PARTH MERCHANT V/S. DETOX INDIA PVT. LTD. & ORS. – NCLT DIVISION BENCH COURT-2, AHMEDABAD – ORDER DATED – 08.12.2025

 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.