Who can seek investigation under Sections 212 & 213 of the Companies Act, 2013?
KEY RATIO
Sections 212 and
213 of the Companies Act, 2013 (“Act”) are not “public interest”
gateways for outsiders to demand investigations. Unless the applicant fulfills
the statutory criteria mentioned under the Act, or is otherwise directly
connected with the company’s affairs, the petition filed by the applicant is
not maintainable. While delivering the order, the National Company Law
Tribunal, Ahmedabad Bench (“NCLT Ahmedabad”) also held that an internal
authorisation, such as a board resolution, may confer procedural authority to
act on behalf of an entity; however, it cannot create or substitute the
statutory locus standi required to invoke Sections 212 and 213 of the Companies
Act, 2013 against a company. Further, the NCLT, Ahmedabad, also held that any
ongoing disciplinary proceedings against the auditors of the company under the
relevant professional framework by themselves do not establish the statutory
nexus or eligibility necessary for seeking an investigation under Sections
212/213 of the Act.
FACTS
The matter
stemmed from a petition filed by Mr. Merchant (Petitioner) seeking an investigation
into the affairs of Detox India Pvt. Ltd. (Respondent) and others,
alleging financial irregularities, unpaid statutory dues and siphoning of
funds. The petition was for the first time dismissed by NCLT Ahmedabad by an
order dated 23.11.2023, holding that the relief sought u/s 212 was premature
since the Petitioner had not approached the Registrar of Companies for its
prima facie report. The Petitioner challenged this order before the NCLAT which
remanded the matter back to the Tribunal by an order dated 12.11.2024, with a
specific direction to first determine the issues of locus standi and
maintainability u/s 212 and 213(b).
On remand while
the Respondent argued that private individuals cannot directly invoke Section
212 or qualify as “any other persons” under section
213. The Petitioner tried to justify his locus on the basis of a Board
Resolution dated 31.08.2022 passed by M/s Rajdeep Boiler Pvt. Ltd., (one of the
Respondents in the instant petition) authorizing him to pursue legal
proceedings on behalf of that company to protect its interests.
TRIBUNAL’S REASONING AND FINDINGS
The NCLT in a
detailed analysis held that Section 212 is triggered only after a Registrar of
Companies report under section 208 and does not confer an independent /
standalone right on private individuals to seek investigation directly before
the Tribunal. The Tribunal also closely examined the phrase “any other
person” used under section 213(b) and held that this expression cannot
be interpreted expansively to include members of the general public or
unrelated third parties.
The Tribunal
also addressed the Petitioner’s reliance on a Board Resolution authorizing him
to initiate proceedings. It clarified that such authorization does not amount
to an assignment of debt, transfer of rights, or creation of any legal privity
that could confer locus standi under Section 213 assertively holding that right
to invoke Section 213 is personal, statutory, and non-transferable.
By applying the
principle of ejusdem generis the Tribunal conclusively held that
“any other person” refers only to persons who are directly or
indirectly connected with the affairs of the company, such as resolution
professionals, liquidators, administrators, or independent directors, and not
strangers with no legal or financial nexus. In reaching this view, the Bench relied
on NCLAT’s judgment dated 22.04.2025 in case of Itesh Sanmukhlal v. Corrtech
International Ltd. & Ors. where the Appellate Tribunal observed that it
was not the appellant’s case that the business of Respondent was being
conducted for a fraudulent or unlawful purpose or that the persons managing the
affairs of the company were guilty of fraud when the appellant was neither
member nor shareholder or creditor of company.
Based on its
findings, the Tribunal noted that the Petitioner was neither a shareholder, nor
a member, or a creditor of Respondent and had produced no document to prove any
such relationship. Accordingly, the petition was dismissed. The Tribunal has
extensively held that even members seeking investigation under section 213(a)
are required to meet strict statutory thresholds and support their application
with evidence demonstrating good reasons for investigation. Allowing an
unrelated individual to invoke Section 213 would dilute these safeguards and
defeat legislative intent. The Petitioner’s attempt to expand the scope of
Sections 212 and 213 to include public interest complaints was held to be
impermissible under the statutory scheme.
SIGNIFICANCE OF THIS ORDER: -
This order of
the NCLT, Ahmedabad Bench has significant implications on the interpretation of
locus standi and maintainability u/s 212 and 213 of the Act. The Tribunal has
clearly reaffirmed that the power to seek investigation into the affairs of a
company is not open-ended and cannot be invoked by any person merely on the
basis of allegations, however serious they may appear.
A key impact of
this order is the clear demarcation of who can approach the Tribunal u/s 212
and 213 by clearly stating that private individuals or unrelated third parties
cannot directly invoke these provisions unless they fall within the specific
categories recognized by the statute. This brings clarity and certainty to the
law by preventing misuse of investigation provisions by persons who have no
legal, financial, or managerial connection with the company concerned.
The Tribunal has
underlined that investigation provisions are not automatic remedies. This
ensures that the process is invoked only in deserving cases and that companies
are not subjected to unnecessary scrutiny based on unsupported allegations. Overall,
this order strengthens procedural discipline under the Companies Act by clearly
separating genuine statutory remedies from impermissible public interest
claims.
This article
is authored by Mr. Arun Gupta and Mr. Sanyam Kohli. Mr. Arun Gupta is the Managing
Partner of Factum Legal. Mr. Sanyam Kohli is a Senior Associate at the Firm.
