Complaints Against Auditors Or Company Secretaries No Ground To Seek Probe Into Company: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad recently held that complaints of professional misconduct against auditors or company secretaries cannot form the basis for seeking an SFIO investigation into a company under Sections 212 or 213 of the Companies Act. It said such disciplinary action concerns only the individual professional and does not give the complainant any right to demand a probe into the company's affairs. A bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma made the ruling on December 8, 2025 while dimissing a plea seeking investigation into the affairs of Detox India Pvt Ltd. The bench observed that disciplinary findings of ICAI or ICSI “pertains solely to professional misconduct and liability of those individuals under the respective professional regulation. Such findings, while relevant do not create a personal grievance or legal standing for the Petitioner under Sections 212 or 213 of the Companies Act, 2013.” The tribunal also said that the petitioner who is an outsider with no link to the company “squarely falls within the category of complete alien.” The petition was filed by Parth Merchant on September 29, 2022 seeking an investigation into the affairs of Detox India Private Limited. Merchant alleged manipulation of statutory records, false certification, unauthorised reduction of share capital and diversion of funds. He said he was filing the petition on behalf of Rajdeep Boiler Private Limited based on a Board Resolution dated August 31, 2022. Rajdeep Boiler is a separate company and the petition contained no material showing it was a shareholder, member or creditor of Detox India. The tribunal had first dismissed the matter in November 2023. The National Company Law Appellate Tribunal remanded the case in November 2024 to determine locus standi and maintainability. Merchant argued that he qualified as any other person under Section 213(b) and had provided sufficient grounds to justify an investigation. He relied on complaints he had filed before ICAI and ICSI against professionals who had certified statutory forms for Detox India. He said these complaints suggested deeper irregularities within the company. Detox India and others submitted that Merchant had no relationship with the company. They said he was not a shareholder, creditor or member. They argued that the Board Resolution of Rajdeep Boiler could not confer standing because rights under Section 213 are statutory and cannot be transferred. They also said Rajdeep Boiler had itself not shown that it had any claim against Detox India. The tribunal held that Merchant had no locus standi. It noted that no document showed he was a shareholder, member or creditor of Detox India. It found that the Board Resolution “merely authorizes proceedings but does not assign debt or create privity.” It further held that “such authorization does not create any legal relationship between the petitioner and Respondent No.1 Company (Detox India).” It also observed that Merchant had not shown that Rajdeep Boiler was a creditor and added that “why it authorised the petitioner and did not file the petition through its authorised person say director or its official remains unexplained.” On the meaning of 'any other person' in Section 213, the tribunal held that the phrase must be read narrowly and applies only to individuals directly or indirectly connected with a company's affairs. It stated that “treating Section 213 as a public-interest avenue is impermissible.” It further explained that a complaint before ICAI or ICSI creates no legal relationship with the company whose affairs are sought to be investigated and that no legal injury arises merely because a professional body receives a complaint. The tribunal also noted that Section 212 can be invoked only when the Central Government acts on a report of the Registrar of Companies under Section 208 and does not allow an outsider to seek an inspection directly. Finding no locus, no legal injury and no statutory basis, the tribunal dismissed the petition. Case Title: Parth Merchant v. Detox India Pvt. Ltd. and Ors. Case Number: Item No. 304 CP/39(AHM)2022 For Applicant: Advocate Dhiren Dave For Respondents: Advocates Nipun Singhvi, Mayur Jugtawat, and Varun Lamb.Click Here To Read/Download Order

Complaints Against Auditors Or Company Secretaries No Ground To Seek Probe Into Company: NCLT Ahmedabad

Shivangi Bhardwaj

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Complaints Against Auditors Or Company Secretaries No Ground To Seek Probe Into Company: NCLT Ahmedabad

Shivangi Bhardwaj

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