Business Secretary Lord Mandelson is on the verge of taking legal action against the ‘Phoenix Four’, who oversaw the collapse of MG Rover.

But the legal action means a parliamentary investigation into the collapse has been called off. The Business Innovation and Skills select committee will now be looking into Lord Mandelson’s handling of the takeover of Cadbury by Kraft.

Peter Luff, Conservative MP who chairs the Business Innovation and Skills Select Committee, said next month’s meeting of the committee had now been postponed ahead of Lord Mandelson’s legal moves.

Mr Luff said: “We decided that in view of the fact that court proceedings appear likely, it would not be right for us to proceed with the evidence session. However, this is a postponement, not a cancellation.

“Should proceedings not go ahead, we will call in the four directors at the earliest opportunity. We also reserve the right to call them to give evidence once any legal proceedings have concluded. “The Phoenix Venture Holdings bosses John Towers, Peter Beale, John Edwards and Nick Stephenson have reacted angrily to the news that Lord Mandelson is seeking to have them banned as company directors.

A spokesman for Phoenix Venture Holdings said: “As we have made clear from the outset, there is no basis for disqualification proceedings. There was no recommendation for disqualification in last year’s Government report.

“Proceedings would be a futile exercise as none of the directors intend seeking UK directorships in the future. It would amount to nothing more than unnecessary political grandstanding at taxpayers’ expense.”

The spokesman added the Phoenix Four would oppose any High Court proceedings, saying: “They would fight them very, very enthusiastically as a matter of principle.”

Last year the Serious Fraud Office announced that no criminal charges would be brought against the Phoenix Four, who were heavily criticised by Lord Mandelson following the long awaited publication last September of the Government report into the collapse of MG Rover nearly five years ago.

The report, compiled at a cost of over £16 million over a four-year period, attacked the Phoenix Four’s conduct while at the helm at Longbridge, which closed in April 2005 with the loss of over 6,000 jobs.