The National Company Law Tribunal (NCLT), Kolkata comprising the Judicial Member Mr. Rohit Kapoor and the Technical Member Mr. Harish Chander Suri was heading an Interlocutory Application and found that the Financial Creditor was guilty of practising and committing fraud. As per section 65 of the Code, a penalty of Rs.50 lakh was imposed on the Financial Creditor.
The order of CIRP in respect of the Corporate Debtor was passed by AA on 14.09.2021. An interlocutory application was filed by the shareholder of the Corporate Debtor praying that the Financial Creditor be held guilty of practising and committing fraud on this Tribunal and as per section 65 of the Code, and penalty be imposed on the alleged Financial Creditor and the CIRP be terminated. The applicant contended that the order of admission was obtained on the basis of fraudulent and manufactured documents for a fictitious and imaginary transaction in collusion with unknown third parties claiming to represent the Corporate Debtor without any authority, who fraudulently admitted liability though there was none. It was further submitted that the order of CIRP is a nullity since the claimed date of default was 15.12.2020 which is hit by section 10A of the Code, which prohibits any application from being filed in respect of any date of default within the period from 25.3.2020 to 24.3.2021.
The Adjudicating Authority found that the Financial Creditor and the Corporate Debtor had obtained orders of CIRP fraudulently and in complicity with each other by filing a collusive petition and later on settled the matter by payment of Rs. 30 Lacs, which cheques although were given on behalf of the Corporate Debtor by some unknown person and are stated to have not been encashed by the Financial Creditor. Both the parties have given a somewhat shady picture which does not bring out an absolute truth in this matter. This matter needed to be further investigated.
The AA noted that the entire transaction as narrated in the Section 7 application was plainly imaginary, concocted and fraudulent. The Corporate Debtor does not appear to have had any genuine liability towards the alleged Financial Creditor and the entire documentation has evidently been prepared by the alleged Financial Creditor in collusion with Videocon Group entities. The alleged documents disclosed in the Supplementary Affidavit of the alleged Financial Creditor, far from helping its case, further demonstrate the fraudulent nature of the papers.
It was observed that the Petition under section 7 was not maintainable due to the prohibition in section 10A of the Code.
The NCLT noted that there was no question of allowing any settlement to take place based on the alleged documents disclosed in the Supplementary Affidavit of the alleged Financial Creditor since the same was evidently a sham and a mala fide ruse to avoid adverse scrutiny on the wholly fraudulent action of the suspected Financial Creditor in instituting the section 7 petition and initiation of CIRP based thereon by practising fraud on the Tribunal. The story of the settlement also clearly appears to be an afterthought.
Apart from the consequences under section 65 of the Code, by reason of which the CIRP stands vitiated and terminated and penalty imposed on the alleged Financial Creditor as stated above, in view of the glaringly fraudulent actions of the alleged Financial Creditor as discussed above, it appears that the same would have far-reaching implications going even beyond this case and therefore, it would be proper for a full investigation to be conducted into the transaction set up by the alleged Financial Creditor in the section 7 petition. The matter is referred Ministry of Corporate Affairs and Central Government.
Adjudication Authority held that Financial Creditor was guilty of practising and committing fraud. As per section 65 of the Code, a penalty of Rs.50 lakh was imposed on the Financial Creditor and the CIRP initiated against the Corporate Debtor-Videocon Infinity Infrastructure Private Limited was terminated.