and other relevant Central Authorities. Aggrieved by these observations and directions in the impugned order, the Appellant has preferred the present appeal.

Contentions:

The Appellant submitted that the Adjudicating Authority, while dismissing the Section 9 application, lacked jurisdiction to direct an investigation against the Appellant. Allegations of fraud or forgery cannot be adjudicated under Section 9.

It was further submitted that for directing an investigation into a company's affairs, the Companies Act provides specific provisions. The impugned order is not in consonance with the Act's scheme. Even under Section 213, a reasonable opportunity of being heard must be given, which was not afforded to the Appellant in this case.

Per contra, the Respondent submitted that even while rejecting a Section 9 application, the Adjudicating Authority, exercising its jurisdiction under the Companies Act is empowered to forward the order to statutory authorities, including the Central Government through the Ministry of Corporate Affairs, for appropriate action under law.

It was further submitted that the NCLT also possesses inherent power as conferred by Rule 11 of the NCLT Rules, 2016 in exercise of which power Adjudicating Authority can forward the copy of relevant appropriate authorities in facts of particular case.

Observations:

The Tribunal at the outset observed that it is evident that the Adjudicating Authority did not issue any direction for investigation. Paragraphs 65 and 66 of the impugned order merely leave the matter open for appropriate statutory authorities—such as the ROC, Income Tax Department, EOW, and SFIO—to take steps under applicable laws. These observations cannot be construed as investigative directions and are only facilitative in nature.

It further noted that section 213(b) of the Companies Act empowers the Tribunal to direct an investigation either on application or otherwise, indicating broad authority. However, such a direction can only be issued after giving a reasonable opportunity of being heard to the concerned parties.

Based on the above, it held that since no such opportunity was afforded in the present case, the observations in paragraphs 65 and 66 cannot be construed as an investigation order under Section 213.

The NCLAT in Allahabad Bank vs. Poonam Resorts Limited- 2020 held that the IBC does not require a pre-admission inquiry or forensic audit to prove default by the Financial Creditor, Corporate Debtor, or any financial institution. In this case, the Adjudicating Authority appointed PwC as a forensic auditor to investigate fraud allegations by the Corporate Debtor, but this order was set aside on appeal. However, this issue is not relevant to the facts of the present case.

In Lagadapati Ramesh vs. Ramanathan Bhuvaneshwari- 2019 , it was contended that provisions of Section 212 of the Companies Act can only be invoked by the Central Government, not by the Adjudicating Authority (NCLT). Investigation under Section 212 is triggered only upon receipt of a report from the Registrar or Inspector under Section 208 or based on certain conditions like a special resolution or public interest.

The NCLAT held that NCLT or Adjudicating Authority cannot directly refer matters for investigation by the SFIO, even if fraud is suspected.

It further added that however, the Adjudicating Authority can exercise powers under Section 213, which allows it to issue notices and, after giving parties an opportunity to be heard, refer matters to the Central Government for investigation by Inspectors. If actionable material arises from such investigation and the Central Government deems it necessary, it may then refer the case to SFIO under Section 212.

Based on the above discussion, the NCLAT the impugned order to direct the matter be referred to the Central Government for investigation through Inspectors, after following the due process under Section 213.

Similarly, in Mr. M. Srinivas vs. Smt. Ramanathan Bhuvaneshwari & Ors., the NCLAT held that under Section 213 of the Companies Act, the NCLT possesses inherent powers under Rule 11 of the NCLT Rules, 2016. It was affirmed that the NCLT can, after giving a reasonable opportunity of being heard to the concerned parties, refer the matter to the Central Government for investigation.

The Tribunal further noted that in Neeta Shrinivas Zanvar and Anr. vs. Nagarjuna Agro Chemicals Private Limited and Ors. (2021),the order passed by the NCLT directing the Registrar of Companies to investigate the company's affairs was challenged. The Tribunal held that the NCLT's direction to the Registrar of Companies to investigate violated the provisions of Sections 212 and 213 of the Companies Act.

The NCLAT in Subhash N Dawar vs. Nanjing Maohj Information & Anr. held that issue pertaining to evade the custom duty on the goods imported certain malpractices by corporate debtor cannot be examined under the IBC.

Based on the above discussion, the Tribunal concluded that the Adjudicating Authority, while exercising jurisdiction under Section 9 of the IBC, also exercises powers of the NCLT under the Companies Act. It can direct an investigation under Section 213 of the Companies Act, but only after affording a reasonable opportunity to the concerned parties. The impugned order particularly para 65 and 66 does not amount to a direction for investigation.

It further held that the NCLT may use its inherent powers under Rule 11 to forward copies of orders to relevant statutory authorities for necessary action. However, directions under Section 212 to the SFIO for investigation can only be made in accordance with statutory provisions, and the Adjudicating Authority cannot directly order the SFIO to investigate.

Accordingly, the present appeal was disposed of.

Case Title: Max Publicity & Communication Pvt. Ltd. Versus Enviro Home Solutions Pvt. Ltd.

Case Number: Company Appeal (AT) (Insolvency) No. 456 of 2025

Judgment Date: 15/05/2025

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.

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