The appeal was filed by the aggrieved party against the impugned order passed by the Hon’ble NCLT, New Delhi Bench, wherein, the Central Government was directed to order an investigation into the affairs of the Corporate Debtor under Section 210(2) (Investigation into the affairs of a company) of the Companies Act, 2013. The appellants then-after, being aggrieved against the said order, approached the Hon’ble NCLAT seeking a stay on the same.

The seldom arrows remaining in the quiver of the Appellant was that the Adjudicating Authority does not possess the power of issuing such an order against the Corporate Debtor since the Adjudicating Authority/Tribunal is not a “Court” (which actually retain the said power) and hence does not have any right to exercise such authority.

In a turn of events, the Appellants in the instant case were successful in blowing up the entire ammunition of the Respondent with only those metaphorical arrows, as the Hon’ble NCLAT held that the Adjudicating Authority indeed did not possess such power of directing the Central Government in ordering an investigation against the said Corporate Debtor. The Hon’ble NCLAT further held that the Adjudicating Authority may not have the power to direct the Central Government in conducting the investigation but it has an option to firstly notify the promoters/Corporate Debtor of such allegations/charges against the said entity, bringing in the concept of natural justice.

The clarification pertaining to why the Adjudicating Authority cannot exercise such rights was brought forth by stating the distinction between the terms ‘Court’ and ‘Tribunal’. There is a thin of distinction, however, it was pointed out that the term ‘Tribunal’ as defined in Section 5(1) of the Insolvency and Bankruptcy Code, 2016 (“the Code”) cannot be held or read in line with the term ‘Court’ as defined in Section 2(29) of the Companies Act, 2013 (“the Act”).

The term Court involves three authorities namely: High Court, District Court and Special Court (deals with the Court of Session, Section 29(iv) pertains to the Special Court constituted u/s 435 and Section 29(5) is concerned with any Metropolitan Magistrate or Judicial Magistrate of the 1st Class). Coming to the term ‘Tribunal’, it was held that the term Tribunal is somewhat similar to Court, but not exactly Court. A Tribunal cannot have the exact features of that of a Court.

Why was the distinction required to be made after all? 

The answer to the same lies in Section 210 and 213 of the Act which entails the following:

1. Section 210 of the Act:
1. Where the Central Government is of the opinion, that it is necessary to investigate the affairs of a company—
1.  on the receipt of a report of the Registrar or inspector under section 208;
2. on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or [Every special resolution is required to be filed in Form No. MGT-14 as per section 117 (3) (a)]
3.  in the public interest, it may order an investigation into the affairs of the company.
2. Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company.

The Ruling of the Case

NCLAT has held that this Tribunal on careful consideration of respective contentions and also keeping in mind a prime fact that the Tribunal/Adjudicating Authority is guided by the Principles of Natural justice and is to follow the procedure prescribed u/s 213(b) of the Companies Act comes to an ‘irresistible’ and inescapable conclusion that the Adjudicating Authority (Tribunal) in Law is not empowered to order an investigation directly, to be carried out by the Central Government. An Adjudicating Authority (Tribunal) as a competent / Appropriate authority in terms of Section 213 of the Companies Act has an option to issue a notice in regard to the charges/allegations leveled against the promoters and others (including the Appellants) of course after following the due procedure enshrined u/s 213 of the Companies Act, 2013. In case an exfacie/prima facie case is made out, then, the Tribunal is empowered to refer the matter to the Central Government for an investigation by the Inspectors and upon such investigation, if any action is required to be taken and if the Central Government subjectively opines that the subject matter in issue needs an investigation, through the Serious Fraud Investigation Office, it may proceed in accordance with Law.