2022 (7) TMI 1122 - Tri - Insolvency and Bankruptcy

Fraudulent transactions - an amount of Rs.72.45 crores has been identified as fraudulent transactions under section 66 of the IBC, 2016 - HELD THAT - It appears that the respondents have sold out the fixed assets without passing it through the books of account. The Respondents have not provided any books of account, list of debtors and their outstanding balances - the whole story has been concocted by the suspended directors of the Corporate Debtor and the same is unbelievable and the liquidator is right in moving this application and claiming the relief as prayed in the present case. There has been due and independent application of mind by resolution professionals besides the transaction audit report while filing this application and thus prayer of the Resolution Professional must be allowed - the Respondents No.1 and 2 are directed to jointly and/or severely pay a sum of Rs. 72.45 Crores on account of payments made to the related parties from the account of the Corporate Debtor - application disposed off.

Summary

Issues Involved:
1. Non-cooperation from the Corporate Debtor.
2. Fraudulent transactions under Section 66 of IBC, 2016.
3. Allegations of mismanagement and siphoning of funds.
4. The validity of the Transaction Audit Report.
5. Allegations of suppression and misrepresentation of facts by the Respondents.

Detailed Analysis:

1. Non-cooperation from the Corporate Debtor:
The Resolution Professional (RP) appointed in the CIRP of M/s Madhusala Drinks Private Limited faced non-cooperation from the Corporate Debtor. Despite an order under Section 19(2) of the IBC directing cooperation, the suspended Board of Directors provided incomplete and insufficient documents, claiming records were destroyed in a fire. The RP appointed a Transaction Auditor to audit the available information from financial creditors and other stakeholders.

2. Fraudulent transactions under Section 66 of IBC, 2016:
The Transaction Audit Report identified Rs. 72.45 crores as fraudulent transactions. Instances included:
- Fixed Assets: Claimed as stolen in an FIR, presumed sold without accounting.
- Inventories: No evidence of existence, presumed taken or sold for personal benefit.
- Trade Receivables: No list or balances provided, presumed siphoned off.
- Cash and Bank Statements: No information available, presumed withdrawn for personal use.
- Loans and Advances: Utilization unclear, presumed misused.
- Dues under West Bengal Sales Tax Act: Tax evasion not disclosed in books.

3. Allegations of mismanagement and siphoning of funds:
The RP asserted that the Corporate Debtor's business was conducted to defraud creditors. The suspended Board of Directors did not manage affairs diligently and did not cooperate with the RP. The RP sought orders for investigation into the Corporate Debtor's affairs under Section 213 of the Companies Act, 2013.

4. The validity of the Transaction Audit Report:
The Respondents challenged the Transaction Audit Report, claiming it was vague, ambiguous, and inconclusive. They argued the application was filed beyond the time limits stipulated in Regulation 35A of the IBBI (Corporate Persons) Regulations, 2016. They also contended that the RP failed to make inquiries with the Excise Department, which had control over the Corporate Debtor's facility.

5. Allegations of suppression and misrepresentation of facts by the Respondents:
The RP alleged that the Respondents intentionally lodged a false FIR to claim that all assets were destroyed in a fire. The Respondents failed to provide records or details of payments to a security agency allegedly guarding the premises. The RP argued that the Respondents' reply was dishonest, aimed at misleading the Adjudicating Authority, and suppressing material facts.

Conclusion:
The Tribunal found the RP's application justified and directed Respondents No.1 and 2 to jointly or severely pay Rs. 72.45 crores on account of payments made to related parties from the Corporate Debtor's account. The Tribunal noted the Respondents concocted a story to mislead and defraud creditors and upheld the RP's claims. The application was allowed, and the RP was authorized to initiate appropriate action if the payment was not made. The case was listed for further proceedings on 02/09/2022.