Modification of investigation agency does not amount to review or recall of earlier order

NCLAT Upholds Change in Investigating Agency for Bhagyodayam Company Probe. Tribunal clarifies modification does not constitute a review or recall of prior order, ensuring investigation objectives remain intact.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) Chennai has upheld the modification of the investigating agency in the case concerning the affairs of M/s Bhagyodayam Company. The tribunal dismissed the appeal filed by Paul Joseph challenging the order which transitioned the investigation from the Serious Fraud Investigation Office (SFIO) to an inspector appointed by the Central Government.

The matter originated from a company petition alleging oppression and mismanagement by the Board of Directors of Bhagyodayam Company, leading to an investigation directive issued on March 11, 2020, by the NCLT Kochi Bench to the SFIO. Subsequently, on January 3, 2024, the tribunal passed an order modifying the investigation agency to a Central Government-appointed inspector, without altering the core objectives of the investigation.

The appellant, Paul Joseph, argued that the modification amounted to a review or recall of the previous order and was executed without prior notice, thus violating the principles of natural justice. However, the tribunal clarified that the modification did not affect the rights of the parties or change the investigation's objectives, as the original directive was not contested.

Justice Sharad Kumar Sharma, Member (Judicial) and Jatindranath Swain, Member (Technical) presiding over the tribunal, emphasized that the change in agency does not constitute a review or recall, as it simply involves altering the investigator while maintaining the investigation's purpose. The tribunal noted that the appellant had not challenged the original investigation order, which remains intact in its core aims.

Furthermore, the tribunal reiterated the prerogative of the NCLT to adopt machinery or agencies for investigations without judicial interference, as these processes are critical in addressing allegations of mismanagement or oppression.

During proceedings, it was revealed that a writ petition regarding the same order is pending before the High Court of Kerala. However, the tribunal stated that the pendency of the writ petition does not impede the current order, as the investigation aims to facilitate a conclusion on the alleged acts of mismanagement.

The tribunal dismissed the appeal, affirming that the modification merely changes the investigating agency without affecting the appellant's rights, and ensuring the investigation's objectives remain consistent with the original mandate.

Bottom Line:

Modification of investigation agency does not amount to review or recall of earlier order, as long as the objective of the investigation remains unaltered.

Statutory Provision(s): Companies Act, 2013 Sections 439(2), Rule 11 & 32 of NCLT Rules.

Paul Jospeh v. Union of India, (NCLAT)(Chennai) : Law Finder Doc Id # 2794170