AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 290
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....d judgment dated 16th April, 2019 dispose of Interlocutory Application in exercising of power conferred u/s 213 of the Companies Act, 2013, with following directions: "19. In the result by exercising powers conferred on this Adjudicating Authority, which being NCLT, U/s 213 of Companies Act, 2013, I.A. No. 446/2018 in C.P. (IB) No. 122/BB/2017 is disposed with the following directions : 1) Learned Resolution Professional is directed to forward all material documents, which is connected to the present case including the Forensic Audit Report dated 14.12.2018, the Central Government, within a period of three weeks from the receipt of the copy of the order. 2) Learned Resolution Professional is also directed to furnish all the documents forwarded to the Central Government, to all parties/other side duly following principles of natural justice. 3) The Central Government is directed to refer the matter to the SFIO for further investigation into the Affairs of the Corporate Debtor, Bank of Maharashtra and other related Companies including Director of Companies of Corporate Debtor & related Companies and officials of Bank of Maharashtra basing on the Re....
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....al assets of one Mr. Pratap Kunda (who was the 1st Respondent) and Mr. Sanjay Raj (who was the 2nd Respondent) and Mr. M. Srinivas (who was the 3rd Respondent and Appellant herein) alleging that they are responsible for defrauding the creditors and in order to recover the total dues of Rs. 461,163,402/- by exercising power conferred on the 'Adjudicating Authority' / 'National Company Law Tribunal' and on the said application, the order has been passed referring the matter to the Central Government for investigation through SFIO. The appellant - 'Mr. M. Srinivas has challenge the aforesaid order. 6. Learned counsel appearing on behalf of the Appellant submitted that the Adjudicating Authority has not been conferred with power u/s Section 213 of the Companies Act, 2013 in absence of any amendment made in Schedule XI of the I&B Code. It was also submitted that the Adjudicating Authority has powers under Section 49, - "Transactions defrauding creditors" - which relates to undervalued transaction; Section 65, which provides action against any person who has done certain things fraudulently or with malicious intent during the 'Insolvency Resolution Process' or 'Liquidation'; Section 6....
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....n, the facility can be called back if there is violation in the utilization f funds. iii Enhancing bank CC facility from Rs. 5 crores to Rs. 10 Crores to accommodate Fixed assets purchase in violation of Loan sanction Terms: BIPPL had applied for a term loan of INR 450 Lakhs with BoM in relation to setting up of a per-cast plant for the Commune 1 project under CPIPL in FY 2015-16. However, the term loan was rejected due to issues with the property pledged as collateral and the bank requesting additional security which BIPPL was not willing to give. Thus, it appears that during FY 2014-15 the CC facility from BoM was enhanced from INR 500 Lakhs to INR 1,000 Lakhs in order to potentially accommodate the setting up of Precast Plant which is in violation of the restrictive covenant of the loan. iv Further issue of shares from ICD from the group: During FY 2015-16, the Inter Corporate Deposit ("ICD") from PPIPL was used to allot an additional 37,00,000 shares to M. Srinivas taking the subscribed share capital to 50,00,000 shares. Therefore, RP is of the view that this done primarily to meet the capital adequacy ratio and the requirement of promoters' ....
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.... iv Undue Benefit to the Statutory Auditor: Outstanding balance of INR 8.82 Lakhs of statutory auditor settled through transfer of plots worth Rs. 26 Lakhs to Miracle Pools Private Limited, an entity registered by the Auditor. v Variance in accounts receivable between financial statements of BIPPL and payables in the financial statements of customers of BIPPL. vi Revenue, cost and advances recognized for Golden Serenity project with no work order. vii. Cost recognized and advances given in relation to Golden County project with no work order with no revenue recognized. viii. Cash and other receipts of INR 44.91 Lakhs associated with ledger "GMD - Golden Days" in relation to work execution, with no work order and no revenue recognized; and ix. Arm's length pricing not assessed while estimating costs and revenue for projects. x. Inflated value of work orders issued to BIPPL by customers of BIPPL in relation to projects Commune and Orchids. 8 Modus Operandi Adopted: From the above observations of the Forensic audit Report, RP submits the following fraudulent intensions and actions: a. The Corporate Debtor....
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....perties Ltd. (Respondent 8) 41,804,526 1,801,180 43,605,706 M/s. Prisha Properties India Pvt. Ltd. (Respondent 7) 233,937,377 233,937,377 Total 322,064,568 15,176,560 337,241,128 10. Also as per Audited results for 2017-18, the rest of the assets shown in the books have been distributed to the Group Companies to the extent of Rs. 1,51,76,560/-(Rs. 1.52 Crores), Duly confirmed by the Director of the Company and the rest of the assets worth Rs. 7,441,849 is not found physically. Also, as pointed out in the audit report 2017/18 and also confirmed in the forensic audit report, the inventory of amount Rs. 941,23,192/- have been written off without any revenue recognized/no invoice raised. Hence, the minimum amount due from the Group to the Corporate Debtor amounts to: Sl. No. Details Amount overdue from Group (Rs.) To be recovered from the Directors of CD (Rs.) Total amount due (Rs.) 1. Receivables overdue 322,064,5681 322,064,5681 2. Assets with Group 15,176,560 15,176,560 3. Assets not found 7,441,849 7,441,849 4. WDV of Assets sold to scrap ....
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....ation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located." 11. The provision aforesaid makes it clear that the National Company Law Tribunal is empowered to deal with insolvency resolution and liquidation for corporate persons including corporate debtor and others. Merely because additional power of Adjudicating Authority has been vested, the power of the National Company Law Tribunal under the Companies Act, 2013 does not stand extinguished. 12. In the case of "Y. Shivram Prasad Vs. S. Dhanapal & Ors." - Company Appeal (AT) (Insolvency) No. 224 of 2018 etc." disposed of on 27th February, 2019 the Appellate Tribunal held that the Adjudicating Authority has dual role of 'Adjudicating Authority' and 'National Company Law Tribunal' for the purpose of 'I&B Code'. 13. Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr', - '2019 SCC Online SC73' while dealing with the matter of settlement between the parties also observed that the 'National Company Law Tribunal' has inherent power under Rule 1....
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.... to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447." 16. From Clause (b) of Section 213 of the Companies Act, 2013, it is clear that on an application made to it 'by any other person' or 'otherwise', if Tribunal/Adjudicating Authority is satisfied that there are circumstances suggesting that the business of the company is being conducted with intent to defraud its creditors, members or any othe....