The National Company Law Appellate Tribunal (NCLAT) has held that the National Company Law Tribunal (NCLT) cannot involve the Enforcement Directorate (ED) or the Central Bureau of Investigation (CBI) in proceedings concerning an investigation into a company’s affairs without first hearing the affected parties, recording its satisfaction under Section 213(b) of the Companies Act, 2013, and giving reasons for involving an external investigating agency.
A three-member Principal Bench comprising Justice Sharad Kumar Sharma, Member (Judicial), Arun Baroka, Member (Technical), and Indevar Pandey, Member (Technical), observed that an investigation under Section 213(b) has serious consequences for a company, including possible social stigma and an adverse impact on its business and market credibility. The statutory safeguards prescribed by the provision, therefore, cannot be bypassed.
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The Appellate Tribunal set aside portions of two orders passed by the NCLT, Kolkata Bench, which had directed the issuance of notices to the ED and CBI and called for tracking information. It remitted the matter to the NCLT for fresh consideration after giving the appellants an opportunity of hearing and examining whether the statutory conditions for such directions were satisfied.
The appeals challenged orders dated December 12, 2025, and February 13, 2026, passed by the NCLT, Kolkata Bench, Court III, in Transfer Petition No. 26(KB)/2025.
The underlying proceedings arose from a company petition instituted by certain respondents before the NCLT, Bengaluru Bench, invoking Sections 42(6), 73, 76, 213, 447, 448 and 451 of the Companies Act, read with Section 43 of the Limited Liability Partnership Act, 2008. Allegations of fraud had been made against Startups Club Services Private Limited and the appellants.
According to the judgment, the appellants and three other partners had incorporated Startups Club Networks LLP to provide mentoring, advisory and consultancy services and to organise entrepreneurship events. The first appellant’s Director Identification Number was deactivated on November 1, 2017, which allegedly affected filings before the Registrar of Companies, including filings connected with share allotments.
The matter was subsequently transferred and renumbered as Transfer Petition No. 26(KB)/2025 before the NCLT, Kolkata Bench.
The NCLT directed its Registry to issue notice to the Director of the Enforcement Directorate and to place the tracking information on record. A later order dated February 13, 2026, contained similar directions for issuing notices to the ED’s Bengaluru office and the CBI office in Bengaluru.
The appellants challenged these directions as premature, contending that the NCLT had involved external investigating agencies at the initial stage without completing the pleadings, hearing the affected parties or recording any satisfaction that the requirements of Section 213(b) had been met.
Examining Section 213(b), the NCLAT said that the provision lays down definite conditions for directing an investigation into the affairs of a company. An investigation cannot be ordered merely because the Tribunal has received an application containing allegations.
The NCLT must first satisfy itself that circumstances suggest one or more of the statutory grounds: that the company’s business is being conducted with intent to defraud its creditors, members or another person; that it is being carried on for a fraudulent or unlawful purpose or oppressively; that persons involved in the company’s formation or management have been guilty of fraud, misfeasance or other misconduct; or that members have not received information about the company’s affairs which they could reasonably expect.
The NCLAT stressed that this satisfaction must be based on an application of mind to the material placed before the Tribunal. The affected parties must also receive a reasonable opportunity of being heard before an investigation is directed or steps towards such an investigation are initiated.
The Appellate Tribunal noted that the orders under challenge did not disclose whether the NCLT had considered or satisfied the parameters prescribed in Section 213(b). Nor did they explain why the involvement of the ED or CBI was necessary at that stage.
The NCLAT held that issuing notices to the ED and CBI and calling for tracking information amounted to taking an initial step towards investigation. Such a step could not be taken as a matter of course or on the first date without determining the need for the agencies’ involvement.
It observed that the ED is an external investigating agency operating outside the framework of the Companies Act. Consequently, any direction involving it in proceedings concerning the affairs of a company must follow a reasoned assessment of the circumstances and compliance with Section 213(b).
The Bench found no recorded justification for issuing notice to the ED at the first available opportunity. It also noted that the respondents’ counsel could not satisfactorily explain the circumstances in which the challenged direction had been issued.
The same defect affected the subsequent directions to the ED and CBI. The NCLAT said that these directions were issued without hearing the appellants on whether the agencies’ involvement was necessary and without recording reasons demonstrating compliance with the law.
The Appellate Tribunal underlined that involving agencies such as the ED and CBI may carry civil consequences, create social stigma and affect the business functioning of the company and the persons concerned. An order capable of producing such consequences must comply with the principles of natural justice.
The NCLT was required to consider the defence of the affected parties, apply its mind to the statutory requirements and record a rational basis for its conclusion. A direction issued without such an exercise was described by the NCLAT as perverse and legally unsustainable.
The Bench clarified that the NCLT remained free to reject the appellants’ objections after hearing them. What the law required was a fair opportunity to present their case and a reasoned determination of whether the proposed investigative step was justified.
The NCLAT quashed the relevant portions of the December 12, 2025, and February 13, 2026, orders directing notices to the ED and CBI. The matter was sent back to the NCLT, Kolkata Bench, Court III, to reconsider the issue in the light of Section 213(b).
The NCLAT made it clear that if the NCLT considers the tracking information necessary, it may pass a fresh order after hearing the appellants, considering the parties’ respective submissions and recording its satisfaction and reasons in accordance with law.
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