NCLT Dismisses Petition Against Detox India Pvt. Ltd. Citing Lack of Locus Standi

Parth Merchant's petition under Sections 212 and 213 of the Companies Act, 2013, dismissed for failing to establish legal standing and maintainability.

The National Company Law Tribunal (NCLT), Ahmedabad Bench, has dismissed a petition filed by Mr. Parth Merchant against Detox India Private Limited, citing the petitioner's failure to demonstrate locus standi and maintainability under Sections 212 and 213 of the Companies Act, 2013. The order, passed by Members Shammi Khan and Sanjeev Sharma, emphasized the need for the petitioner to establish a direct connection with the company as a shareholder, creditor, or a person directly involved with its affairs.

The case revolved around allegations of financial irregularities, including manipulation of statutory records, unauthorized reduction of share capital, diversion of funds, and fraud. However, the Tribunal found that Mr. Merchant did not possess the requisite legal standing to invoke the provisions under which the petition was filed. The petitioner, who claimed authorization from Rajdeep Boiler Pvt. Ltd., a purported creditor, failed to provide evidence of any subsisting debt or a direct legal relationship with Detox India Pvt. Ltd.

In its detailed judgment, the Tribunal highlighted that the rights under Section 213 are non-transferable and must be exercised by individuals with a direct stake in the company's affairs. The Tribunal also observed that the statutory requirements for maintaining a petition under Section 212 were not met, as the petitioner did not approach the Registrar of Companies (RoC) prior to filing the petition.

Further, the Tribunal noted that the petitioner's reliance on professional misconduct allegations against certain professionals associated with Detox India Pvt. Ltd. did not confer any personal grievance or legal standing under the Companies Act, 2013. The Tribunal asserted that disciplinary actions concerning professional misconduct are governed by respective professional bodies and do not relate to the Companies Act's provisions.

The judgment underscores the importance of establishing a clear legal standing and connection with the company when invoking Sections 212 and 213, which are designed to protect the interests of shareholders and creditors directly impacted by a company's actions.

Bottom Line:

Locus standi under Sections 212 and 213 of the Companies Act, 2013 must be established by the petitioner as either a shareholder, creditor, or a person connected with the company's affairs. Mere authorization by a third party does not confer locus standi to invoke these provisions.

Statutory provision(s): Sections 212, 213, 447, 448 of the Companies Act, 2013

Parth Merchant v. Detox India Private Limited, (NCLT)(Ahmedabad) : Law Finder Doc Id # 2820396