NCLAT Modifies NCLT Order Forwarding Case to SFIO: Holds Directions Beyond Jurisdiction [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has allowed an appeal filed by Max Publicity & Communication Pvt. Ltd., modifying an order passed by the National Company Law Tribunal (NCLT), Mumbai Bench, which had directed that a copy of the order be forwarded to investigative agencies including the Serious Fraud Investigation Office (SFIO), Economic Offences Wing (EOW), and other statutory authorities.

The case is based on a Section 9 application filed by Enviro Home Solutions Pvt. Ltd. seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Max Publicity. While the NCLT dismissed the application, it proceeded to make observations on alleged sham transactions related to CSR obligations involving the corporate debtor, and directed that the order be sent to various authorities for further action.

Complete practical guide to Drafting Commercial Contracts, Click Here

Aggrieved by this, Max Publicity approached the NCLAT, submitting that such directions were passed without jurisdiction, particularly when the Section 9 application itself had been rejected and no opportunity had been given to the appellant to respond to the adverse observations.

The counsel, appearing for the appellant, argued that the NCLT had exceeded its jurisdiction under the IBC by recommending or initiating investigation into alleged fraud without following the procedure laid down under Section 213 of the Companies Act, 2013. It was submitted that no such directions can be passed without affording a reasonable opportunity of hearing to the affected parties.

The NCLAT observed that although the NCLT had not explicitly directed an investigation, the language used in paragraphs 65 and 66 of the order could be misinterpreted as such. The Appellate Tribunal clarified that forwarding a copy of the order to authorities does not amount to a direction for investigation.

Complete Ready to Use PDFs of 200+ Agreements Click here

The Bench, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), and Arun Baroka (Technical Member), held that while NCLT can exercise powers under Section 213, such power must be exercised only after giving the concerned parties a reasonable opportunity of being heard.

It further held that forwarding of the order to statutory authorities under Rule 11 of the NCLT Rules, 2016 may be permitted in appropriate cases, but references to specific agencies like the SFIO or EOW, without due process, cannot be sustained.

The NCLAT directed that the references to SFIO and EOW in paragraph 65 of the NCLT’s order be deleted. It upheld the forwarding of the order to other regulatory authorities, such as the Ministry of Corporate Affairs, Registrar of Companies, Income Tax Department, and GST Authorities, clarifying that this should not be treated as a directive to initiate investigation. As a result the appeal was disposed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates