The National Company Law Appellate Tribunal has held that a Tribunal cannot direct investigative agencies such as the Enforcement Directorate or the Central Bureau of Investigation to furnish tracking reports without first satisfying the statutory conditions under Section 213(b) of the Companies Act, 2013 and affording a reasonable opportunity of hearing to the affected parties. The appellate tribunal quashed two NCLT Kolkata orders that had issued such notices on the very first hearing date, terming the exercise a derogation of statutory procedure and a violation of natural justice.
Background & Facts
The Dispute
The appellants, Ms. Salma Moosa and Mr. Srinivasan Vivek, challenged two orders passed by the National Company Law Tribunal, Kolkata Bench, Court III in Transfer Petition No. 26(KB)2025. The first order, dated 12.12.2025, directed the Registry to issue notice to the Director, Enforcement Directorate, New Delhi, and to place the tracking information on record. The second order, dated 13.02.2026, issued similar notices to the Enforcement Directorate, Bangalore, and the CBI, Bangalore, also calling for tracking reports. The appellants contended that these directions were issued prematurely, without the Tribunal applying its mind to the prerequisites under Section 213(b) of the Companies Act, 2013, and without hearing them.
Key Facts
- The appellants, along with three other partners, incorporated M/s Startup Club Networks LLP (Respondent No. 10) on an unspecified date to offer mentoring, advisory, consultancy services and organise entrepreneurship events.
- On 01.11.2017, Appellant No. 1's DIN was deactivated, affecting RoC filings including share allotments. Consequently, Respondents No. 1 to 8, who had provided loans to Respondent No. 9 (M/s Startups Club Services Private Limited) and the appellants, could not be regulated as per books.
- Respondent No. 9 received revenue of Rs. 1,18,73,833.
- Appellant No. 1 filed Writ Petition No. 40498/2019 before the High Court of Karnataka seeking a writ of mandamus to direct the Registrar of Companies, Bangalore, to restore the DIN.
- Respondents No. 1 to 8 filed Company Petition No. 27/BB/2021 before NCLT, Bengaluru Bench, invoking Sections 42(6), 73, 76, 213, 447, 448, 451 of the Companies Act, 2013 read with Section 43 of the LLP Act, 2008, alleging fraud against Respondent No. 9 and the appellants.
- The matter was transferred to the newly constituted NCLT Court III, Kolkata, and renumbered as TP/26(KB)2025.
- During proceedings, Respondents No. 1 to 8 sought action against the Auditor (Respondent No. 21) for not timely submitting the audit report. The Auditor submitted that directors were disqualified on 01.11.2017 by the MCA.
- An application COMP.APPL/47(KB)2025 was preferred, on which the NCLT passed the impugned orders.
Procedural History
- 01.11.2017: DIN of Appellant No. 1 deactivated by MCA.
- 2019: Writ Petition No. 40498/2019 filed before Karnataka High Court for DIN restoration.
- 2021: Company Petition No. 27/BB/2021 filed before NCLT Bengaluru Bench under multiple sections including Section 213.
- Intervening period: Matter transferred to NCLT Kolkata Bench, Court III, renumbered as TP/26(KB)2025.
- 12.12.2025: NCLT passed order in TP/26(KB)2025 directing notice to ED, New Delhi (paragraph iv).
- 13.02.2026: NCLT passed further order in same TP directing notices to ED, Bangalore (paragraph vii) and CBI, Bangalore (paragraph viii).
- 2026: Company Appeal (AT) No. 55 of 2026 filed against order dated 12.12.2025.
- 2026: Company Appeal (AT) No. 137 of 2026 filed against order dated 13.02.2026.
- 03.09.2026: NCLAT Principal Bench, New Delhi pronounced judgment allowing both appeals in part.
The Parties' Positions
The appellants argued that issuance of notices to ED and CBI was premature and violated Section 213(b) because the Tribunal had not recorded satisfaction on the statutory parameters (fraudulent intent, oppression, member information deprivation) nor afforded a hearing. The respondents' counsel failed to justify the circumstances warranting such directions at the initial stage.
Relief Sought
The appellants sought quashing of the directions in paragraph (iv) of the 12.12.2025 order and paragraphs (vii) and (viii) of the 13.02.2026 order insofar as they mandated notices to ED and CBI for tracking reports, and remission for fresh consideration after hearing.
The Legal Issue
Whether the NCLT can issue notices to external investigative agencies (ED, CBI) calling for tracking reports at the inception of proceedings under Section 73(4) read with Section 213 of the Companies Act, 2013, without first satisfying the statutory conditions under Section 213(b) - namely, prima facie existence of fraudulent intent, oppression, or member information deprivation - and without affording a reasonable opportunity of hearing to the affected parties.
Arguments Presented
For the Appellant
Counsel for the appellants submitted that the NCLT's directions to the ED and CBI fell within the ambit of Section 213, which mandates that the Tribunal must first satisfy itself on the conditions under Clauses (i), (ii) and (iii) of Section 213(b) and then provide a reasonable opportunity of hearing before ordering any investigation or steps towards investigation. The notices were issued on the very first date without any recorded satisfaction, without hearing the appellants, and without any rationale for involving external agencies. This constituted non-application of judicial mind, violation of natural justice, and a perverse order. The involvement of ED and CBI, being outside the Companies Act framework, required stricter adherence to statutory preconditions.
For the Respondent
Counsel for Respondents No. 1 to 8 attempted to justify the NCLT's directions but failed to provide satisfactory reasoning for issuing notices to investigative agencies at the threshold stage without compliance with Section 213(b) prerequisites or a hearing.
The Court's Analysis
The NCLAT undertook a detailed examination of Section 213(b) of the Companies Act, 2013. The provision empowers the Tribunal to order investigation into a company's affairs upon an application, if it is satisfied that there are circumstances suggesting (i) the business is conducted with intent to defraud creditors, members or others, or for a fraudulent/unlawful purpose, or oppressively; (ii) persons concerned in formation or management have been guilty of fraud, misfeasance or misconduct; or (iii) members have not been given all information they might reasonably expect. Only upon such satisfaction, and after giving a reasonable opportunity of being heard to the parties concerned, may the Tribunal order investigation by inspectors appointed by the Central Government.
"Since carrying out an investigation has serious repercussions and consequences on the status of the company and its own credibility in the market, that is why the law has contemplated that the Tribunal too, when it decides to hold an investigation, has to satisfy the parameters prescribed under Clause (i), (ii) and (iii) and only when it satisfies that the affairs of the company were intended to default its creditors, members, or such persons... It's only upon the satisfaction of the three ingredients that the Tribunal will have to satisfy itself that those parameters exist and thereafter give a reasonable opportunity of being heard to the parties..."
The Tribunal emphasised that the proviso to Section 213(b) reinforces this sequence: determination of causes under Clauses (i)-(iii), reasonable opportunity to the affected company, hearing, and only then direction for investigation. The NCLAT found that the impugned orders contained no justification for issuing notices to ED at the first instance. The NCLT had not recorded any satisfaction under Section 213(b), nor had it heard the appellants. The directions were passed "on the very first date of inception of proceedings even without ensuring to hear the parties to justify the necessity of involvement of an external investigative agency."
The appellate tribunal noted that ED and CBI are external investigative agencies outside the Companies Act framework. Any investigation into the allegations could only be directed after satisfying Section 213(b) conditions and adhering to natural justice. The orders suffered from "non-application of judicial mind" and were "perverse in nature." The NCLAT also observed that such directions carry civil consequences and economic bearing on the company's business, and could cast a social stigma, making prior hearing mandatory.
The Verdict
The NCLAT partly allowed both appeals. It quashed the direction in paragraph (iv) of the order dated 12.12.2025 (notice to ED, New Delhi) and paragraphs (vii) and (viii) of the order dated 13.02.2026 (notices to ED, Bangalore and CBI, Bangalore for tracking reports). The matter was remitted to NCLT Kolkata Bench, Court III to reconsider the entire proceedings in TP/26(KB)2025 after hearing the parties and applying the provisions of Section 213(b). The remaining portions of the impugned orders were left undisturbed.
What This Means For Similar Cases
Statutory Preconditions Are Mandatory, Not Directory
The judgment reinforces that Section 213(b) establishes a mandatory two-step gatekeeping mechanism: (a) the Tribunal must record satisfaction on the existence of circumstances under Clauses (i), (ii) or (iii), and (b) it must afford a reasonable opportunity of hearing to affected parties. Neither step can be skipped. Practitioners should immediately object if an NCLT directs investigative agency involvement without this recorded satisfaction and hearing.
External Agency Notices Require Heightened Scrutiny
Notices to ED, CBI, SFIO or other external bodies carry reputational and commercial consequences beyond the Companies Act framework. The NCLAT's reasoning implies that any direction roping in an outside agency - even for a tracking report - triggers the full Section 213(b) protocol. Lawyers should argue that such directions are not mere administrative steps but investigative initiation requiring statutory compliance.
First-Day Orders Without Hearing Are Vulnerable
The NCLAT's characterisation of the NCLT's first-date orders as "perverse" and a "derogation of non-compliance" signals that ex parte or first-hearing directions involving investigative agencies will be set aside on appeal. Practitioners should seek a stay or challenge such orders promptly, citing this precedent.
- Actionable takeaway: In any Section 213/212/210 proceeding, file a preliminary objection if the Tribunal issues notices to ED/CBI/SFIO before framing issues, recording Section 213(b) satisfaction, and hearing all parties.
- Drafting tip: Plead specifically that the Tribunal has not applied its mind to Clauses (i), (ii), (iii) of Section 213(b) and that natural justice mandates a hearing before any external agency is involved.
- Remedy: If such an order is passed, prefer an appeal under Section 421 before NCLAT on the limited ground of procedural impropriety and violation of Section 213(b), as the appellants successfully did here.
