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of <h1>Fraudulent insolvency initiation claims, including 'fraudulent bank trading,' probed under IBC ss.65-66; appeal dismissed, inquiry continues.</h1> Allegations of fraudulent or malicious initiation of the insolvency resolution process, including 'fraudulent bank trading,' were held to be examinable by ... Fraudulent bank trading - Insolvency Resolution Process - 'Financial Creditor' committed a fraud on the basis of record filed by 'Corporate Debtor' which was seriously contested by the 'Financial Creditor' - HELD THAT:- We find that 'the fraudulent or malicious initiation of the proceedings' and 'fraudulent bank trading' etc. can be looked into by Tribunal under Sections 65 and 66 of the MB Code. In any case, during the course of Insolvency Resolution Process, if allegation of fraud by one or other party is brought to the notice of the Adjudicating Authority it is always open to the Adjudicating Authority to notice the appropriate authorities and parties to find out whether a prima facie case is made out and the same has any effect in the resolution process or not. It is informed that the matter was again taken by the Adjudicating Authority on 23rd August, 2017 and when on the said date further observations and direction have been made. The said order is not under challenge. As the Adjudicating Authority to find out the truth of the allegation has issued notice, we are not inclined to interfere with the order at this stage. Appeal is dismissed with aforesaid observations. A Corporate Insolvency Resolution Process was pending against the corporate debtor. During the resolution process, the corporate debtor alleged that the financial creditor committed fraud based on records filed with the Registrar of Companies, which the financial creditor contested. The Adjudicating Authority listed the matter for arguments and directed the Registrar of Companies to preserve CCTV footage of visitors for the relevant period, and issued notice to an interested party. On appeal, it was argued that 'offences and penalties' under the Insolvency and Bankruptcy Code, 2016 can be examined only by the Special Judge under Chapter VIII. The Appellate Tribunal held that allegations such as 'fraudulent or malicious initiation of the proceedings' and 'fraudulent bank trading' may be examined by the Tribunal under Sections 65 and 66, and that when fraud is alleged during the insolvency resolution process, it is open to the Adjudicating Authority to involve appropriate authorities/parties to determine whether a prima facie case exists and whether it impacts the process. As notice had been issued to 'find out the truth of the allegation,' the Tribunal declined to interfere at this stage, while preserving liberty to challenge any adverse order, including under section 31.
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