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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 ..... ose of Interlocutory Application in exercising of power conferred u/s 213 of the Companies Act, 2013, with following directions: "19. In the result by exercising powers conferred on this Adjudicating Authority, which being NCLT, U/s 213 of Companies Act, 2013, I.A. No. 446/2018 in C.P. (IB) No. 122/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/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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the 2nd Respondent) and Mr. M. Srinivas (who was the 3rd Respondent and Appellant herein) alleging that they are responsible for defrauding the creditors and in order to recover the total dues of Rs. 461,163,402/- by exercising power conferred on the 'Adjudicating Authority' / 'National Company Law Tribunal' and on the said application, the order has been passed referring the matter to the Central 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 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 per-cast plant for the Commune 1 project under CPIPL in FY 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 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-e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y confirmed by the Director of the Company and the rest of the assets worth Rs. 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 Rs. 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 322,064,5681 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested, the power of the National Company Law Tribunal under the Companies Act, 2013 does not stand extinguished. 12. In the case of "Y. Shivram Prasad Vs. S. Dhanapal & Ors." - Company Appeal (AT) (Insolvency) No. 224 of 2018 etc." disposed of on 27th February, 2019 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'. 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447." 16. From Clause (b) of Section 213 of the Companies Act, 2013, it is clear that on an application made to it 'by any other person' or 'otherwise', if Tribunal/Adjudicating Authority 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, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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