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TMI Blog2019 (11) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... D THAT:- As per Section 60(1) of the I B Code the National Company Law Tribunal having territorial jurisdiction over the place where the registered office is located will be the Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors - The provision of this section makes it clear that the National Company Law Tribunal is empowered to deal with insolvency resolution and liquidation for corporate persons including corporate debtor and others. Merely because additional power of Adjudicating Authority has been vested, the power of the National Company Law Tribunal under the Companies Act, 2013 does not stand extinguished. In the case of Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS [ 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] , the Appellate Tribunal held that the Adjudicating Authority has dual role of Adjudicating Authority and National Company Law Tribunal for the purpose of I B Code - Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward all material documents, which is connected to the present case including the Forensic Audit Report dated 14.12.2018, the Central Government, within a period of three weeks from the receipt of the copy of the order. 2) Learned Resolution Professional is also directed to furnish all the documents forwarded to the Central Government, to all parties/other side duly following principles of natural justice. 3) The Central Government is directed to refer the matter to the SFIO for further investigation into the Affairs of the Corporate Debtor, Bank of Maharashtra and other related Companies including Director of Companies of Corporate Debtor & related Companies and officials of Bank of Maharashtra basing on the Report of Forensic Audit Report, as expeditiously as possible. 4) Bank of Maharashtra is also directed to extend full assistance to the SFIO to complete the investigation as expeditiously as possible. 5) The parties are liberty to take appropriate legal course of action basing on the ultimate findings given by the SFIO in this case. 6) The prayer as sought for the application stand disposed of in the light of above directions. 7) No order as to costs." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government for investigation through SFIO. The appellant - 'Mr. M. Srinivas has challenge the aforesaid order. 6. Learned counsel appearing on behalf of the Appellant submitted that the Adjudicating Authority has not been conferred with power u/s Section 213 of the Companies Act, 2013 in absence of any amendment made in Schedule XI of the I&B Code. It was also submitted that the Adjudicating Authority has powers under Section 49, - "Transactions defrauding creditors" - which relates to undervalued transaction; Section 65, which provides action against any person who has done certain things fraudulently or with malicious intent during the 'Insolvency Resolution Process' or 'Liquidation'; Section 66 in case during the 'Corporate Insolvency Resolution Process' or in 'liquidation process', it is found that any business of the 'Corporate Debtor' has carried out with the intent to defraud creditors and under Section 35 for the 'Liquidator' to investigate the affairs of the 'Corporate Debtor'. This apart, action can be taken and punishment can be imposed by Special Court only under Section 68(b) of the I&B Code, Section 69, Section 71 and Section 74 of the 'I&B Code'. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not willing to give. Thus, it appears that during FY 2014-15 the CC facility from BoM was enhanced from INR 500 Lakhs to INR 1,000 Lakhs in order to potentially accommodate the setting up of Precast Plant which is in violation of the restrictive covenant of the loan. iv Further issue of shares from ICD from the group: During FY 2015-16, the Inter Corporate Deposit ("ICD") from PPIPL was used to allot an additional 37,00,000 shares to M. Srinivas taking the subscribed share capital to 50,00,000 shares. Therefore, RP is of the view that this done primarily to meet the capital adequacy ratio and the requirement of promoters' contribution for the enhanced CC facility. v. Inflating Revenue to avail CC limit enhancement: Revenue for FY 2014-15 inflated by INR 2,300.49 Lakhs through year-end adjustment entry. It may be noted that CC limit enhanced by BoM from 500 Lakhs to 1,000 Lakhs in FY 2015-16, apparently based on the financial for 2014-15. vi Surge in Financials in 2014-15 to facilitate enhancement: The auditors observed in FY 2014-15, when then enhancement of the CC facility from INR 500 Lakhs to INR 1,000 Lakhs, a surge in revenue, profit, and inventory and a red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith ledger "GMD - Golden Days" in relation to work execution, with no work order and no revenue recognized; and ix. Arm's length pricing not assessed while estimating costs and revenue for projects. x. Inflated value of work orders issued to BIPPL by customers of BIPPL in relation to projects Commune and Orchids. 8 Modus Operandi Adopted: From the above observations of the Forensic audit Report, RP submits the following fraudulent intensions and actions: a. The Corporate Debtor was set-up for fraudulent Purpose and to defraud the creditors: This Golden Gate Group of Companies with a fraudulent intention set up the CD for various fraudulent transactions, namely, to somehow avail bank loans, to generate unaccounted cash, to manage round tripping of funds with respect to group Companies businesses, for diversion of funds amounting to fraud, etc. b. Wrong-Purpose shown to ensure loan sanction: The CD and its Directors applied for enhancement of CC facility for working capital with a fraudulent intention to use the same for purchase of Fixed Assets as the Term loan applied for Capex was rejected by Bank. c. Manipulated Financials to ensure loan sanction. d. Increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to the Corporate Debtor amounts to: Sl. No. Details Amount overdue from Group (Rs.) To be recovered from the Directors of CD (Rs.) Total amount due (Rs.) 1. Receivables overdue 322,064,5681 322,064,5681 2. Assets with Group 15,176,560 15,176,560 3. Assets not found 7,441,849 7,441,849 4. WDV of Assets sold to scrap dealers and money siphoned off 22,357,233 22,357,233 5. Inventory consumed, not invoiced 94,123,192 94,123,192 Total dues from Group 337,241,128 123,922,274 461,163,403 9. The Appellant, who is the 3rd Respondent, was heard by the Adjudicating Authority, which has been recorded by the Adjudicating Authority as follows : "3. The application is opposed by the Respondent No. 3 by filing separate reply dated 20.03.2019 by inter alia contending as follows: 1) The instant application is not maintainable either in law or on facts, and thus it is liable to be dismissed in limine on this ground alone. 2. It is true that the Company M/s. Bhuvana Infra Projects was incorporated in the year 2011. However, it is not correct to state that it is a sub-contracting arm of its group Companies. The Companies has its own objects and functions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of 'I&B Code'. 13. Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr', - '2019 SCC Online SC73' while dealing with the matter of settlement between the parties also observed that the 'National Company Law Tribunal' has inherent power under Rule 11 of the National Company Law Tribunal Rules, 2016. 14. Therefore, we hold that the 'Adjudicating Authority' which is the 'National Company Law Tribunal' has dual and interwoven role and power to pass order under Section 213 of the Companies Act, 2013 read with Rule 11 of the National Company Law Tribunal Rules, 2016. 15. Section 213 of the Companies Act, 2013 relates to 'investigation into company's affairs in other cases' and reads as follows: "213. Investigation into company's affairs in other cases The Tribunal may,- (a) on an application made by- (i) not less than one hundred members or members holding not less than one-tenth of the total voting power, in the case of a company having a share capital; or (ii) not less than one-fifth of the persons on the company's register of members, in the case of a company having no share capital, and supported by such evidence as may be necessary for the purpose of sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority is satisfied that there are circumstances suggesting that the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive to any of its members, or that the company was formed for any fraudulent or unlawful purpose and that the person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members or the members of the company have not given all the information with respect to its affairs which they might reasonably expect, and that the affairs of the company ought to be investigated, after giving a reasonable opportunity of being heard to the parties concerned, the Tribunal/Adjudicating Authority has power to refer the matter to the Central government for investigation into the affairs of the company. 17. Apart from the power conferred by Section 213 of the Companies Act, 2013, the 'National Company Law Tribunal' has inherent powers under Rule 11 of National Company Law Tribunal Rules, 2016. Therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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