Tribunal Orders Registrar to Inspect Books & Directs Respondents to Contribute to Corporate Debtor Assets

The Tribunal directed the Registrar of Companies, Coimbatore, to inspect the books and conduct inquiries for the transactions alleged under certain clauses. The respondents were directed to contribute a specified amount to the assets of the corporate debtor within a set timeframe. The application was disposed of with these directions.

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Issues Involved:
1. Invocation of Section 66 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) for fraudulent and wrongful trading.
2. Diversion of funds to related parties.
3. Non-handover of cash balance.
4. Arbitrary write-off of receivables.
5. Payments made to customers and written off.
6. Loans given to parties and written off.
7. Diversion of stocks.

Detailed Analysis:

1. Invocation of Section 66 of IBC, 2016 for Fraudulent and Wrongful Trading:
The applicant sought to invoke Section 66 of the IBC, 2016, focusing on fraudulent trading and wrongful trading. Section 66(1) imposes liability on any person knowingly carrying on business with dishonest intent to defraud creditors. Section 66(2) deals with directors or partners who knew or should have known about impending insolvency but failed to minimize potential loss to creditors. The Tribunal examined whether the transactions alleged by the applicant fell within the confines of wrongful trading under Section 66(2).

2. Diversion of Funds to Related Parties:
The applicant alleged that funds were diverted to related parties, Trinity Papers India P. Ltd. and Sivasakthi International, amounting to Rs. 541.58 lakhs and Rs. 378.73 lakhs respectively. The Forensic Audit Report indicated these transactions were preferential under Section 43 of the IBC, 2016. However, the Tribunal noted that third parties involved in these transactions were not impleaded, making it challenging to consider the allegations without their presence.

3. Non-Handover of Cash Balance:
The applicant claimed that former directors did not hand over a cash balance of Rs. 12.31 lakhs to the Interim Resolution Professional (IRP) when the Corporate Insolvency Resolution Process (CIRP) commenced. The Tribunal found no satisfactory explanation from the respondents regarding the utilization of the cash balance, leading to the conclusion that the respondents had removed the cash with dishonest intent to defraud creditors. The respondents were directed to contribute Rs. 12.31 lakhs to the assets of the corporate debtor.

4. Arbitrary Write-Off of Receivables:
Receivables amounting to Rs. 649.39 lakhs from Sakal Papers P. Ltd. were allegedly written off arbitrarily, causing wrongful loss to the corporate debtor. The Tribunal noted that the applicant failed to demonstrate how these write-offs were computed and did not implead necessary third parties involved in these transactions, making it difficult to consider the allegations.

5. Payments Made to Customers and Written Off:
Payments amounting to Rs. 50.28 lakhs made to customers were written off, allegedly causing wrongful loss to the corporate debtor. The Tribunal observed that the applicant did not provide sufficient evidence or involve necessary third parties, making it challenging to consider these allegations.

6. Loans Given to Parties and Written Off:
Loans given to various parties amounting to Rs. 43.49 lakhs were written off. The Tribunal noted that the corporate debtor had no objects for providing loans to third parties and that these transactions were a ruse for pilferage. However, the applicant failed to implead necessary third parties, making it difficult to consider the allegations.

7. Diversion of Stocks:
The applicant alleged that stocks worth Rs. 2,70,46,147 were diverted by the respondents. The Tribunal found inconsistencies in the stock figures provided by the respondents but noted that the applicant failed to quantify how the figure of Rs. 2,70,46,147 was computed. The Tribunal directed the Registrar of Companies, Coimbatore, to inspect the books and conduct inquiries under Sections 206 and 207 of the Companies Act, 2013.

Conclusion:
The Tribunal directed the Registrar of Companies, Coimbatore, to inspect the books and conduct inquiries for the transactions alleged under clauses (a), (b), (d), (e), and (f) of the relief portion. For clause (c), the respondents were directed to contribute Rs. 12.31 lakhs to the assets of the corporate debtor within four weeks. The application was disposed of with these directions.

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