M.Srinivas vs Ramanathan Bhuvaneshwari

[ arising out of Order dated 16th April, 2019 by NCLT, Bengaluru Bench, in I.A. Nos. 446 of 2018 in CP (IB) No. 122/BB/2017 ]

IN THE MATTER OF:

Mr. M. Srinivas No. D26, Golden Corner Apartments Belangur Gate, Sarjapur Road, Near Belandur Gate Bangalore - 560 003 ...Appellant

Versus

Smt. Ramanathan Bhuvaneshwari Resolution Professional, M/s Bhuvana Infra Projects Private Limited Flat No. 528, K.R. Garden, First Floor, 6th Block, Koramangala, Bangalore ...Respondent No. 1

Mr. Pratap Kundra 6-3-1096, FNOL 304 V.V. Vintage, Somajiguda Hyderabad- 500082, Telangana, India ...Respondent No. 2

Mr. C.D. Sanjay Raj No.4, Benson Road, Benson Town, Bangalore- 560046, Karnataka ...Respondent No. 3

Mr. L. Ramesh #230, 4th Cross, Bellandur, Bangalore South- 560103, Karnataka ...Respondent No. 4

Mr. B.R. Rajashekar No. 20, 12th Cross, RMVIInd Stage, Gedalahalli, Sanjay Nagar, Bangalore- 560094, Karnataka ...Respondent No. 5 2

M/s Commune Properties India Pvt. Ltd. # 823, 21st Main Road 8th Block, Koramangala, Bangalore, Karnataka- 560095 ...Respondent No. 6

M/s Prisha Properties India Pvt. Ltd. 1st Floor, Vikas Tower, Castle Street, Ashok Nagar, Bangalore, Karnataka- 560025 ...Respondent No. 7

M/s Golden Gate Properties Ltd. #820, 80 Feet Road, 20th Main, 8th Block, Koramangala, Bangalore, Karnataka- 560095 ...Respondent No. 8

Mr. Jayatheerthak.B NO-337/1A, 18th Cross Upper Place Orchards, Sadashivanagar, Bengaluru- 560080 ...Respondent No. 9

Present:

For Appellant : Mr. Ashish Rana and Mr. Surekh Baxy, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

In the 'Corporate Insolvency Resolution Process' against M/s. Bhuvana

Infra Projects', the 'Resolution Professional' brought to the notice of the

Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench

that the promoters of the 'Corporate Debtor' and its company defrauded a

number of creditors of more than crores of rupees. The Adjudicating

Authority by impugned judgment dated 16th April, 2019 dispose of

Company Appeal (AT) (Insolvency) No. 498 of 2019 3

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

Company Appeal (AT) (Insolvency) No. 498 of 2019 4

Bank of Maharashtra basing on the Report of

Forensic Audit Report, as expeditiously as

possible.

4) Bank of Maharashtra is also directed to extend

full assistance to the SFIO to complete the

investigation as expeditiously as possible.

5) The parties are liberty to take appropriate legal

course of action basing on the ultimate findings

given by the SFIO in this case.

6) The prayer as sought for the application stand

disposed of in the light of above directions.

7) No order as to costs."

2. The Appellant - 'M. Srinivas', majority shareholder of the 'Corporate

Debtor' (3rd Respondent before the Adjudicating Authority) has challenged

the order dated 16th April, 2019 on the ground that the Adjudicating Authority

has no jurisdiction to pass order u/s 213 of the Companies Act, 2013

3. The question arises for consideration in this appeal is whether the

'Adjudicating Authority' which is 'National Company Law Tribunal' having

dual jurisdiction under the 'Companies Act, 2013' and the' Insolvency and

Bankruptcy Code, 2016' can direct the Central Government to refer the matter

to the 'Serious Fraud Investigation Office' (SFIO) for further investigation into

the affairs of the 'Corporate Debtor', Bank of Maharashtra and other group of

companies including the Directors of the companies of Corporate Debtor and

group companies and officials of Bank of Maharashtra basing it on the

'Forensic Audit Report'.

Company Appeal (AT) (Insolvency) No. 498 of 2019 5

4. During the 'Corporate Insolvency Resolution Process', the 'Resolution

Professional' of M/s. Bhuvana Infra Projects Pvt. Ltd. earlier filed an

application (I.A. No. 269/2018) u/s 66 of the 'Insolvency & Bankruptcy Code,

2016 (for short, 'the I&B Code') for recovery of Rs. 46 Crores from the 'Groups

of Companies' and the Directors of the 'Corporate Debtor', the Adjudicating

Authority by order dated 24th October, 2018 observed that the 'Resolution

Professional' has not made out any prima facie case for alleged discrepancies

under Section 66 of the I&B Code and there cannot be a parallel proceedings

before the Tribunal and the Court.

5. Subsequently, the 'Committee of Creditors' appointed 'Forensic Auditor'

to conduct a Forensic Audit Report and on receipt of the report, 'Resolution

Professional' filed another I.A. No. 446 of 2018 under Section 66 read with

Section 25(2), 69, 70 and other applicable sections of the ''I&B Code' inter alia'

seeking to attach the personal 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

Company Appeal (AT) (Insolvency) No. 498 of 2019 6

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 66 in case during the 'Corporate Insolvency Resolution Process' or in

'liquidation process', it is found that any business of the 'Corporate Debtor'

has carried out with the intent to defraud creditors and under Section 35 for

the 'Liquidator' to investigate the affairs of the 'Corporate Debtor'. This apart,

action can be taken and punishment can be imposed by Special Court only

under Section 68(b) of the I&B Code, Section 69, Section 71 and Section 74

of the 'I&B Code'. According to the Appellant all the allegations are baseless

and not based on record.

7. From the record, we find that the Adjudicating Authority having gone

through the 'Forensic Audit Report' and observed:

"7. Following are the irregularities pointed out in

the Forensic Audit Report:

a. Related Parties' and individuals behind

these Companies:

i. Corporate Debtor M/s. Bhuvana Infra

Projects (BIPPL) M/s. Golden Gate

Properties Ltd. (GGPL), M/s. Prisha

Properties India Pvt. Ltd. (PPIL) and

M/s. Commune Properties Pvt. Ltd.

Company Appeal (AT) (Insolvency) No. 498 of 2019 7

(CPIL), New Age Properties LLP are

part of the 56 Group Companies,

which are Related Parties.

ii. Mr. Prattap Kunda and Mr. Sanjay Raj

are the individuals related to all the

above Group/ Related Entities.

iii. Loan from HDB Financial Services

being serviced by GGPL and PPIPL,

also showing Group Company

relationship between the entities and

Corporate Debtor.

iv. Mr. Sanjay Raj is the 'Benami'

Individual in whose name the

properties are being purchased by

the Group Companies.

b. Loans availed from the Bank of Maharashtra (BOM) in a fraudulent manner and mis-utilisation of Cc facility:

i. Few months Directorship to

impress the Bank with Credentials of Group

Entities: Mr. Sanjay Raj, the Director cum

KMP of the Group became director of

Corporate Debtor (BIPPL) for a period of five

months only during which period the first

tranche of CC limit of INR 500 Lakhs was

Company Appeal (AT) (Insolvency) No. 498 of 2019 8

availed from BoM by also providing personal

guarantee and had hypothecated land in his

name as collateral security.

ii. Mis-use of CC facility from BoM against

the terms of sanction: The Cash Credit

facility, meant for working capital, was

mis-utilized by transfer to other bank

accounts of BIPPL and in turn used for

purchase of fixed assets for INR 79.50

Lakhs in contravention to the conditions

of CC limit sanction. As per the loan

sanction, 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.

Company Appeal (AT) (Insolvency) No. 498 of 2019 9

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' contribution for the

enhanced CC facility.

v. Inflating Revenue to avail CC limit

enhancement:

Revenue for FY 2014-15 inflated by

INR 2,300.49 Lakhs through year-end

adjustment entry. It may be noted that

CC limit enhanced by BoM from 500

Company Appeal (AT) (Insolvency) No. 498 of 2019 10

Lakhs to 1,000 Lakhs in FY 2015-16,

apparently based on the financial for

2014-15.

vi Surge in Financials in 2014-15 to

facilitate enhancement: The auditors

observed in FY 2014-15, when then

enhancement of the CC facility from INR

500 Lakhs to INR 1,000 Lakhs, a surge in

revenue, profit, and inventory and a

reduction in debtors.

c. Financial Irregularities in the conduct of business of CD:

i. Identified cash deposits of INR 171.95

Lakhs into and cash withdrawals of INR

165.81 Lakhs from the bank accounts of

BIPPL. The transactions pattern indicates

that these could potentially be diversion

of funds for generation of unaccounted

cash.

ii. Identified purchases of INR 1,881.55

Lakhs from non-OEM, small time vendors

and traders, which appears to be

suspicious.

iii. Parking of funds of INR 346.66 Lakhs

with contactors through potentially

Company Appeal (AT) (Insolvency) No. 498 of 2019 11

fictitious suspense account in FY 2013-14

and subsequently written- off the books

of accounts of BIPPL in FY 2016-17.

d. Round Tripping Transaction:

i. Identified round tripping transactions

form the bank accounts of BIPPL for INR

779.00 Lakhs which could potentially be

accommodation entries.

e. Asset Stripping:

i. Inventory worth INR 941.23 Lakhs

written-off during FY 2017-18 without

any documentation and/or revenue being

recognized.

ii Fixed assets sold to scrap dealers,

resulting in INR 579.00 Lakhs of fixed

assets being written-off in the books of

BIPPL during FY 2016-17.

f. Anomalies in Accounting and Audited Financial Statements:

i. Revenue for FY 2014-15 inflated by INR

2,300.49 lakhs through year-end

adjustment entry. It may be noted that

CC limit enhanced by BoM from 500

Company Appeal (AT) (Insolvency) No. 498 of 2019 12

Lakhs to 1,000 Lakhs in FY 2015-16,

apparently passed on the financial for

2014-15.

ii. Revenue for FY 2015-16 written-off to the

extent of INR 2,437.24 Lakhs through

year-end adjustment entry. However,

BOM enhanced CC limit from 1,000

Lakhs to 1,250 Lakhs in FY 2016-17.

iii Revenue for FY 2016-17 written-off to the

extent of INR 2,706.26 Lakhs through

year end adjustment entry.

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.

Company Appeal (AT) (Insolvency) No. 498 of 2019 13

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 was set-up for

fraudulent Purpose and to defraud the

creditors: This Golden Gate Group of

Company Appeal (AT) (Insolvency) No. 498 of 2019 14

Companies with a fraudulent intention

set up the CD for various fraudulent

transactions, namely, to somehow avail

bank loans, to generate unaccounted

cash, to manage round tripping of funds

with respect to group Companies

businesses, for diversion of funds

amounting to fraud, etc.

b. Wrong-Purpose shown to ensure loan

sanction: The CD and its Directors applied

for enhancement of CC facility for working

capital with a fraudulent intention to use

the same for purchase of Fixed Assets as

the Term loan applied for Capex was

rejected by Bank.

c. Manipulated Financials to ensure loan

sanction.

d. Increased the losses in 2016-17 through

fictitious transactions to reduce the

statutory liability and also to justify

default to banks.

Company Appeal (AT) (Insolvency) No. 498 of 2019 15

e. Liquidated Assets/Inventory in a planned

manner in 2016-17 to make the Company

a Shell.

f. Facilitated to file u/s 7 of the Code with the

sole aim to liquidate the CD: Mr. Sanjay

Raj, one of the Common Directors in all the

Group Companies resigned from

directorship of all the customers of BIPPL

i.e. GGPL, PPIPL. CPIPIL and from New Age

Properties LLP in 2017, the year when New

Age Properties LLP filed an application on

BIPPL under Section 7 of the IBC.

Planned Resignation of original

Shareholder cum Directors: To avoid

responsibility on loans becoming NPA all

Directors of CD resign around the same

time in Feb/March 2017 and Dummy

Directors were brought in to meet MCA

requirement.

g. Statutory Auditors of the Group-

Companies used for the entire Modus

Operandi: The Director cum Statutory

Auditor of the Group Companies Mr.

Company Appeal (AT) (Insolvency) No. 498 of 2019 16

Rajashekar and Mr. Jayatheertha, the

Statutory Auditor have been used for their

expertise to facilitate the entire modus

operandi.

9) Total Dues to the CD:

As per the Audited Results as on 31st March

2018, The Corporate Debtor has overdues from

its Group Companies, in the form of Receivable of

Rs. 33.70 crores and dues towards Assets worth

Rs. 1.52 Crores which were distributed to the

Group Companies. Details are below:

Group Company Net Receivables Assets of CD Total Dues Name distributed to the (Rs.) (Rs.) Group Rs.

M/s. Commune 46,322,665 13,375,380 59,698,045 Properties India Pvt. Ltd.

(Respondent 6)

M/s. golden 41,804,526 1,801,180 43,605,706 Gate Properties Ltd.

(Respondent 8)

M/s. Prisha 233,937,377 233,937,377 Properties India Pvt. Ltd.

(Respondent 7)

Total 322,064,568 15,176,560 337,241,128

Company Appeal (AT) (Insolvency) No. 498 of 2019 17

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 To be recovered Total amount overdue from from the due (Rs.) Group (Rs.) Directors of CD (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 22,357,233 22,357,233 scrap dealers and money siphoned off

5. Inventory consumed, not 94,123,192 94,123,192 invoiced Total dues from Group 337,241,128 123,922,274 461,163,403

Company Appeal (AT) (Insolvency) No. 498 of 2019 18

9. The Appellant, who is the 3rd Respondent, was heard by the

Adjudicating Authority, which has been recorded by the Adjudicating

Authority as follows :

"3. The application is opposed by the Respondent

No. 3 by filing separate reply dated 20.03.2019

by inter alia contending as follows:

1) The instant application is not maintainable

either in law or on facts, and thus it is liable to

be dismissed in limine on this ground alone.

2. It is true that the Company M/s. Bhuvana Infra

Projects was incorporated in the year 2011.

However, it is not correct to state that it is a sub-

contracting arm of its group Companies. The

Companies has its own objects and functions

within the ambit of objects as stated in the

Memorandum & Article of Association. Hence, it

is denied that the Company M/s. Bhuvana Infra

Projects (herein after referred to as Company for

brevity) exclusive for the group Companies

obviously RP has not looked into the records

and has made bald and frivolous allegations. It

is asserted that the Application is the New Age

Properties LLP itself is not a Group Company

Company Appeal (AT) (Insolvency) No. 498 of 2019 19

belied this claim. However, the RP is put to strict

proof of the allegations made in this paragraph.

3) It is admitted that the RP has to take control of

all the assets of the Corporate Debtor but it is

false to state that there are receivables overdue

from the Group Companies. It is pointed out that

the Tribunal rejected earlier I.A. NO. 269/2018

with an observation that the appropriate from

for initiating fraudulent actions is Criminal

Court and also granted liberty to RP to initiate

Criminal Proceedings in accordance with law."

10. We have heard the learned counsel for the parties and perused the

record. As per Section 60(1) of the I&B Code the National Company Law

Tribunal having territorial jurisdiction over the place where the registered

office is located will be the Adjudicating Authority, in relation to insolvency

resolution and liquidation for corporate persons including corporate debtors

and personal guarantors, as quoted below:

"60. (1) The adjudicating Authority, in relation to

insolvency resolution and liquidation 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

Company Appeal (AT) (Insolvency) No. 498 of 2019 20

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 11 of the National Company Law Tribunal Rules, 2016.

14. Therefore, we hold that the 'Adjudicating Authority' which is the 'National

Company Law Tribunal' has dual and interwoven role and power to pass order

under Section 213 of the Companies Act, 2013 read with Rule 11 of the National

Company Law Tribunal Rules, 2016.

15. Section 213 of the Companies Act, 2013 relates to 'investigation into

company's affairs in other cases' and reads as follows:

"213. Investigation into company's affairs in other cases

The Tribunal may,--

Company Appeal (AT) (Insolvency) No. 498 of 2019 21

(a) on an application made by--

(i) not less than one hundred members or

members holding not less than one-tenth of

the total voting power, in the case of a

company having a share capital; or

(ii) not less than one-fifth of the persons on the

company's register of members, in the case

of a company having no share capital,

and supported by such evidence as may

be necessary for the purpose of showing

that the applicants have good reasons for

seeking an order for conducting an

investigation into the affairs of the

company; or

(b) on an application made to it by any other

person or otherwise, if it is satisfied that

there are circumstances suggesting that--

(i) the business of the company is being

conducted with intent to defraud its

creditors, members or any other person or

otherwise for a fraudulent or unlawful

purpose, or in a manner oppressive to any

of its members or that the company was

formed for any fraudulent or unlawful

purpose;

Company Appeal (AT) (Insolvency) No. 498 of 2019 22

(ii) persons concerned in the formation of the

company or the management of its affairs

have in connection therewith been guilty of

fraud, misfeasance or other misconduct

towards the company or towards any of its

members; or

(iii) the members of the company have not

been given all the information with respect

to its affairs which they might reasonably

expect, including information relating to

the calculation of the commission payable

to a managing or other director, or the

manager, of the company,

order, after giving a reasonable

opportunity of being heard to the parties

concerned, that the affairs of the company

ought to be investigated by an inspector or

inspectors appointed by the Central

Government and where such an order is

passed, the Central Government shall

appoint one or more competent persons as

inspectors to investigate into the affairs of

the company in respect of such matters

and to report thereupon to it in such

Company Appeal (AT) (Insolvency) No. 498 of 2019 23

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

Company Appeal (AT) (Insolvency) No. 498 of 2019 24

defraud its creditors, members or any other person or otherwise for a fraudulent

or unlawful purpose or in a manner oppressive to any of its members, or that

the company was formed for any fraudulent or unlawful purpose and that the

person concerned in the formation of the company or the management of its

affairs have in connection therewith been guilty of fraud, misfeasance or other

misconduct towards the company or towards any of its members or the members

of the company have not given all the information with respect to its affairs which

they might reasonably expect, and that the affairs of the company ought to be

investigated, after giving a reasonable opportunity of being heard to the parties

concerned, the Tribunal/Adjudicating Authority has power to refer the matter to

the Central government for investigation into the affairs of the company.

17. Apart from the power conferred by Section 213 of the Companies Act,

2013, the 'National Company Law Tribunal' has inherent powers under Rule 11

of National Company Law Tribunal Rules, 2016. Therefore, in public interest, it

is always open to the 'National Company Law Tribunal' after giving a reasonable

opportunity of being heard to the parties concerned refer the matter to the

Central Government for investigation, if the Tribunal/Adjudicating Authority

forms a prima facie opinion that acts of fraud have been committed by company

or group of companies or its Director(s) or officers. In the present case 'Forensic

Audit Report' alleged that the members of the 'Corporate Debtor' and its 'Group

Companies' along with officers of the 'Bank of Maharashtra' have committed

certain fraud, which, inter alia, suggest that a sum of Rs. 3,172.25 Lakhs are

receivable by the 'Corporate Debtor'. The Appellant and others were given

reasonable opportunity of hearing by Adjudicating Authority. As such no

Company Appeal (AT) (Insolvency) No. 498 of 2019 25

interference is called for against the impugned order. In absence of any merit,

the appeal is dismissed. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

[ Kanthi Narahari ] Member (Technical) New Delhi

24th July, 2019

/ns/

Company Appeal (AT) (Insolvency) No. 498 of 2019