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TMI Blog2019 (4) TMI 1772X X X X Extracts X X X X X X X X Extracts X X X X ..... es-judicata. However, basing on the material evidence like Forensic Audit Report submitted by the Applicant, we are not inclined to throw the application on technical grounds and to decide the matter on merits of the case. The Learned Resolution professional has not placed any substantial material before the Tribunal to show as what course of action she has taken in pursuance to the order dated 24th October, 2018 passed in IA No. 269 of 2018 except merely contending that that Criminal action is separate and Section 66 proceedings are different and thus there is no bar for the applicant to file an another application in view of new material i.e. Forensic Audit Report available. It is true Section 60(4) of Code confers powers on the Adjudicating Authority with all the powers of Debt Recovery Tribunal for the purpose of CIRP, Liquidation or Bankruptcy etc. However, basing on various allegations of fraud on the part of the Ex- Directors of Corporate Debtors since the year 2011, the matter requires further investigation basing on the Forensic Audit Report. The findings given in Forensic Audit Report only prima established the fraudulent transactions, in question. Therefore, it is necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-16 95,241,321 210,422,005 470,192,235 775,855,561 6. 2016-17 23,739,714 29,576,977 347,863,430 414,855,234 7. 2017-18 21,945,758 65,117,153 37,681,398 124,744,309 Total 1,226,122,317 504,074,353 1,246,590,221 2,990,462,005 2) RP also observes that the Corporate Debtor presently does not carry any business activity and hence the company is made a Shell Company with no employees, no business and no assets. All the assets of the Company have been diverted to the Group entities. 3) Under Section 25(2) of the Code, the Resolution Professional has to take control and custody of all the assets of the Corporate Debtor. As there are no other assets available with the Corporate Debtor, except receivables from the Group Companies, the Resolution Plan has to come out of the Assets diverted to Group Companies and Receivables which are overdue from the group Companies. 4) Earlier IA No. 269/18 was filed u/s. 66 of the Code with prayer to pass orders to recover ₹ 46 crores from the Group Company and its Directors. Since the Tribunal finds that RP has not submitted any Investigation Report, like Forensic Audit Report etc., to prove the fraudulent transactions sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity from BoM against the terms of sanction: The Cash Credit facility, meant for working capital, was mis-utilised by transfer to other bank accounts of BIPPL and in turn used for purchase of fixed assets for INR 79.50 Lakhs in contravention to the conditions of CC limit sanction. As per the loan sanction, the facility can be called back if there is violation in the utilization of funds. iii. Enhancing bank CC facility from ₹ 5 crores to ₹ 10 crores to accommodate Fixed assets purchase in violation of Loan sanction Terms: BIPPL had applied for a term loan of INR 450 Lakhs with BoM in relation to setting up of a pre-cast plant for the Commune 1 project under CPIPL in F.Y. 2015-16. However, the term loan was rejected due to issues with the property pledged as collateral and the bank requesting additional security which BIPPL was not willing to give. Thus, it appears that during F.Y. 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 Pre-cast Plant which is in violation of the restrictive covenant of the loan. iv. Further Issue of shares from ICD from the group: During F.Y. 2015-16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment entry. However BOM enhanced CC limit from 1,000 Lakhs to 1,250 Lakhs in F.Y. 2016-17. iii. Revenue for F.Y. 2016-17 written-off to the extent of INR 2,706.26 Lakhs through year end adjustment entry. iv. Undue Benefit to the Statutory Auditor: Outstanding balance of INR 8.82 Lakhs of statutory auditor settled through transfer of plots worth ₹ 26 Lakhs to Miracle Pools Private Limited, an entity registered by the Auditor. v. Variance in accounts receivable between financial statements of BIPPL and payables in the financial statements of customers of BIPPL. vi. Revenue, cost and advances recognized for Golden Serenity project with no work order. vii. Cost recognized and advances given in relation to Golden County project with no work order with no revenue recognized. viii. Cash and other receipts of INR 44.91 Lakhs associated with 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. (Respondent 6) 46,322,665 13,375,380 59,698,045 M/s. Golden Gate Properties Ltd. (Respondent 8) 41,804,526 1,801,180 43,605,706 M/s. Prisha Properties India Pvt. Ltd. (Respondent 7) 233,937,377 233,937,377 Total 322,064,568 15,176,560 337,241,128 10) Also, as per Audited results for 2017-18, the rest of the assets shown in the books have been distributed to the Group Companies to the extent of ₹ 1,51,76,560/-(₹ 1.52 Crores), duly confirmed by the Director of the Company and the rest of the assets worth ₹ 7,441,849 is not found physically. Also, as pointed out in the audit report 2017/18 and also confirmed in the forensic audit report, the inventory of amount ₹ 941,23,192/- have been written off without any revenue recognized/no invoice raised. Hence, the minimum amount due from the Group 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 322,064,568 322,064,568 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the doctrine of res-Judicata. And the same is not maintainable either on law or on facts and it is liable to be dismissed at the threshold without going into the merits of the case. 2) The Tribunal has passed an order dated 24.10.2018, by inter alia observing as under: "As stated supra, the COC in its meeting dated 06.10.2018 has taken a decision, authorizing RP to initiate Criminal Proceedings for the alleged recovery or dues amounting of ₹ 46 Crores defrauded by the group Company of the Corporate Debtor. The learned RP has not made out any prima facie case so as to take cognizance of the alleged discrepancies under Section 66. There cannot be parallel proceedings before the Tribunal and Criminal Court. Moreover, appropriate forum for initiating fraudulent actions is Criminal Court. Therefore, it is for the RP to initiate appropriate Criminal Proceedings as per the decisions of COC as states supra. Therefore, it is contended that the order has passed by the Tribunal has reached its finality as the same was not questioned before the Hon'ble NCLAT." 3) It is alleged that the Resolution Professional, who is expected to have at least the basic knowledge of Law partici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Age Properties LLP itself is not a Group Company belied this claim. However, the RP is put to strict proof of the allegations made in this regard. It is true that the RP has to take control of all the assets of the Corporate Debtor but it is false to state that there are receivables overdue from the Group Companies. 3) It is denied that the Forensic Audit Report has observed several irregularities in the business of the Corporate Debtor. The Audit report made without calling for any clarifications from the Respondents is per se unacceptable in the eye of law. While conducting a Forensic Audit Report it is important that the Auditor should approach the case from both the perspectives. Whereas, the Audit report submitted to this Hon'ble Tribunal is a one sided report and therefore, does not hold good in the eye of law and the entire exercise of appointing the Forensic Auditor BDO by the COC is orchestrated by the RP only to protect the interest of Lender namely, Bank of Maharashtra from its failure to comply with the terms of sanction before the release of Loan Funds. It is further alleged that the Resolution Professional had hidden the fact from the Tribunal that Forensic Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the Borrower in seeking enhancement of loan the alleged "modus Operandi". The Statutory Auditor does not render any advisory services, Statutory Auditor does not run the Company, nor its affairs and the Role of the Statutory Auditor does not run the Company, nor its affairs and the Role of the Statutory Auditor comes only at the end of the year when the Final Accounts of the Company are adopted by the Board of Directors for his Review and Report. The Statutory Auditor accordingly has confined his role only to Audit the books of the Company for the Financial Years 2014-15 and 2015-16. The Statutory Auditor has not rendered any Service other than the Statutory Audit. The Statutory Auditor was at no point of time was involved either in preparing the CMA data or in preparing the project report nor was involved in any other Bank finance relating activity. The Respondent No.9 is not aware of the alleged loan transactions with Bank of Maharashtra and its subsequent enhancement. The Resolution Professional has made uncalled allegations against the Respondent to protect the bank official who have sanctioned the loan and its subsequent enhancement. It is evident that the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, which are admittedly summary in nature , can enter into complicated issues like fraudulent transactions , irregularities etc. so as to fix the quantum of amount to be recovered from those transactions; 4) Whether transactions like fraudulent trading or wrongful trading as contemplated U/s. 66 of Code and other provisions can be invoked under the existing provisions of Code without further discreet enquiry to be made by institutions like SFIO. 11. Before adverting to fundamental issues raised in the case, it is necessary to advert to casual applications being filed by the Learned Resolution Professional filed without raising any substantial questions of law and facts. As stated supra, the Learned Resolution professional has earlier filed IA No. 269 of 2018 against three Ex. Directors namely C.D. Sanjay Raj, M. Srinivas, L. Ramesh, B.S. Rajasekhar and three other Companies, U/s. 66 R/w 25(2) of Code by inter alia seeking to attach personnel properties of Respondents No. 1 to 4, who are personal guarantors for defrauding Creditors to the tune of ₹ 46,11,63, 402. The Tribunal disposed of said IA vide an order dated 24.10.2018, by inter alia stating as follows; "As stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states: "This Report is prepared solely for the client information. The Report is intended for distribution only to the Bank of Maharashtra and may not be relied upon by other parties ("Third Party"). Neither this deliverable nor its contents may be distributed to, discussed with, or otherwise disclosed to any third party without prior written consent of BDO India. We accept no responsibility or liability to a Third Party to whom our report may be shown or in whose hands it may come. The report should not be published or reproduced in part or whole without prior written consent from us." 4) Page 10 of the Forensic Audit Report states: "in respect of the bank accounts statement provided by BoM for loan account of BIPPL, the information appearing against certain transactions were not sufficient to ascertain the name of the payee and nature or transaction. We are not able to ascertain the beneficiary details for 750 transactions out of total 33,858 transactions appearing in loan account of BIPPL in BoM books. The 750 transactions aggregates to total credits (receipts) of INR 817.77 Lakhs and to total debit (payment). 5) Moreover, principles of natural justice demands that conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Promoter of Tejkamal Pharmaceuticals Pvt. Ltd, U/s. 66, R/w Rule 25(2) of the I&B Code, 2016, by inter alia seeking to quash impugned sale transactions as null and void as its violates all related laws of the land and is opposed to public policy etc. The Adjudicating Authority, after considering the matter, has disposed of the said IAs, by referring the matter to SFIO to test the veracity of allegations and counter-allegations made by the parties. 16. Aggrieved by the said common order dated 20th August, 2019 of the of Tribunal to refer the matter to SFIO, the parties have preferred Company Appeal (AT) (Insolvency) Nos. 543-544 of 2018. While the Appeals are pending, the learned Resolution Professional after compromising the fraudulent transactions in questions, has filed IA No. 378 of 2018 U/s. 12A of the Code R/w Regulation 30A of the IBBI (IRP for Corporate Persons) Regulations, 2016, by inter alia seeking to withdraw the main Application/Petition on the ground that CIRP process was completed by settling claims of all creditors of the Corporate Debtor. Therefore, the Tribunal has disposed of the CP No. 255 of 2016 (T.P No. 106 of 2017), by an order dated 19th November, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cie view that findings given in Forensic Audit Report only prima established the fraudulent transactions, in question. Therefore, it is necessary to conduct further investigation by SFIO in the affairs of Company basing on the findings given in Forensic Audit Report, after affording proper opportunity to concern opposite parties to defend them. Hence, we are inclined to refer the matter to SFIO for further investigation by invoking powers conferred U/s. 212/213 of the Companies Act, 2013 and thereafter, aggrieved party can take appropriate legal course of action. 19. In the result by exercising powers conferred on this Adjudicating Authority, which being NCLT, U/s. 213 of Companies Act, 2013, IA No.446/2018 in C.P(IB) No.l22/BB/2017 is disposed with the following directions : 1) Learned Resolution Professional is directed to 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/ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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