Mr. Chandrakant Shankar Lad vs Dilshad Trading Pvt. Limited And Ors
- CitationCompany Appeal (AT) (Ins) No. 939 of 2022
Ratio decidendi
The rule this decision rests on
Where the Adjudicating Authority, in exercise of its discretion under the Insolvency and Bankruptcy Code framework, directs a fresh audit of a corporate debtor's books and accounts notwithstanding that an earlier transaction audit has been submitted, such a direction is not to be interfered with on appeal where there are serious allegations of fraud against the directors and a parallel criminal investigation is pending, since the existence of an earlier audit report does not by itself preclude a further audit in such circumstances. Persons affected by an audit report directed in insolvency proceedings, including former directors who were not heard before the direction was made, are not prejudiced by the absence of prior hearing, because they remain free to raise objections to the report before the Adjudicating Authority once it is submitted.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
IN THE MATTER OF: Chandrakant Shankar lad ...Appellant
Versus Dishad Trading Pvt. Ltd. & Anr. ...Respondents Present: For Appellant: Ms. Eshna Kumar, Ms. Prachi Bhatia and Mr. Aditya Maheshwari, Advocates. For Respondents: Mr. Samaksh Goyal, Advocate for R-1. Mr. Ashwini Kumar Singh, Advocate for R-3. ORDER
12.08.2022: Heard the Ld. Counsel for the Appellant. This Appeal has
been filed against the order dated 24.06.2022 passed by the Adjudicating
Authority (National Company Law Tribunal, Mumbai Bench, Court -II) in MA.
No. 2170/2019 in CP (IB) No. 166/(MB)/2018, by which order, direction was
issued to appoint an Auditor to audit the Books and Accounts of Corporate
Debtor.
Ld. Counsel for the Appellant has come up in this Appeal challenging
the order on the ground that there was already a transaction audit conducted
by an Auditor on which report has already been submitted. Hence, there was
no occasion for directing for a fresh Audit Report. It is submitted that order
does not contain any reason for passing the order. -2-
Ld. Counsel appearing for the Respondent who had filed the application
submits that the transaction audit report which has been submitted itself
indicate that there was no material to come to the conclusion regarding the
fraudulent transaction, whereas the CBI Enquiry is already going on against
the Promoters and Directors. There are serious allegations of committing fraud.
The submissions made by the Applicant has been noticed in paragraph
3 & 4 of the order and finding substance in the submissions Adjudicating
Authority has directed for appointment of the Auditor. The present is not a
normal case where since once transaction audit had been taken place, the
court ought not to have directed for further audit. When the CBI enquiry is
already going on and there are allegations of serious fraud against the
Directors, Adjudicating Authority in exercise of its discretion has directed for
fresh audit. We are of the view that this order requires no interference by this
Appellate Court. More so then court has already directed for submission of the
Report at an early date. After audit report is submitted it is always open to all
concerned to raise their objections if any including the Ex- Directors.
Company Appeal (AT) (Ins) No. 939 of 2022 -3-
Ld. Counsel for the Appellant submits that the Appellant were not heard
before passing the orders. The Adjudicating Authority have directed for the
audit report on the application of Operational Creditor after hearing the
Resolution Professional for the Corporate Debtor, it is always open for the
Appellant to raise such objections to the Audit Report as permissible in law
before the Adjudicating Authority.
The Appeal is dismissed subject to observations as made above.
[Justice Ashok Bhushan] Chairperson
[Justice Rakesh Kumar] Member (Judicial)
[Dr. Ashok Kumar Mishra] Member (Technical)
sr/nn
Company Appeal (AT) (Ins) No. 939 of 2022
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