Mr. Rosita Fernando, Resolution Professional Of Expertus Infotech Private Limited vs Expertus Infotech Private Limited

- a) That this Hon'ble Adjudicating Authority may be pleased to order Liquidation of the Corporate Debtor, M/s. Expertus Infotech Pvt. Ltd; - b) That this Hon'ble Adjudicating Authority may be pleased to pass an order that the Resolution Professional Rosita Fernando having IBBI Regn No. IBBI/IPA-003/ICA1-N-00452/2024-2025/14405, be appointed as the Liquidator of the Corporate Debtor; and - c) To pass such other orders or further orders which may be deemed to be fit and proper in the interest of justice.

The transactions during the last two years from 20-12-2022 to 20-12-2024 are regular.

After holding Transaction Audit of the CD's accounts and scrutiny of its audited financial statements and other related documents and information collected from CD and its Banks, for two years prior to the date of CIRP initiation, RP has made the following findings in respect of CD's Assets:

- CD was operating from a rented building, which it vacated in the year 2017 after cessation of activity in 2015-16. It did not have any land and building of its own. - CD's Fixed Assets consisted of computer systems and related equipment, two Vehicles (Cars) and Miscellaneous Fixed Assets such as Furniture & Fixture. As of 31^st March 2023, the value of the gross block was Rs.3,39,59,608.25, and the WDV became NIL since 2020-21 on accumulated depreciation. The CD says that these assets were very old and scrapped and the scrap value was very low. In transaction audit and in the CD's account statement from ICICI Bank from 3^rd Apr 2012 till 1^st July 2019 the value of the transaction entry for sale of one car was found, but there were no entries for the other car and other fixed assets. Details of disposal and appropriation of value have been called for from CD, who has replied that these assets very old and scrapped. The RP has written back that it was not enough to say so. They have to give proof documents for the sale as scrap or for the present whereabouts of it. The CD has agreed to furnish the same.

- CD's bank account with ICICI Bank became dormant since 1st July 2019 with NIL credit balance. CD had opened a bank account with IDFC First Bank on 31st Aug 2021. On the CIRP start date, 20th Dec 2024, its Balance Sheet shows a bank credit balance of Rs. Rs.1,43,181. After drawal of Rs.1,25,000/- for part payment to the IRP, the present credit balance in this bank account is Rs.18,181/-. Details of bank account, if any, during the interval period from 2nd July 2019 to 30th Aug 2024, have been called for from the CD. The CD agreed to furnish the IDFC account details for the period.

- Over two years prior to the CIRP start date, CD has written off a sum of Rs.8.40 Lac due from its Director, viz, Mr Srinivas Krishnamurthi. He is now living in USA as a citizen. An attested copy of Form 1040-NR, U.S. Non-Resident Alien Income Tax Return or any other Form of Income Tax filed for his resident status by him for last three tax years, or an Affidavit sworn in by him, declaring his Assets in India and elsewhere as on 20th Dec 2022 and at present have been called for from CD.

- CD had made investments in a subsidiary Expertus Infrastructure Private Limited and another allied concern Expertus HR and had, over two years prior to the CIRP start date, written off those investments, as the depreciated value had come to NIL and as these concerns are defunct about ten years prior to CIRP start date. Audited BSPL of Expertus Infrastructure Private Limited were verified by RP for their financial health during the relevant periods. It is also an inactive and defunct company. It is informed by the Company that Expertus HR became defunct 10 years back and no balance sheet exists. For another concern, namely, Expertus Amsphere, in which CD had invested Rs.49,900/-, the Company informs that the Company was never incorporated.

In its application for insolvency under Sec 10, the Company had filed an Affidavit before the NCLT stating that it had reached the present position because of the failure of its single client, M/s Expertus Inc which did not pay the receivables since 2015. Eventually the agreement between Expertus Inc and the CD was terminated in 2019. CD could not find any other customers and had to close down the business. The details in this regard were called for. The CD produced the Termination Agreement executed between it and Expertus Inc, but not the B/S of 2016 of Expertus Inc onwards. Later, on insistence from RP, the audited Balance Sheet of Expertus Inc, USA was also produced for the FY 2022 and 2023.

The audited balance Sheet of 2016 of CD (Expertus Infotech Private Limited (EIPL) revealed that:

a)

In Note 8 of Report on Financial Statements of 2016 (signed in 2019), the Auditors had pointed out that the Company had not recognized revenues amounting to Rs.14,47,72,622/- due from its client, Expertus Inc of USA, instead of recognizing the amount as revenue and writing off the uncollectable receivables. It is contravention of the provisions of the RBI Master Circulars on Forex Trade and Sec 92F(ii) of the Income Tax Act.

b)

In Note 10(a), the Auditors have remarked that the Company had written off receivables to the extent of Rs.8,54,17,599/- due from Expertus Inc and no approval of RBI was obtained for it.

c)

The Termination Agreement dated 29th July 2019 between CD and the overseas buyer Expertus Inc states that the buyer had a setback in business which adversely impacted its ability to avail and pay for services from CD and both agreed to a One-Time Settlement of Rs.2.25 Crores.

The Company has replied that:

The core issue remains that the revenue was never realized. The alternative to not recognizing this revenue would have been to classify it as a write-off, which, as you can imagine, would have resulted in an extraordinarily large write-off amount — approximately ₹23 crore. The fundamental reality is that since the funds were never received, it becomes a matter of accounting treatment — whether as non-recognition or as a write-off. Given that this occurred within the same financial year, and as per accounting principles, revenue that is definitively susceptible need not be recognized, it was appropriately not accounted for as revenue.

This, however, does not apply to ₹8,54,17,599/-, which pertains to prior years. As it relates to past periods, it was required to be written off rather than classified under non-recognition.

The financial distress faced by the organization was so severe that it resulted in the departure of the entire workforce. We have already shared copies of employee resignation letters to confirm this. With no available funds and no personnel to manage the process, it became increasingly difficult to follow up on procedural requirements. While the intent was always to complete these formalities in due course, the lack of resources made it impossible to do so.

View of Resolution Professional:

To a query by Mr. Sobhan Padmanabhan as to whether the liabilities had been crystallised in the Termination Agreement, it was informed by the RP that only the One Time Settlement of Rs 2.25 Crores was mentioned in the Termination Agreement and no other liabilities were mentioned.

The RP informed that Balance Sheets of Expertus Inc for 2022 and 2023 have been produced. It does not show any activity and it also shows losses. 100% voting rights of Expertus Inc is with Mr Ramesh Ramani and Mrs Mohana Radhakrishnan who are also the only Directors of EIPI..

The writeoff has happened in 2016, nine years ago. This falls outside the CIRP period. This may not be classified as fraud as it is mentioned by the Statutory Auditor in the Balance Sheet and it is in the public domain for the last so many years. The fact that the Company has not obtained RBI approval is a default and cannot be classified as Fraud and it is to be appropriately dealt with by the Govt authorities concerned.

It is only brought to the attention of the CoC since the write off was mentioned in the Application by the CD.

The CoC members noted the same.

Resolution No 1

As per Sec 21 (8) of the IBC 2016, “ save as provided in this code, all decisions of the committee of creditors shall be taken by a vote of not less than 51%, of the voting share of the financial creditors or COC as applicable.

This is approved by 73% of the COC. Hence passed

Resolution No 2

Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the AA of the decision of the CoC (approved by not less than 66 percent of the voting share) to liquidate the Corporate Debtor, the AA shall pass a liquidation order as referred to in sub clauses (i) and (ii) and (iii) of clause (b) of sub section (1)

This is approved by 100% of the COC. Hence passed

Please take the approvals of the COC on record.

Agenda 2: To take note of the funds brought in by the suspended Directors as advised by the Resolution Professional

The RP recalled that during the last CoC meeting the details of the disposal and appropriation of value for one car were called for from CD, who replied that the car was very old and scrapped. On persistent enquiry, the Company produced Form 29 of 13-09-2021 for transfer of ownership without any consideration to one Mr V Gokul, S/o Venkataramani, in respect of the said car, which is a Wagon R. The Company was advised to bring back an amount of Rs.60,000/- (approximate value of the car in 2021, in lieu of the car) to its Current Account with Bank to avoid classifying the transaction as fraudulent. The Suspended Directors have wired the amount of Rs.60,000/- to the Current Account of the Company with the Bank on 20-03-2025.

Further, during the last CoC meeting, it was stated that the CD has written off a sum of Rs.8.40 Lac due from its Director, viz, Mr Srinivas Krishnamurthi. He is now living in USA as a citizen. This writeoff is appearing in the Balance Sheet of the Company as on 31-03-2024. This has been recalled and the suspended Director has credited an amount of Rs.8.40 lac into the Current Account of the Company with Bank on 20-03-2025.

In the last CoC Meeting, the members were informed of the CD’s disposal of the most of the computer systems and furniture and fixture of the Company by way of donations to schools etc. The RP pursued with the CD the availability of the remaining items of computer systems. The CD has scrapped these items and stored them in the residential premises of one of the Directors. The junked items were inspected by the RP and were got valued by a Valuer engaged by the RP. The Valuer has valued the market value of the items at Rs.49,600/- and the liquidation value at Rs.39,000/-.

The transactions during CIRP period in the Bank Account of the CD are given below:

15. Provide details of section 66 or avoidance application filed / pending.