2025 (10) TMI 683 - AT - Companies Law

Decision upholds investigator substitution as procedural, not a recall, keeping original order effective and rights intact

Paul Jospeh Versus Union of India and Bhagyodayam Company

NCLAT dismissed the appeal, holding the impugned order merely substituted the investigating agency and did not amount to a recall or review of the earlier ... Appointment of inspector to investigate the affairs - order in the shape of the review - order passed without the issuance of any prior notice to the Appellant - whether such type of order, which has only the effect of modifying the earlier order of 11.03.2020, with the change of the investigating officer or an investigating agency, can be said to be an order in the shape of the recall of an earlier order? - HELD THAT:- The said order cannot be said to be an order in the shape of the recall of an earlier order, as recall will entail completely vanishing the effect of the earlier order, altogether, substituting the earlier existing order by giving it a new expression in order to meet an object already prescribed by earlier order, if it is not contrary to the one, which was already given in the earlier order, which in the instant case happens to be that of 11.03.2020 it will not be recall, because the principle effect of earlier order continues. If the order of 11.03.2020 or the impugned order of 03.01.2024 are taken into consideration, in fact, the aim, objective and purpose of both orders happen to be the same, on the basis of the recommendation made by the administrator on 22.01.2019. Thus, the nature of the order that was passed on 03.01.2024 is neither the recall nor the review of the earlier order because it was simpliciter having an effect of changing of the investigating officer or an agency who was to carry out the investigation into the affairs, which was complained of by the administrator vide its communication of 22.01.2019. Hence, the nature of the impugned order which has been passed, it does not change the implication or expand its objective of the principal order of 11.03.2020, and that to particularly when the Appellant cannot have any grievances as against the impugned order of 03.01.2024, when he has not put a challenge to the earlier order of 11.03.2020, where the investigation was directed to be handed over to a Serious Fraud Investigation Officer, its only the investigating agency, which was being altered by the modification made by the impugned order of 03.01.2024. Since the impugned order of 03.01.2024 in itself does not have any independent existence in itself, as it has to be read only in modification to the earlier order of 11.03.2020, which has attained finality. Even otherwise, it is a settled law that once the investigation has been directed for any act, by the satisfaction, which has been recorded by the Court or an Officer, which herein would be the NCLT, which has passed an earlier order of 11.03.2020. The investigation is not required to be interrupted on this premise merely because of the modification if permitted to be carried by the order of 03.01.2024 - Since the impugned order, its only effect is that there is only a change of agency of an investigation, and it does not affect any of the rights of the Appellant in any manner whatsoever. The adoption of machinery who could made responsible to investigate is a prerogative of the NCLT, which cannot be said to have been rendered in exceeding its jurisdiction nor it’s the case of the Appellant. The Respondent No.2, during the course of the arguments, has submitted that as against the same order, he has preferred a Writ Petition Original Petition Civil No.458/2024 which is pending consideration before the Hon’ble High Court of Kerala, pendency of Writ Petition by Respondent No.2, will not carry any impediment, which has been preferred at the behest of the Respondent No.2 as against the same order, which has to be independently decided - the impugned order does not require to be interfered by this Appellate Tribunal, for the reason that the consequential effect of the impugned order would be only to enable the authority to come to a logical conclusion after conclusion of investigation with regard to the set of allegations found to be levelled by the administrator, which will be taken as to be a fact-finding investigation before taking any punitive action in accordance with law. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an order modifying a prior investigatory direction by substituting the investigating agency (changing from a designated investigation agency to a Central Government-appointed inspector) constitutes a review or recall of the earlier order and thereby attracts the safeguards of review/recall (including prior notice and making the affected party a party to the proceedings), or whether it is a permissible modification that leaves the substantive object of the original order intact. 2. Whether the Tribunal had jurisdiction under applicable rules to modify the mode/agency of investigation and whether such modification affects the finality of the original investigatory direction or the rights of the affected party (estoppel, lack of notice, or violation of principles of natural justice). 3. Whether courts/tribunals should ordinarily interfere with ongoing or directed investigations merely because of a change in the investigating agency, and whether pendency of a separate writ against the same order by an interested party impedes independent appellate consideration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Nature of the modification: review/recall versus permissible modification Legal framework: Review and recall of judicial/tribunal orders require satisfaction of their constituent elements (complete annulment or reversal of earlier order, or exercise of review jurisdiction where specific grounds exist). Modification that does not alter the object, aim or operative effect of the original order but only changes incidental machinery may fall outside review/recall. Precedent Treatment: The Tribunal treated established principles distinguishing recall/review from mere modification; previous jurisprudence recognizing that substitution of an implementing agency, when it does not affect the substantive directive, is not a review/recall. Interpretation and reasoning: The Tribunal found the impugned order changed only the agency tasked with conducting the investigation while preserving the substantive investigatory direction and objective of the earlier order. Recall or review would require obliteration or fundamental alteration of the earlier order's effect; here the principal direction continued to exist and operate. The modification was characterized as a 'change of the investigating officer or agency' without change in the objective or legal effect of the primary order, and therefore not a review or recall. Ratio vs. Obiter: Ratio - A modification that substitutes the investigating agency but preserves the object and operative effect of the original investigatory direction is not a review/recall and does not attract the procedural attributes of review/recall. Obiter - Observations on the manner in which an administrator's recommendation factors into agency selection. Conclusions: The impugned order is a permissible modification, not a review or recall; therefore procedural requisites specific to review/recall (such as re-issuance in review form or special notice on that ground) are not triggered by the modification itself. Issue 2 - Jurisdiction to change investigating agency; effect on finality, estoppel, and natural justice contentions Legal framework: Tribunals possess procedural powers under their rules (here Rule 11 & 32 of the relevant NCLT Rules) to issue directions for investigation, including choice of machinery, provided such exercise is within jurisdiction and does not transgress substantive rights. Finality of an order is implicated if a subsequent order nullifies or fundamentally alters the earlier order's operative effect. Precedent Treatment: The Tribunal relied on settled law that selection or re-allocation of investigatory machinery is within the Tribunal's administrative discretion and does not ipso facto infringe on parties' rights unless it alters substantive outcomes or is beyond jurisdiction. Interpretation and reasoning: The Tribunal held that changing the investigating agency is an adoption of alternate machinery to achieve the same objective and is within its powers. Because the earlier order remained substantively intact, its finality was not nullified. The appellant, having not challenged the original investigatory direction when it was made, cannot now contest a peripheral modification - an estoppel argument premised on the finality of the earlier order and the appellant's inaction. The Tribunal further found that the modification did not affect any substantive right of the appellant and therefore did not violate principles of natural justice or require separate impleadment prior to modification. Ratio vs. Obiter: Ratio - The Tribunal has jurisdiction to alter the agency of investigation under its procedural powers where the substantive direction remains unchanged; lack of prior challenge to the original order limits a party's ability to object later to such non-substantive modifications (estoppel). Obiter - Remarks on the resignation of the original administrator and its bearing on choice of agency. Conclusions: The Tribunal lawfully exercised its jurisdiction in modifying the investigating agency; the modification did not impinge on the finality of the original order or the appellant's rights, and the appellant is estopped from treating the modification as an invalid review/recall or as a breach of natural justice. Issue 3 - Interference with investigations and effect of parallel writ petition Legal framework: Courts/tribunals generally refrain from interfering with investigations because investigations are fact-finding processes instrumental to subsequent adjudicative or punitive action; intervention is warranted only where jurisdiction is exceeded or rights are prejudicially affected. Precedent Treatment: The Tribunal applied the established principle that an investigation directed by a judicial/tribunal order should not be routinely stayed or disturbed merely on procedural grounds when the investigation's purpose and scope remain unaltered. Interpretation and reasoning: Because the impugned modification leaves intact the investigatory direction and only enables a different agency to carry out fact-finding, judicial interference was unnecessary. The Tribunal emphasized that investigations are a prelude to conclusions and potential punitive action; interruption would frustrate the fact-finding process. Regarding pendency of a separate writ challenging the same order, the Tribunal held that such pendency does not preclude independent appellate adjudication of the challenge before the Tribunal and does not operate as an automatic impediment to the investigatory process or to appellate consideration. Ratio vs. Obiter: Ratio - Courts/tribunals should not ordinarily interfere with or stay an investigation merely because the investigating agency is changed, provided the investigation's object and scope are not altered; concurrent writ proceedings do not automatically preclude independent adjudication. Conclusions: Interference with the impugned modification was unwarranted; the appeal lacked merit and dismissal was appropriate as the modification merely facilitated the continuation of a fact-finding investigation without affecting substantive rights. Cross-reference See Issue 1 and Issue 2: The determination that the impugned order is a permissible modification (Issue 1) underpins the conclusions on jurisdiction, estoppel, and non-violation of natural justice (Issue 2), which in turn supports the refusal to interfere with the investigatory process (Issue 3).