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2023 (10) TMI 119 - AT - Insolvency and BankruptcySeeking reopening of Accounts with the Order of the Tribunal, was kept pending - erroneous admission of Section 7 application only based on the Financial Statements of the Years 2012-2016, which the Appellant was challenging as fraudulent - HELD THAT - It is the main case of the Respondents that an amount of Rs. 4 Crores was lent to the Corporate Debtor Company based on a Resolution passed by the Board of Directors on 07/11/2011. Curiously, this document was neither filed before the RoC nor was it a part of the Section 7 Application filed earlier or even part of the present Application, but was only filed along with the Rejoinder . It is clear that there was an interim direction given by the three Member Bench of the Principal Bench, NCLAT dated 17/11/2020 that any action taken during the CIRP would be subject to the outcome of this Appeal. This Order was not challenged and the interim direction stands as of today. Having regard to the chequered history of the case, the Investigative Auditors Report which is dated 01/08/2018 and immediately a week thereafter the second Section 7 Application was filed before the Adjudicating Authority and C.A. 162/130/HDB/2019 seeking reopening of the Books of Accounts under Section 130 of the Companies Act, 2013 was filed by the Appellant on 26/11/2018 and the Order of the Admission under Section 7 of the Code was passed on 13/02/2020, which Impugned Order does not refer to adjudication of C.A. 162/130/HDB/2019, this Tribunal is of the considered view that the issues raised by the Appellant regarding transactions and entries in the Financial Books require Consideration. This Tribunal is of the considered view that the Adjudicating Authority ought to have adjudicated C.A. 162/130/HDB/2019 which was kept pending from 26/11/2018 to 13/02/2020 before deciding the Section 7 Petition. The Impugned Order of the Adjudicating Authority is set aside and the matter is remanded to the Adjudicating Authority to decide application and then adjudicate the Section 7 Application, in accordance with Law - Appeal allowed.
Issues Involved:
1. Validity of the Financial Creditor's claim under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Allegations of financial fraud and manipulation by the Financial Creditor. 3. Admissibility of evidence and documents submitted by the Financial Creditor. 4. Pending application for reopening of the Corporate Debtor's accounts under Section 130 of the Companies Act, 2013. Summary: 1. Validity of the Financial Creditor's Claim: The Appellate Tribunal reviewed the Impugned Order dated 13/02/2020, which admitted the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against M/s. Aayusiddhi Life Sciences Private Limited. The Adjudicating Authority noted that the Petitioners provided finances to the Corporate Debtor based on a request from the Managing Director and that the Corporate Debtor owed Rs. 2,39,59,045/- as per their Balance Sheet dated 31/03/2016. The Corporate Debtor denied these liabilities and claimed financial fraud by the Petitioners. 2. Allegations of Financial Fraud: The Appellant argued that the Petitioners, who were part of the Board of Directors, committed financial fraud and misappropriated funds amounting to Rs. 4,77,02,727/-. The Appellant contended that the Section 7 Application was filed to avoid action for the misappropriated sums. The Appellant also argued that the financial statements relied upon by the Petitioners contained fraudulent entries, as detailed in an Investigative Audit Report dated 01/08/2018. 3. Admissibility of Evidence: The Respondents submitted a Resolution dated 07/11/2011 and a letter dated 08/11/2011, which were not part of the initial records but were filed later as part of the Rejoinder. The Respondents argued that the balance sheets authenticated by the Managing Director and Chartered Accountant showed the amounts due. The Adjudicating Authority admitted the Section 7 Application based on these balance sheets, which were considered valid acknowledgments of debt. 4. Pending Application for Reopening of Accounts: The Appellant had filed C.A. 162/130/HDB/2019 under Section 130 of the Companies Act, 2013, seeking to reopen the Books of Accounts for the Financial Years 2012-2016, alleging fraud. The Tribunal noted that the Adjudicating Authority had not adjudicated this application before deciding on the Section 7 Petition. The Tribunal emphasized that the issues raised regarding 'transactions' and 'entries in the Financial Books' required consideration. Conclusion: The Tribunal allowed the Appeal, set aside the Impugned Order, and remanded the matter to the Adjudicating Authority to first decide C.A. 162/130/HDB/2019 and then adjudicate the Section 7 Application in accordance with the law. The Tribunal did not delve into the merits of the matter regarding 'Debt' and 'Default' but noted that the allegations raised by the Appellant needed examination. The Adjudicating Authority was directed to decide the matter expeditiously, with both parties requested to appear on 16/10/2023.
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