2023 (7) TMI 1127 - HC - Insolvency and Bankruptcy

NCLT Addresses Mismanagement & Financial Discrepancies in M/s.SLO Industries Case

Anil Kumar Ojha Versus Central Bureau of Investigation, Rep. by DIG-ACB, Shastri Bhavan, Mr. Chandramouli Ramasubramaniam, Union Bank of India, [Formerly the Corporation Bank] SAMMV Branch, Rep. by its Assistant General Manager, The Chairman, Union Bank of India

The National Company Law Tribunal (NCLT) addressed issues of mismanagement, financial discrepancies, manipulation of accounts, and non-cooperation in a ... Misconduct by Resolution Professional - Liquidator is not able to furnish the details called by the NCLT - Resolution Professional not allowed to manage the affairs of the company due to non cooperation and interruption by the erstwhile Manager - HELD THAT:- This communication goes to show that the petitioner herein has already approached the CBI with the complaint followed by the representation that was forwarded to CVC Union Bank and CVC Union Bank after recording the matter that it has already been seized of by the NCLT and Resolution Professional been appointed, warned to approach the appropriate authority. As this Court has already pointed out as one round of complaint had been initiated against the Resolution Professional came to an end by an order passed by IBBI on 29.10.2021 followed by the order in the review application dated 21.11.2021. Now certain new facts from the communication of the Liquidator has come to light and in the normal course, query raised by the Liquidator could have been explained by the Resolution Professional, but he had failed to do so for more than a year. The query raised by the Liquidator regarding non reconciliation of account and stocks, bank cash balance to the tune of 840 Crores need to be proved and explained and therefore, the CBI is directed to conduct preliminary enquiry on the complaint dated 13.08.2021 and the representation been given by the petitioner on 19.01.2021. If need the communication of the Liquidator dated 01.03.2022 shall also be taken for consideration for taking preliminary enquiry and if any cognizable offence is made out, then the CBI can register the complaint and proceed in accordance with law in the course of conducting preliminary enquiry. If the investigating officer need any access to any account in the premises of SLO Industries, party concern shall provide it without any demur or protest. Petition disposed off. Issues involved:The judgment involves issues related to mismanagement and financial discrepancies in a company under the Insolvency and Bankruptcy Code, allegations against the interim resolution professional, non-cooperation by former directors, manipulation of balance sheets, failure to provide financial statements, non-payment of GST, and the need for a specialized agency to investigate potential criminal activities.Issue 1: Mismanagement and Financial DiscrepanciesThe company, M/s.SLO Industries Limited, fell under a scam and was referred to the Insolvency and Bankruptcy Code. The National Company Law Tribunal (NCLT) entrusted the management to the interim resolution professional, followed by the Liquidator taking over in 2022. Complaints were lodged against the interim resolution professional, leading to a review application and subsequent orders by the appropriate authority.Issue 2: Reconciliation of Accounts and Financial StatementsThe Liquidator found discrepancies in the company's accounts between the inventory at the time of Resolution Professional's tenure and the stock position during the handover. Despite seeking explanations and responses from the Resolution Professional, the reconciliation of accounts, including a significant closing stock inventory difference of 840 Crores, remained unresolved. The NCLT directed the Liquidator to provide audited financial statements for specific years.Issue 3: Allegations of Manipulation and Non-CooperationThe Liquidator's report highlighted that the company's balance sheet was manipulated by former directors to show a favorable picture. The Chartered Accountant appointed by the directors did not provide necessary financial details, hindering the Liquidator's ability to comply with NCLT directives. The Resolution Professional faced allegations of mismanagement and non-cooperation by former management, leading to criminal complaints and subsequent withdrawal.Issue 4: Non-Payment of GST and Financial TransparencyThe Resolution Professional faced scrutiny for non-payment of GST and other financial obligations, claiming legal challenges as reasons for non-compliance. The court emphasized the importance of transparency in business transactions and noted the lack of satisfactory explanations provided to the Liquidator, prompting the need for further investigation by a specialized agency.Separate Judgment:A separate judgment was delivered directing the Central Bureau of Investigation (CBI) to conduct a preliminary inquiry based on a complaint and representation against the Resolution Professional. The CBI was instructed to investigate potential cognizable offenses related to the financial discrepancies and non-compliance highlighted in the case, with access to relevant company accounts if necessary.Conclusion:The judgment addresses various issues surrounding mismanagement, financial discrepancies, manipulation of accounts, non-cooperation, and the need for transparency in business dealings. It underscores the importance of accountability and proper investigation into potential criminal activities within the company, ultimately directing the CBI to conduct a preliminary inquiry for further action.