2020 (6) TMI 810 - Tri - Insolvency and Bankruptcy

Rejection of claim of purported financial creditor - Inclusion of New Hind Silk House P. Ltd as the financial creditor of CD - rejection for the reason that claim of New Hind Silk House P. Ltd admitted by the RP is barred by limitation - whether, admission of the claim of New Hind Silk House P. Ltd. and inclusion of it as a member of CoC is in contravention of any of the provisions of the l B,Code and Regulations and provisions of the law for the time being in force? - HELD THAT - The CIRP was initiated in the instant case vide order of admission dated 13/12/2019. According to the RP the claims of New Hind Silk House Private Limited was received on 27.02.2020 and the RP collated, verified and admitted it on 02.03.2020. The RP had relied on the above said acknowledgement of debts signed by the CD dated 1.04.2016 01.04.2017. A look at the said disputed documents leads no doubt of fabrication of it by the RP or by the FC. It contains affixture of the seal of the CD, and signature of two directors of the CD - in this case, the document under challenge being signed by the two directors of the CD, that it contains seal of the CD, the production of the same along with Form C by the FC cannot be doubted unless substantive proof is produced on the side of the applicant. In the absences o such material to doubt the genuineness of the above said disputed documents, there are no merit in the submission on the side of the applicant in this regard. Admission of Audited Balance Sheet upto the financial year ending 31/03/2019 - HELD THAT - Admittedly the CD was not in operation, and its name was struck off from the register of Companies, W.B. The audited balance statement, till the financial year ending 31.3.2016 alone was available with the CD when the RP took over the assets of the CD. The company's name was then restored and the RP appointed the auditor for preparation of balance sheet for the leftover periods and made it up to date in compliance with the provisions of the Companies Act. It is an act empowered to do by the RP as an administrator of the CD undergoing resolution. An auditor is statutorily liable for any fraud played for the fabrication of a balance sheet - It is an admitted fact that the loan availed by the CD from the disputed FC reflects in the books of accounts and interest to the loan was paid by the CD up to 05/08/2016. The disputed and undisputed balance sheets includes the admitted loan availed by the CD. An overall scrutiny of the documents placed and considering the above said circumstances discussed, it is opined that the RP has screened the referred documents with utmost care and caution expected to apply as per the provisions of the Code and Regulations, in the nature of the matter under consideration. More over this application is bad for nonjoinder of two directors of CD who had signed the disputed acknowledgement and the FC/ New Hind Silk House Private Limited who had submitted the same along with Form C to the RP. Application dismissed.

Summary

Issues Involved:
1. Legality of inclusion of New Hind Silk House Pvt. Ltd. as a financial creditor in the Committee of Creditors (CoC).
2. Allegation of the claim being barred by limitation.
3. Validity of balance confirmations and audited balance sheets used to substantiate the claim.
4. Allegation of fraud and fabrication by the Resolution Professional (RP).

Issue-wise Detailed Analysis:

1. Legality of Inclusion of New Hind Silk House Pvt. Ltd. as a Financial Creditor:
The applicant challenged the inclusion of New Hind Silk House Pvt. Ltd. as a financial creditor, arguing that the claim was barred by limitation and improperly admitted by the RP. The RP, however, verified and admitted the claim based on documents such as balance confirmations and audited balance sheets, which were approved by the CoC. The Tribunal found that the RP acted in compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations, determining that the admission of the claim was not in contravention of any legal provisions.

2. Allegation of the Claim Being Barred by Limitation:
The applicant argued that the claim was barred by limitation, citing that the last payment of interest was received on 05/08/2016, and no further payments were made. The RP countered this by presenting balance confirmations dated 01/04/2016 and 01/04/2017, signed by the directors and bearing the company's seal, indicating an acknowledgment of debt. The Tribunal held that these documents were admissible as evidence, thus dismissing the limitation argument.

3. Validity of Balance Confirmations and Audited Balance Sheets:
The applicant objected to the reliance on balance sheets for the years 2016-17 and 2017-18, prepared after the RP's appointment, and the balance confirmations, questioning their authenticity and method of delivery. The Tribunal noted that the balance confirmations were signed by the CD's directors and bore the company seal, making them credible. Additionally, the RP was empowered to appoint auditors to update the balance sheets, and the Tribunal found no substantial proof of collusion or fabrication, thus validating the documents used to substantiate the claim.

4. Allegation of Fraud and Fabrication by the RP:
The applicant alleged that the RP fabricated documents to include New Hind Silk House Pvt. Ltd. as a creditor. The Tribunal emphasized that any fraud or fabrication must be proven with substantive evidence. The balance confirmations and audited balance sheets were found to be genuine, signed by the CD's directors, and bearing the company seal. The Tribunal concluded that without substantial proof, the allegations of fraud could not be upheld.

Conclusion:
The Tribunal dismissed the application, finding no merit in the applicant's arguments. The RP's actions were in compliance with the IBC and related regulations, and the documents used to admit the claim were deemed credible and admissible. The Tribunal also noted the application was flawed for non-joinder of necessary parties, specifically the directors who signed the disputed documents and New Hind Silk House Pvt. Ltd.