TMI Blog2019 (4) TMI 1772X X X X Extracts X X X X X X X X Extracts X X X X ..... cide 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 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 opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 2012-13 177,757,510 Nil Nil 177,757,510 3. 2013-14 368,183,037 43,211,743 46,021,782 457,416,562 4. 2014-15 500,076,670 155,746,475 344,831,376 1,000,654,522 5. 2015-16 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 obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies, which are Related Parties . ii. Mr. Pratap Kunda and Mr. Sanjay Raj are the individuals related to all the above Group / Related Entities. iii. Loan from HDB Financial Services being serviced by GGPL and PPIPL, also showing Group Company relationship between the entities and Corporate Debtor. iv. Mr. Sanjay Raj is the Benami Individual in whose names the properties are being purchased by the Group Companies. b. Loans availed from Bank of Maharashtra (BOM) in a fraudulent manner and mis-utilisation of Cc facility: i. Few months Directorship to impress the Bank with Credentials of Group Entities Mr. Sanjay Raj, the Director cum KMP of the Group became director of Corporate Debtor (BIPPL) for a period of five months only during which period the first tranche of CC limit of INR 500 Lakhs was availed from BoM, by also providing personal guarantee and had hypothecated land in his name as collateral security. ii. Mis-use of CC facility 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh potentially fictitious suspense account in F.Y. 2013-14 and subsequently written-off the books of account of BIPPL in F.Y. 2016-17. d. Round Tripping Transaction: i. Identified round tripping transactions from the bank accounts of BIPPL for INR 779.00 Lakhs which could potentially be accommodation entries. e. Asset Stripping: i. Inventory worth INR 941.23 Lakhs written-off during F.Y. 2017-18 without any documentation and/or revenue being recognized. ii. Fixed assets sold to scrap dealers, resulting in INR 579.00 Lakhs of fixed assets being written-off in the books of BIPPL during F.Y. 2016-17. f . Anomalies in Accounting and Audited Financial Statements: i. Revenue for F.Y. 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 F.Y. 2015-16, apparently based on the financial for 2014-15. ii. Revenue for F.Y. 2015-16 written-off to the extent of INR 2,437.24 Lakhs through year-end adjustment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PPIPL, CPIPIL and from New Age Properties LLP in 2017, the year when New Age Properties LLP filed an application on BIPPL under Section 7 of the IBC. Planned Resignation of original Shareholder cum Directors: To avoid responsibility on loans becoming NPA all Directors of CD resign around the same time in Feb/March2017 and Dummy Directors were brought in to meet MCA requirement. g. Statutory Auditors of the Group-Companies used for the entire Modus Operandi: The Director cum Statutory Auditor of the Group Companies Mr. Rajashekar and Mr. Jayatheertha, the Statutory Auditor have been used for their expertise to facilitate the entire modus operandi. 9) Total Dues to the CD: As per the Audited Results as on 31st March 2018. The Corporate Debtor has over dues from its Group Companies, in the form of Receivable of ₹ 33.72 crores and dues towards Assets worth ₹ 1.52 Crores which were distributed to the Group Companies. Details are below: Group Company Name Net Receivables Rs. Assets of CD distributed to the Group Rs. Total Dues (Rs.) M/s. Commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the inception in 2011 to till date as shown in the forensic audit report clearly shows the fraudulent intention and actions of the parties to defraud the creditors, justifying the application u/s. 66, seeking orders directing the Group Companies/other Related parties who are individuals, to remit the over dues, consisting of the Receivables and value of Assets and Inventory distributed to the Group Companies, to pave way for the Resolution Plan under CIRP. 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 within the ambit of objects as stated in the Memorandum 85 Article of Association. Hence, it is denied that the Company M/s. Bhuvana Infra Projects (herein after referred to as Company for brevity) exclusive fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under the same provisions seeking the same relief cannot be filed. Therefore, it reflects the casual, incompetent and lackadaisical approach of the Resolution Professional but also expressly manifests her utter disregard to the orders passed by the Hon ble Adjudicating Authority. 4) The Learned Counsel for Respondent No.4 has relied upon the judgments given by the Apex court in Arcelor Mittal v. Satish Kumar Gupta and Ors., Rajputana Properties (P.) Ltd. v. Ultratech Cement Ltd. Ors., Swiss Ribbons Pvt. Ltd. Anr. v. Union of India Ors., K. Sashidhar v. Indian Overseas Bank Ors., Innovations Private Limited v. Kirusa Software ( P.) Ltd. And the object of the Code is to maximize the value of the Corporate Debtor. It shall be the endeavour of the RP to conduct the entire process with a view to find a resolution and maximize the value of the Corporate Debtor. However, in the instant case, the effort, focus and sole objective of the RP was to witch hunt the erstwhile promoters of the Corporate Debtor. 5) The RP has miserably failed to perform the acts and take the steps as required under the CIRP Regulations within the prescribed timelines. The RP has not taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forensic Audit Report dated 14.12.2018, the claims made by the RP are solely dependent on Forensic Audit Report turn out to be assumptions and presumptions. It is alleged that time and again the Resolution Professional is making false allegations and also false representations. 6. The Respondent No.9 has filed statement of objections dated 16.02.2019, by inter alia contending as follows: 1) The present application is filed with the sole intention of harassing the Respondent No. 9. It lacks bona fides and is liable to be dismissed in limine. 2) The present application has been filed seeking reliefs attachment of assets of Respondents No. 1,2,3,6,7 and 8 under section 66 of the I B Code, 2016 and thus no relief was asked for against him. 3) The Forensic Auditor has relied upon data, documentations, information and explanation that has been provided till 30th November, 2018 whereas substantial discussion and replies were given to the queries of the Auditor on 4th of December 2018 by this Respondent which has been ignored by the Auditor and finds no reference in the FAR. The FAR was conducted based on the information provided by alleged information provided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls in sanctioning of loans and its subsequent enhancement. 7. Heard Shri G.S. Kannur, learned Senior Counsel for the Applicant along with Ms. R. Bhuvaneshwari, learned Resolution Professional and Shri Deepak, learned Counsel for Respondent No.6, Shri Tarunn Surana, and learned Counsel for Respondent No.9. We have carefully perused the pleadings of the parties along with extant provisions of Code and the law on the issue. 8. Shri G.S. Kannur, the Learned Senior Counsel for the Applicant, while reiterating the various averments made in the pleadings and also relied upon the following judgments in support of his case: Bikram Chatterji v. Union of India 2018 SCC Online SC 1371 Bikram Chatterji v. Union of India 2018 SCC Online SC 3132 Pushpak Ranjeetmal Singhvi v. Icon Builders and Developers 2017 SCC Online Bom. 2571 Subrata Chattoraj v. Union of India Manu/Sc/0453/2014:(2014)8 SCC 768 IDBI Bank Ltd. v. Jaypee Infratech Ltd. [C.A. No. 26 of 2018] Ajith Kunimal Venugopal v. Oil Tools International Services (P.)Ltd. [Company Appeal (AT) No. 338 of 2017] Birla Cotsyn (India) Ltd. v. BSE Ltd. [Appeal No. 228 of 2018] UCO Bank v. M. Venu Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The above order stated to become final as it was not carried to Hon ble NCLAT. However, again the present application is filed stated to be revised Application of earlier IA No. 269 of 18 dated September, 2018, under same Sections by seeking same relief, after adding some other respondents, by inter alia seeking to attach personal assets of Respondents No. 1 to 3 without disclosing as what are properties to be attached basing the finding of Forensic Audit report. 12. It is true that once an application/petition is disposed of finally, normally another application/petition is not maintainable on the same issue b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on notice before passing any order/finding on the allegations. Admittedly, the concerned parties are not involved except one or so, which cannot be taken to be granted that concerned parties are given sufficient opportunity to defend themselves. Therefore, we are of the prima facie view that Forensic Audit Report in question cannot be taken as conclusive evidence to order recovery of the alleged amount involved in the impugned transactions. 13. It is also to be noted that it is M/s. New Age Real Properties, which has initiated CIRP proceedings against Corporate Debtor on the ground that it had committed default for ₹ 65,00,000. Surprisingly, Bank of Maharashtra, which is leading member of COC by holding 93%, has not come forward on its own with any details of investigation report on the alleged irregularities stated to have been committed by the Respondents. Bank of Maharashtra is thus only encouraging and assisting the learned Resolution professional to take action sitting on back seat. Therefore, it is also further necessary to investigate the role of Bank of Maharashtra in sanctioning the loan in question and its failure to detect the alleged diversion of funds by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professional to withdraw the main Company petition. 17. By taking into consideration of the above issues, the Hon ble NCLAT allowed the said Appeals by setting aside the impugned order dated 04.02.2019 with following observations: a) Learned Counsel appearing on behalf of the SFIO submits that Section 212 of the Companies Act is independent to Section 213 of the Companies Act. Even if such submission is accepted that the Central Government order for SFIO enquiry, the Adjudicating Authority cannot direct the same, except in terms of Section 213 of the Companies Act. b) This apart, in the present case we find that the Adjudicating Authority has not given any reason to form opinion whether it is a case for investigation by SFIO or not. The Appellant and others were also not given notice, asking them to state as to why the matter be investigated through SFIO. Merely on the request of the Resolution Professional Impugned order has been passed. c) For the reasons aforesaid and in view of the development as noticed above, we set aside the impugned order. However, it is made clear that we have not gone into the question as to whether transaction in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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