2026 (3) TMI 662 - AT - IBC

Forensic audit evidence rejected where unsigned, disclaimer laden and uncommissioned by authorised parties; fresh audit relief denied.

The article addresses whether an unsigned, disclaimer laden forensic/transaction audit report commissioned by suspended management should be admitted and ... Seeking directions for a fresh transaction/forensic audit and re-examination of admitted claims - bogus claimants based on sham cash receipts while abandoning the conduct of forensic audit - suspended management of the Corporate Debtor​​​​​​​ - commercial wisdom of committee of creditors - maintainability of application under insolvency code - confidentiality of committee of creditors information - duty of resolution professional to form and record opinion before filing avoidance applications. Admissibility of forensic/transaction audit commissioned by suspended management - HELD THAT:- The Tribunal upheld the Adjudicating Authority's refusal to take the Baker Tilly report on record because the report lacked indicia of authenticity and ownership (unsigned, unstamped, bearing disclaimers), was presented as a draft without substantiating certification, and was commissioned by an interested party. The court emphasised that such a suo-moto report from the suspended management raises conflict of interest concerns, undermines independence and credibility, may breach confidentiality of CoC/RP material, and therefore the Adjudicating Authority was entitled to decline reliance on the report. [Paras 10, 11] The forensic/transaction audit report commissioned by the suspended management was not admissible and the Adjudicating Authority did not err in refusing to take it on record. Locus of suspended management to initiate forensic audit - Whether the suspended management had authority or maintainable cause under the IBC to conduct a forensic audit and seek its acceptance under Section 65/Sections 60(5) and 65. - HELD THAT:- The Tribunal endorsed the Adjudicating Authority's view that there is no provision in the Code entitling the suspended management to conduct an independent forensic audit and to seek its formal acceptance where no allegation of fraudulent initiation of CIRP is made. The impugned application seeking to place the report on record and obtain rulings thereon was therefore not maintainable in the form presented. [Paras 8, 10] The suspended management lacked a recognised entitlement to unilaterally commission and press for judicial acceptance of a forensic audit; the application under Sections 60(5)/65 was not maintainable on that basis. Duty of resolution professional to form and record opinion before filing avoidance applications - Whether the Resolution Professional improperly filed avoidance applications without forming or recording the requisite opinion or without affording the suspended management an opportunity to respond. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that the RP had submitted a detailed report reflecting formation and determination of his opinion before filing avoidance applications and that the suspended management had filed objections to those applications; consequently the grievance that the RP failed to afford a fair chance or had not formed the statutory opinion was not established. [Paras 11] The challenge to the RP's filing of avoidance applications was rejected; the RP had complied with the requirement of recording his opinion and the suspended management had avenues to object. Final Conclusion: The appeal is dismissed and the impugned order is affirmed; the Tribunal found no infirmity in the Adjudicating Authority's refusal to admit the forensic report commissioned by the suspended management, held that the suspended management lacked entitlement to unilaterally conduct such an audit for judicial acceptance, and rejected the challenge to the RP's filing of avoidance applications. Issues: Whether the Adjudicating Authority erred in refusing to take on record the Baker Tilly forensic/transaction audit report and in dismissing IA No. 151 of 2025 filed by the suspended management seeking directions for a fresh transaction/forensic audit and re-examination of admitted claims.Analysis: The appeal challenges only IA No. 151 of 2025 which sought recording and ruling upon a forensic audit report purportedly commissioned by the suspended management and reliefs directing the Resolution Professional to conduct fresh transaction/forensic audit and re-examine admitted claims. The statutory framework under the Insolvency and Bankruptcy Code, 2016 and the CIRP regulations recognises the role and duties of the resolution professional and the commercial decision-making authority of the committee of creditors. The Adjudicating Authority examined the Baker Tilly report and found it unsigned, unstamped, replete with extensive disclaimers and lacking indicia of independent audit ownership and authenticity. The Adjudicating Authority also noted that the suspended management had no authorized locus to commission a transaction/forensic audit at its own instance, that such a report risked conflict of interest and bias, and that confidentiality of CoC information could be breached by unilateral commissioning. The record showed that the resolution professional had formed and filed his opinion and had initiated appropriate avoidance proceedings, and that objections to those proceedings by the suspended management were already on record. The impugned order therefore assessed both procedural and evidentiary infirmities in treating the Baker Tilly report as reliable or admissible and evaluated maintainability of the prayer under Sections 60(5) and 65 of the Code in the context of the facts presented.Conclusion: The Adjudicating Authority did not err in refusing to take on record the unsigned and disclaimer-laden forensic/transaction audit report commissioned by the suspended management and in dismissing IA No. 151 of 2025; the appeal is dismissed and the impugned order is affirmed.