2020 (10) TMI 967 - Tri - Companies Law

Tribunal orders production of financial statements & documents for forensic examination

The Tribunal directed the 1st Respondent Company to produce original financial statements for 2013-14 and 2014-15, and the applicant to produce the ... Oppression and mismanagement - forgery of signature on the Financial Statements of the 1st Respondent Company for the Financial Years 2013-14 and 2014-15, the Power of Attorney dated 31.07.2006 and the two PANCARDS bearing Nos. ASEPK5529M and AFWPN7566B - requirement of forensic investigation or not - HELD THAT:- Considering the signature in the Financial Statements and the two PAN cards of the applicant and also perusing the letter dated 23.04.2018 sent by the Company Secretary, this Tribunal finds that there is a difference in the signature of the applicant. Hence, this tribunal is of the opinion that a forensic verification is necessary before disposing of the Company Petition. This Tribunal is of the view that the ends of natural justice would be met if all the facts that could have a bearing on the issues before us, must be brought on record. For this purpose, in exercise of the statutory powers conferred on this Tribunal under Rule 43 of the NCLT Rules 2016 and also under Section 424 of Companies Act 2013, requiring the production of documents, it is deemed necessary to call for necessary documents such as, the original audited Financial Statements for the period 2013-14 and 2014-15 signed by the Board of Directors, PAN Cards of applicant, Power of Attorney executed on 31.07.2006, in order to set a correct picture in the matter. This Tribunal hereby direct the Respondent No.1 Company to produce the original audited Financial Statements of the 1st Respondent company for the Financial Year 2013-14 and 2014-15. The applicant is also directed to produce the original Power of Attorney dated 31.07.2006 and the originals of two Pan Cards of the applicant bearing nos. ASEPK5529M and AFWPN7566B to this Tribunal in a sealed cover within two weeks from the date of receipt of this order - The applicant is directed to appear in person before this Tribunal on any working day within two weeks in order to give a specimen signature, so that the same can be sent to the Central Forensic Science Laboratory along with the documents for comparing the signature appearing in those documents. Application allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a forensic examination of disputed signatures on company records (audited financial statements for FY 2013-14 and 2014-15, a Power of Attorney dated 31.07.2006, and two PAN cards) is warranted where allegations of forgery/fabrication are raised in a petition under the oppression and mismanagement provisions of the Companies Act, 2013. 2. Whether the Tribunal has the procedural power and discretionary authority to call for original documents and to order forensic examination of disputed records, and on what terms (including cost allocation), under the NCLT Rules and Companies Act, 2013. 3. Whether prima facie inconsistencies in signatures and documentary assertions (including admission/inconsistencies by the applicant and contemporaneous company records) justify ordering production of originals, specimen signatures and referral to the Central Forensic Science Laboratory (CFSL) prior to final disposal of the main company petition. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Availability of forensic examination where forgery/fabrication of statutory records is alleged Legal framework: Rule 43(3) of the NCLT Rules authorises the Bench, where forgery/fabrication of statutory records is raised in proceedings of oppression and mismanagement, to allow an application and send disputed records for the opinion of the Central Forensic Science Laboratory (CFSL) at the cost of the party alleging fabrication, or to dismiss such application; Section 424 of the Companies Act, 2013 empowers the Tribunal to regulate procedure and exercise powers analogous to a Civil Court, including requiring discovery and production of documents and receiving evidence on affidavits. Precedent Treatment: The Tribunal applied the statutory rule (Rule 43(3)) and Section 424 powers directly; no external case law or appellate precedent is invoked, followed, or distinguished in the judgment. Interpretation and reasoning: The Tribunal observed that the petition under Sections 241, 242 and 244 alleged fabrication and forgery of signatures in company financial statements and a POA, and that discrepancies in signatures (including those on PAN cards and a company secretary's correspondence) amount to a cogent prima facie issue of authenticity. Given the express statutory provision in Rule 43(3) permitting forensic referral where forgery/fabrication is raised, and the Tribunal's Section 424 powers to call for documents and regulate procedure guided by natural justice, a forensic examination is an appropriate investigatory step prior to adjudicating the core oppression and mismanagement claims. Ratio vs. Obiter: Ratio - Where forgery/fabrication of statutory records is seriously alleged in proceedings under oppression and mismanagement, the Tribunal may, in exercise of Rule 43(3) and Section 424, order forensic examination by CFSL of disputed records at the cost of the party alleging fabrication, after calling for originals and specimen signatures as necessary. Conclusion: Forensic examination is warranted in the present proceedings; the Tribunal ordered production of originals and specimen signature and referral to CFSL for comparison. Issue 2 - Scope of Tribunal's discretionary power to call for originals, specimen signatures and to direct CFSL examination, and allocation of costs Legal framework: Section 424 confers on the Tribunal powers akin to a Civil Court (including requiring discovery and production of documents) and to regulate its own procedure guided by natural justice; Rule 43(3) specifically contemplates forensic examination and allocation of costs to the party alleging fabrication. Precedent Treatment: The Tribunal relied on the textual mandate of Rule 43(3) and the procedural powers under Section 424 without reference to other authorities. Interpretation and reasoning: The Tribunal held that natural justice requires that 'all the facts that could have a bearing on the issues' be placed on record. Exercising powers under Rule 43(3) and Section 424, the Tribunal directed production of original audited financial statements for FY 2013-14 and 2014-15, the original POA, the originals of the two PAN cards, and directed the applicant to supply a specimen signature in person. The Tribunal directed the Registry to forward these originals and specimen to CFSL within specified timelines. Consistent with Rule 43(3), the Tribunal directed that the costs of forensic examination be borne by the applicant and fixed an initial deposit amount (Rs. 30,000), while leaving open payment of any additional sum demanded by CFSL. Ratio vs. Obiter: Ratio - The Tribunal may, exercising Rule 43(3) and Section 424, require production of originals and specimen signatures and refer documents to CFSL; costs of such forensic examination may be apportioned to the party alleging fabrication, subject to Tribunal directions regarding deposit and further payments. Conclusion: The Tribunal validly exercised its discretionary powers to order production, specimen signature, CFSL referral, and to fix initial costs payable by the applicant, specifying timelines and procedural steps. Issue 3 - Sufficiency of prima facie material to justify forensic referral (weighing admissions, denials and contemporaneous documents) Legal framework: Principles of natural justice and the Tribunal's fact-finding powers under Section 424 permit preliminary investigative steps to resolve contested factual issues where authenticity of records is central to the controversy. Precedent Treatment: The Tribunal treated contemporaneous documents (company secretary's letter concerning DIR-12 and attendance confirmation) and inconsistencies in signatures (financial statements, PAN cards, Articles/Memorandum) as material bearing on the authenticity question; no separate authorities cited. Interpretation and reasoning: The Tribunal examined the pleadings and documentary record: the applicant's allegations of mismatched signatures on company incorporation documents, financial statements and PAN cards; the company secretary's letter indicating lack of attendance register signatures and later confirmation by messenger; the applicant's prior admissions regarding signing certain documents (including a later withdrawal of allegation concerning the POA). The respondents' contentions (habit of varying signatures, possession of two PAN cards, and failure to raise AGM non-convening earlier) were considered. The Tribunal found a discernible difference in the applicant's signatures across documents and concluded that a forensic verification was necessary before final determination of the company petition. The Tribunal emphasised that the presence of conflicting averments, admissions and documentary inconsistencies warrants objective forensic comparison rather than premature dismissal of the forgery allegation. Ratio vs. Obiter: Ratio - Prima facie disparity in signatures across relevant documents and contemporaneous statements may justify a forensic referral to ascertain authenticity before adjudicating substantive corporate disputes; prior admissions by the alleging party do not preclude forensic examination if overall factual matrix raises genuine doubt. Conclusion: The Tribunal concluded that the inconsistencies and materials on record provided sufficient prima facie basis to order forensic verification and production of originals and specimen signature. Ancillary findings and orders (operative conclusions) 1. The Tribunal directed production by the respondent company of original audited financial statements for FY 2013-14 and 2014-15, and directed the applicant to produce the original POA dated 31.07.2006 and the originals of the two PAN cards, within two weeks in sealed cover. 2. The applicant was directed to appear in person within two weeks to provide a specimen signature for transmission with the documents to CFSL. 3. The Registry was directed to send the originals and specimen signature with a copy of the order to CFSL (CFSL, Hyderabad) within one week of receipt of originals. 4. The applicant was directed to deposit an initial sum of Rs. 30,000 with the Pay & Accounts Officer, Ministry of Corporate Affairs, Chennai, towards CFSL costs within two weeks; any additional amount demanded was to be paid when called for. 5. The TIA for forensic examination was allowed and the directions above were issued to facilitate forensic determination prior to disposal of the main company petition.