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NCLAT directs no further steps to be taken to institute criminal prosecution against the Appellant


The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson, Dr. Alok Srivastava and Barun Mitra, Technical Members was hearing an Appeal on Wednesday and held that until further investigation was completed, no further steps were taken to institute criminal prosecution against the Appellant nor enforce the recovery of any amount towards these transactions.


The present Appeal, filed under section 61 of the IBC Code, 2016 by the Appellant arises out of an order passed by the Adjudicating Authority. By the Impugned Order, the Adjudicating Authority admitted the application filed under Sections 66, 68, 69, 70 and other provisions of IBC by the Resolution Professional, directing the Respondents to contribute jointly and severally to the assets of the Corporate Debtor which was under CIRP besides directing criminal prosecution of the Respondents under Section 69 of IBC. Aggrieved by this impugned order, the present appeal has been preferred by Respondent No. 21, who was the present Appellant.


The Appellate Authority noted that on going through the TAR, it was more than amply clear that Transaction Auditor has admitted the inability to comment on the transactions falling under Sections 43, 45 and 50 of IBC. Even in respect of fraudulent transactions under Section 66 of IBC, the Transaction Auditor has admitted that they were not in a position to give a conclusive opinion and that this matter required further investigation.


It was to be noted that the Transaction Auditor had admitted the inability to comment on the transactions falling under Sections 43, 45 and 50 of IBC and in respect of fraudulent transactions under Section 66 of IBC also did not give a conclusive opinion and opined need of further investigation. This aspect was also emphatically asserted by the Learned counsel for the Appellant while making his pleadings. We find that the Adjudicating Authority has also taken due cognisance of the observations made in the TAR that in respect of the alleged fraudulent transactions under Section 66 of IBC, no conclusive opinion could be given by them and that the matter required further investigation. There is a clear convergence of opinion between the Transaction Auditor and the Adjudicating Authority that further investigation was warranted in the matter.


The Appellate Authority were of the considered opinion that the real nature of the transactions in question required deeper examination and that the matter be put to rest only after the true character of the transactions was unravelled. The need for unearthing the true nature and character of these transactions had acquired special relevance in the present matter since the Adjudicating Authority has ordered the initiation of criminal prosecution of the Appellant under Section 69 of IBC besides directing recovery of Rs. 2687.27 lakhs jointly and severally including from the present Appellant while fore-closing his right to reply, which prima-facie militates against the principles of natural justice.


For the foregoing reasons, the Appellate Authority, therefore, set aside the impugned order and remand the matter back to the Adjudicating Authority for taking appropriate steps to conduct a detailed and in-depth investigation of the transactions in dispute to arrive at a conclusive opinion on whether they fall within the bracket of Section 66 of the IBC without getting influenced by any comments made in this judgment and decide on merits in accordance with the law. The Appellate Tribunal also restored the right of the Appellant to furnish his reply/clarifications on the transactions in question in the interest of justice. It was further directed while allowing one more opportunity for the Appellant to be heard, the Adjudicating Authority may like to fix the timeline to obviate the scope of dragging the matter any further by the Appellant. Until further investigation was completed, no further steps are taken to institute criminal prosecution against the Appellant nor enforce the recovery of any amount towards these transactions.


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