2026 (1) TMI 1093 - AT - Companies Law

Company petition under Section 213 dismissed where allegations concern debt recovery and regulatory lapses, no prima facie fraud.

Dismissal of a company petition under statutory misfeasance provisions was affirmed because the allegations concerned recovery of dues and dishonoured ... Dismissal of Petition filed under Section 213(b) of the Companies Act, 2013 as being not maintainable - failure to issue notice to the respondents - recovery of dues or dishonoured cheques - non-compliances are regulatory lapses enforceable by the Registrar of Companies under Sections 92, 137, and 454 - no prima facie evidence of systemic fraud or intent to defraud creditors - HELD THAT:- The allegations merely relate to the recovery of dues or dishonoured cheques as non- compliance of statutory nature/regulatory lapses are very well enforceable by the ROC under Section 92, 137 and 454 of the Companies Act, 2013 and there is no prima facie evidence of any systematic fraud with an intention to prima facie defraud its members, creditors or any other stake holders. The appellant has already filed complaints before the said statutory authorities and no concrete/final findings have come in the said complaints till date and it also shows the appellant has been taking recourse to alternative remedies. There could be no violation of natural justice either as hearing has since been given to the appellant by the Ld. NCLT. The Ld. NCLT was right in rejecting the company petition in limine, without issuing notice to the Respondents on the grounds viz (i) the allegations merely relate to recovery of dues or dishonoured cheques; (ii) non-compliances are regulatory lapses enforceable by the Registrar of Companies under Sections 92, 137, and 454, and (iii) there is no prima facie evidence of systemic fraud or intent to defraud creditors. Thus, the complaint/petition under Section 213 of the Companies Act, 2013 appears to be an act of frustration of the appellant in not recovering his dues. Appeal dismissed. Issues: Whether the petition under Section 213(b) of the Companies Act, 2013 seeking investigation into the affairs of a company is maintainable where the allegations primarily concern recovery of debts, dishonoured cheques, and statutory filing non-compliances.Analysis: Section 213(b) permits investigation where there is prima facie opinion that a company's business is conducted with intent to defraud creditors or for fraudulent or unlawful purposes. The petition relied on alleged statutory irregularities, dishonoured cheques, professional complaints, and non-filing of statutory forms. These matters were evaluated against the threshold for a prima facie finding of systemic fraud or intent to defraud creditors. The petition's allegations were treated as contractual or recovery disputes amenable to civil or negotiable-instrument proceedings, and as regulatory lapses enforceable by the Registrar of Companies under Sections 92, 137, and 454. Prior or pending complaints before professional/statutory bodies and absence of conclusive findings were also noted. The petition was examined for misuse of Section 213(b) as a substitute forum for debt recovery and for absence of material establishing overarching fraudulent management warranting an investigation.Conclusion: The petition is not maintainable under Section 213(b); there is no prima facie evidence of systemic fraud or intent to defraud creditors, and the relief seeking investigation is unsuitable where the grievances pertain to recovery of dues and regulatory non-compliances. The appeal against the order dismissing the petition is dismissed.