Mr. M.P. Balakrishnan vs N. Mohanraj

(Hybrid Mode)

Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):

The aspect of investigation into the affairs of the Company, is prescribed under the statute as per the provisions contained under Section 213 of the Companies Act, 2013, which constitutes of two parts, under its Clause (a), it pertains to the Applications, where the Tribunal may exercise it’s power, on an application made as per Section 213 (1) (a) (i) and (ii), subject to the satisfaction of the conditions given under sub-clause (a) for the purposes to direct the investigation into the affairs of the Company.

The issue with which we would be concerned, would be the issue of preference of an Application by invoking provisions contained under sub-clause (b) of Section 213 of the Companies Act, 2013, which prescribes that ``any other person or otherwise, if it is satisfied there are circumstances suggesting with regards to the parameters given therein, investigation could be ordered’’.

The basic intention of the provisions contained under Section 213(b) has been that, there has to be certain checks and balances, which is to be exercised by the Ld. Tribunal, before passing of an order of carrying out the investigation into the affairs of the Company, on an application by any person or otherwise and for that purpose, the Ld. Tribunal itself has to satisfy itself to the circumstances prevailing under Section 213(b) to be satisfied to justify passing of an order of carrying out the investigation.

In the instant case, an Application invoking the provisions contained under Section 213(b) was preferred on 28.09.2023, wherein an investigation was sought to be made in the management of the affairs of the 1^st Respondent Company i.e. the Appellant herein, pertaining to the matters of the sale of the properties of the 1^st Respondent Company and with regards to the various other allegations of fraud, as it was contained and alleged in the Application.

This instant Company Appeal is accompanied with an Application being IA No. 515 / 2026, for the Stay of the Impugned Order dated 28.01.2026 passed on CP(CA)/42/(CHE)/2024. CP(CA)/42/(CHE)/2024 was preferred before Ld. NCLT, for seeking an investigation which remain pending ever since its institution on 28.09.2023, and when the matter was taken up before the Ld. Tribunal on 06.11.2024, a preliminary objection was raised with regards to the propriety of the maintainability of the Application itself at the behest of the Applicant and accordingly, the Ld. Tribunal had passed an order on 06.11.2024, that for the purposes of considering the Application under Section 213(b), the Applicant will have to first establish his locus by filing of an Affidavit in that regard, to sustain the Application to be considered on its own merits. Relevant part of order dated 06.11.2024 is extracted hereunder:

`` ….

This is an Application filed by Mr. N. Mohanraj whose locus has not been established for filing Application under Section 213(b) of CA, 2013. The Petitioner sought time to seek instructions and clarify the matter. However, clarification filed on 19.04.2024 does not mention anything about the locus of the Petitioner except stating that the company has been struck off and action can be taken against the struck off company. The Applicant is directed to establish the locus and file an affidavit.

List the petition for hearing on 22.01.2025’’

Ever since, passing of the order dated 06.11.2024, the matter remained pending and the Application under Section 213(b) was not considered on merits till ultimately when CP(CA)/42(CHE)/2024, was taken up on 28.01.2026, wherein the Ld. Tribunal has proceeded to allow the Application and directed to carry out the investigation in accordance with Section 213(b) of the Companies Act.

The grievance of the Ld. Counsel for the Appellant is that, since passing of an order of investigation has serious consequences, hence, the Ld. Tribunal being an Adjudicatory body deciding rights of the parties was duty bound to have considered and assigned reasons for orders being issued by it in the light of the provisions contained under Section 213(b) of the Companies Act, to justify the necessity of carrying out the investigation after recording its satisfaction to justify direction for investigation under Section 213(b), which is the intention expressed by the provision contained in itself, which calls for that there has to be a satisfaction and reasons are required to be recorded by the Ld. Tribunal to justify passing of the order of investigation into the affairs of the Company.

Secondly, it has been argued by the Ld. Counsel for the Appellant, that in the light of the order passed by the Ld. Tribunal on 06.11.2024, which records the preliminary objection raised by the Appellant, with regards to the aspect of maintainability of the Application preferred by the Respondent, the said issue was required to be considered and addressed by the Tribunal before taking a call on the Application on its merits and that, it was necessary for the Ld. Tribunal to have considered the locus of the Appellant and then only it ought to have proceeded to pass an order on merits of the Application.

Having heard the Ld. Counsel for the Appellant and looking to the nature of the order, which has been passed by the Ld. Tribunal, apart from the fact that, it has not recorded any reasons, which could have necessiated the direction of investigation as contemplated under Section 213(b) of the Companies Act, 2013. It appears that the Ld. Tribunal has somehow omitted to take notice of its earlier order dated 06.11.2024, where the Ld. Tribunal itself has bound itself to consider the locus of the Applicant to the Application first. But, without addressing on the said issue, the Ld. Tribunal has proceeded to pass an order on merits without assigning any reasons, which is procedurally erroneous.

Owing to the fact that the impugned order of 28.01.2026 suffers from an apparent procedural and adjudicatory vices of non-application of mind as no sufficient grounds or reasons have been assigned to justify the order for an investigation under the provisions contained under Section 213(b) of the Companies Act. Accordingly, the impugned order of 28.01.2026 cannot be sustained and hence, would stand quashed. The matter is remitted back to the Ld. Tribunal, to reconsider the Application and prior to passing any final orders of the same, the Ld. Tribunal is requested to first take into consideration the order passed on 06.11.2024, and then proceed to pass an appropriate order in accordance with law.

All pending Interlocutory Applications, if any, would stand closed.