Panchapakesan Swaminathan & Anr. vs R. Raghavendran

[Per; V. P. Singh, Member (T)]

This Appeal emanates from the Order dated 25^th January 2021 passed by the Adjudicating Authority/National Company Law Tribunal, Chennai Bench, Chennai in IA/539/IB/2020, in Company Petition IBA/370/2019, whereby the Adjudicating Authority had directed the Registrar of Companies to inspect the books and conduct inquiries as provided under Section 206 and Section 207 of the Companies Act, 2013, and to furnish the report to the Appropriate Authority for necessary action under Section 208 of the Companies Act, if any required.

Further, the Adjudicating Authority directed the Respondents to contribute a sum of ₹ 12.31 lakh to the Corporate Debtor's assets under Section 66 of the IBC, 2016, within four weeks from the date of Order. Accordingly, being aggrieved by the said Order, this Appeal is preferred. However, the original parties status in the Company Petition represents them in this Appeal for the sake of convenience.

The Corporate Insolvency Resolution Process has been initiated against the Corporate Debtor by the Corporate Applicant/Corporate Debtor under Section 10 of the Insolvency and Bankruptcy Code with effect from 15^th April 2019, and IRP/RP was appointed. During the CIRP period, the Resolution Professional (in short 'RP') with the approval of the Committee of Creditors (from now on referred to as 'CoC') has engaged the Forensic Auditor to investigate the Corporate Debtor's affairs and find out any avoidable transactions or vulnerable transactions entered by the Corporate Debtor before the Corporate Insolvency Process period ( in short 'CIRP').

The Forensic Audit was carried by the Forensic Auditor, who submitted its report on 2^nd January 2020, who made observations about certain transactions of the Corporate Debtor, which were reported to have been conducted with the intent to defraud the creditors. Based on the Forensic Audit Report, the RP has filed the impugned Application under Sections 25, 43, 45 (2) and 66 (2) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 NCLT Rules.

The Adjudicating Authority has made the following observations which are being reproduced for ready reference;

The Adjudicating Authority has failed to take notice that no special pleadings have been made against the Appellant's either under Section 66 (1) or under Section 66 (2) of the Code, passed an order under Section 206 and Section 207 of the Companies Act, 2013 directing the concerned Registrar of Companies for further inspection/enquiry/investigation since Respondents have failed to demonstrate the said allegations levelled against the Appellants.

The Adjudicating Authority has directed the Appellants to contribute ₹12.7 lakhs to the Corporate Debtor's assets without considering whether the said allegations were covered under Section 66 (1) or 66 (2) of the Code without providing any opportunity to the Appellant to explain the same.

The Adjudicating Authority has failed to consider the audited financial statements of the Corporate Debtor for the Financial Year 2018-19. The unaudited financial statements for the year 2018-19 had been taken into consideration by the Financial Creditor for finalising the forensic report. However, audited financial statements for the Financial Year 2018-19 were prepared during the CIRP period and signed by the Appellant, in the capacity of Suspended Director and Respondent in the capacity of Resolution Professional on 23^rd December 2019. As a result, the Financial Auditor issued the Forensic Audit Report on 2^nd January 2020 without considering audited financial statements for 2018-19.

Audited financial statements for the Financial Year 2018-19 were not provided to the Forensic Auditor, and it could not consider the same for finalising its report.

The Resolution Professional contends that the Corporate Applicant has initiated the Corporate Insolvency Resolution Process under Section 10 of the Code. Based on a resolution passed in the 2^nd CoC meeting, dated 5^th August 2019, during the Corporate Insolvency Resolution Process, the Forensic Auditor was appointed to identify whether any activities were carried out in violation of the provisions of the Code viz, Preferential Transaction, Undervalued Transactions, Fraudulent Transactions or Extortionate Transactions.

After receiving the Forensic Audit Report, it was evident that the Corporate Debtor had carried on business to defraud the creditors of the Corporate Debtor. Based on the Forensic Auditor Report, five discrepancies were pointed out; these are;

The Appellant has produced ledger statements for 1^st April 2019 to 4^th July 2019 regarding cash expenses for the 1^st time as part of the appeal documents, however, without any voucher slips for the entries. Such documents were neither submitted before NCLT nor have the Appellant moved an Application seeking an order from this Appellate Tribunal to produce the said documents by specifying reasons for non-production before the NCLT. The Resolution Professional has the case that the Appellant's failure to hand over the cash balance post CIRP date. The Appellants have now made up Ledger statements only to evade the directions for payment, and as such, the said ledger statements shall not be relied on in the present Appeal.

We have heard the argument advanced by the learned Counsel for the parties and perused the record. During the argument, the learned Counsel for the Appellant raised the question about the jurisdiction of the Adjudicating Authority in passing the impugned Order to enquire/investigate into the affairs of the Company by the Registrar of Companies under Section 206 and 207 of the Companies Act 2013.

Considering the serious nature of the transactions reported in the Forensic Audit, the Adjudicating Authority has directed the Registrar of Companies to conduct an inspection, inquire, and proceed, following the report prepared under Sections 207 and 208 of the Companies Act 2013.

The learned Counsel for the Appellant submits that the Adjudicating Authority has failed to take notice that no specific pleadings have been made against the Appellant's either under Section 66 (1) or Section 66 (2) of the Insolvency and Bankruptcy Code 2016, but passed an order under Sections 206 and 207 of the Companies Act, 2013 insofar as Prayers Clauses (a), (b, (d), (e) and (f) are concern directing the concerned Registrar of Companies for further inspection/enquiry/investigation since Respondent has failed to demonstrate the said allegations levelled against the Appellants. About the Prayer Clause (c), the Adjudicating Authority has directed the Appellant's to contribute the ₹ 12.31 lakhs to the assets of the Corporate Debtor without determining whether the said allegations were covered under Section 66 (1) or 66 (2) of the Code and without providing any opportunity to the Appellants as to how the said amounts were utilised for the operational purpose of the Company. The entire proceedings conducted by the Adjudicating Authority were flawed in law that vitiated and violated natural justice principles. The Adjudicating Authority had not heard the Appellants before recording its prima facie opinion for directing further inquiries under Sections 206 and 207 of the Companies Act, 2013 and directing an amount of ₹ 12.31 lakhs to the assets of the Corporate Debtor.

The Appellant further contends that Adjudicating Authority overlooked the written submissions and case laws, both Indian and English, and other documentary evidence, i.e., audited financial statements for 2018-2019. Therefore, the findings and conclusions of the Forensic Auditor as accepted by the Adjudicating Authority are erroneous and against the legal provision. The Adjudicating Authority considered the audited financial statements for 2018-19 instead of material misstatements made by the Forensic Auditor based on the unaudited financial statements.

Further, the fundamental flaw in the Forensic Audit Report is that the observation made therein was entirely inconsistent with audited financial statements for the Financial Year 2018-19. The Forensic Auditor considered the unaudited financial statements for the Financial Year 2018-19 for finalising the forensic report. However, audited financial statements for the Financial Year 2018-19 were prepared during the CIRP and signed by the Appellants in the capacity of suspended Director and Respondent Resolution Professional on 23^rd December 2019. But the Forensic Auditor, without considering Audited Financial Statements for the Financial Year 2018-19, issue a Forensic Audit Report dated 2^nd January 2020.

In the Forensic Audit Report, it is stated that ₹ 1524.55 lakhs comprising of the amount mentioned in Prayers Clauses (a), (d), (e), and (f) of Application is shown as written off, but no such written off was made or effected in the audited financial statements for the Financial Year 2018-19. Thus it is nothing but misleading and material misstatements and therefore cannot be the basis for granting any relief sought.

The learned Counsel for the Appellant placed reliance on the judgement of this Appellate Tribunal in Company Appeal (AT) (CH) 06 of 2021 in the matter of Neeta Sriniwas Zanvar vs Nagarjuna Agrochemicals Private Limited. In this case, this Appellate Tribunal has held that the Adjudicating Authority/NCLT cannot exercise the powers under Sections 206 & 207 of the Companies Act 2013 for enquiry/inspection/investigation. However, they can exercise the powers under Sections 210 (2) and 213 of the Companies Act subject to bona fide opinion, formed after reasonable opportunity given to the opposite party on these aspects.

They learned Counsel for the Appellant emphasised that if it is presumed for the sake of argument that the NCLT had powers under section 210 (2) and 213 of the Companies Act 2013 and applicable provisions of IBC, if any, it can also be considered as flawed in law since roving/fishing inquiries are not permitted given the law laid down by the Hon'ble Supreme Court in the matter of Barium chemicals limited versus Company Law Board, (1966) 36 Company Cases 639. Since the IA is filed based on the forensic audit report and the investigation has been carried out about the affairs of the Corporate Debtor by the Resolution Professional against this backdrop, there was no justification for ordering 3^rd investigation. If permitted, it will give fishing and roving inquiries, which become an endless process and lead to the Corporate Debtor's destruction.

This Appellate Tribunal in case of Neeta Shrinivas Zanvar and Another vs Nagarjuna Agro Chemicals Private Limited and Others, 2021 SCC OnLine NCLAT 135 has held that:

In the above-mentioned case, this Appellate Tribunal has taken the view that the National Company Law Tribunal has powers to direct the Central Government for an investigation into the affairs of the Company. NCLT can order investigation under Section 213 of the Companies Act, 2013, which requires "good reasons" to be shown and "satisfaction" of the learned National Company Law Tribunal of the circumstances. It is further held that the direction issued by the learned National Company Law Tribunal in appointing the Registrar of Companies to investigate into the affairs of Respondent No. 1 Company violates the provisions of the statute, in as much as in terms of Section 210 (2) of the Companies Act, 2013, such a direction can be given only to the Central Government and not to the Registrar upon the satisfaction of the conditions precedent specified therein.

However, it is made clear that under Sub-section (4) of Section 206 of the Companies Act 2013, if the Registrar is satisfied based on information available or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose, the Registrar may, after informing the Company of the allegations against it by written Order, call on the Company to furnish in writing any information or explanation the matters as specified in the Order and carry out such enquiry as he deems fit after providing the Company with a reasonable opportunity of hearing.

It is pertinent to mention that under proviso to Sub-section (4) of Section 206, Central Government is empowered to direct the Registrar or any inspector appointed by, for the purpose to carry out the enquiry under this sub-section.

The learned Counsel for the Respondent submits that the specific case of Appellants is that the Respondent filed an application under Sections 43, 45 and 66 (2) of IBC, 2016. Still, the one composite Application under these Sections is not maintainable. In this regard, it is stated that though the Respondent had quoted the above sections in the relief column, but relief is sought only under Section 66 of I&B Code. In addition to the above, it is a well-established principle of law that the wrong quoting of the provision of law does not render the Application invalid.

Further, the Respondent, during arguments, stated that the Applicant before the Adjudicating Authority/National Company Law Tribunal, categorically conceded that though the Application is filed under Sections 43, 45 (2) and 66 (2) of IBC, 2016, but the Respondent herein was confining their arguments only to Section 66 of IBC, 2016. The Adjudicating Authority has duly recorded this in paragraph 3 of the impugned Order. Therefore the contention of the Appellant about the maintainability of the composite Application under Sections 43, 45, and 66 of the I&B Code, 2016 is not sustainable.

The Resolution Professional submits that the Forensic Auditor submitted its interim report during for 4^th COC meeting held on 23rd October 2019. The members of CoC advised the Appellant's herein to provide an appropriate reply to the Forensic Auditor. They directed the Forensic Auditor to submit the final report after incorporating the Corporate Debtor's response from the former management, i.e. the Appellants herein.

Accordingly, during the 6^th CoC meeting held on 28^th January 2020, the Forensic Auditor submitted its report (Annexure A2, pages 132 to 464, of the appeal paper book) before the CoC after receiving the reply email dated 31^st December 2019 from 1^st Appellant herein. The Forensic Audit Report states that five issues were overwhelmingly evident to show that the Corporate Debtor had carried on business with an intent to defraud the creditors of the Corporate Debtor. Accordingly, the COC directed the RP to file an Application, which got numbered as IA 539 of 2020.

The RP further submits that the Corporate Debtor has diverted ₹ 541.58 lakhs to a related party 'Trinity Papers India Private Limited' and ₹ 378.73 lakhs to another related party M/S' Shivsakti International'. Further, former directors did not hand over the cash balance of ₹ 12.31 lakhs to the IRP when the CIRP commenced.

It is further submitted that receivables that were written off arbitrarily ₹ 649.39 lakhs from Sakal Papers Private Limited are to be recovered from the Promoter Director for causing wrongful loss to the Corporate Debtor.

Payments made to customers and written off for a sum of ₹ 50.28 lakhs is recoverable from the promoter director for causing wrongful loss to the Corporate Debtor.

Loans given to parties and written off for ₹ 43.49 lakhs is recoverable from the Promoter Director for causing wrongful loss to the Corporate Debtor.

In the written submissions on behalf of the Respondent, it is contended that the CoC provided an opportunity to the Appellants during the Forensic Audit. However, except denial, the Appellant's response failed to substantiate their stand with documentary evidence for the cited transactions, including cash balance expenditure. Furthermore, the Appellant's were provided with an opportunity during the argument to explain the transactions. Therefore, the contentions of the Appellant that no opportunity was provided by the Adjudicating Authority to file a detailed counter along with the evidence is nothing but too shy away from their legal responsibilities.

It is essential to mention that the proceeding under the Insolvency and Bankruptcy Code, 2016, is initiated by the Corporate Debtor/Corporate Applicant itself. Serious irregularities are reported in the Forensic Audit Report against the Corporate Debtor. However, the power of the NCLT to order an investigation under the Companies Act, 2013 can not be denied. But whether the Adjudicating Authority under the I& B Code is empowered to order inquiry and investigation about affairs of the Company or not is to be observed.

Based on the Forensic Audit Report and Application filed by the RP, the Adjudicating Authority noticed that the Corporate Debtor had diverted a sum of ₹ 541.58 lakh to a related party viz., Trinity Papers India P. Limited., the attention is drawn to the Financial Statements as enclosed for the period 2016-17, 2017-18 and 2018-19.

Further, as per the said report of the Forensic Auditor, between Corporate Debtor and Trinity Papers India P. Ltd., there have been purchases and sales of goods. However, about some of the ledger entries, only 'Bank' or 'Cash Receipt' particulars have been given without correlating the underlying commercial transaction' between the parties.

The balances about the said Trinity Papers India P. Ltd. outstanding for the periods under consideration had been given by way of a tabulation from which it is evident that for the Financial Year 2016-17, a sum of ₹ 19.13 lakh is stated to be payable, whereas for the years ended 2017-18 and 2018-19 it is stated that a sum of ₹ 55.18 lakh and ₹ 541.58 lakh are received. However, on further analysis of the Financial Statements for the year ended 2018-19, the Forensic Audit Report discloses that the closing balance of Trinity Papers India P. Ltd., Chennai has been recorded as 'Nil' by the journal entries to one M/s. Eswaran Agencies.

Forensic Audit Report specifies that the said Company viz., Trinity Papers India P. Ltd. has been used as a vehicle to boost the sales by bill trading without any actual movement of goods. It is pointed out that due to stress arising out of' Working Capital Requirements', the Section 10 Petition under IBC, 2016 is filed by the Corporate Debtor itself. However, no efforts have been taken to recover the amount outstanding and reflected as received from the said Trinity Papers India P. Ltd. to the extent of ₹ 541.58 lakh. As such, the Forensic Auditor concluded that there had been a diversion of funds.

Of a similar effect, the transaction with another related party viz., M/s. Sivasakthi International adopting the similar modus Operandi by the Corporate Debtor is also brought forth in the Forensic Audit Report and the Application filed by the Applicant / RP. However, the amount which is reflected is to the extent of ₹ 378.73 lakh as compared to the one as given to Trinity Papers India P. Ltd. After analysing the Financial Statements of the Corporate Debtor for the Financial Years 2016-17; 2017-18 and 2018-19 and the Forensic Auditor again concludes it about the said M/s. Sivasakthi International that there has been a clear case of diversion of funds.

The Forensic Audit Report states that the receivables were written-off arbitrarily of ₹ 649.39 lakh from one M/s. Sakal Papers Pvt. Ltd., Pune and hence is required to be recovered from the Promoter - Directors for causing wrongful loss to the Corporate Debtor.

The Adjudicating Authority has noticed, referring the said Forensic Audit report in connection with the analysis of receivables written-off in the Financial Year 2018-2019, as pointed out in the table given below about M/s Sakal Papers Pvt. Ltd., as reflected in the Books of the Corporate Debtor:-

Learned Counsel for the Applicant/RP emphasising the Forensic Audit Report submits that sales by the Corporate Debtor for the Financial Year 2018-2019 continued to be made therein, as to the parties despite 'no receipt' or 'receipt of lesser amount' as compared to the amount due from the sales already effected, in particular, about M/s Sakal Papers Pvt. Ltd. as evident from the table extracted as above, thereby causing a loss to the Company to the extent of ₹ 649.39 lakh.

The Forensic Audit Report recommended that the payments made to the customers and written-off amounting to ₹ 50.28 lakh are recoverable from the Promoters for causing wrongful loss to the Corporate Debtor.

The Forensic Auditor's report further highlights, a sum of ₹ 30.78 lakh was written off on 1^st April 2018, while the corresponding payment is stated to have been made subsequently on 28.06.2018.

The Applicant also highlighted the transactions made between the Corporate Debtor and the said M/s. VKS Agencies (India) Pvt. Ltd. The Forensic Auditor had issued a letter to the said M/s. VKS Agencies (India) Pvt. Ltd. requesting a ledger copy, and in response to the same vide a letter dated 16^th November 2019; it was informed to the Forensic Audit that 100% of the advance amount of ₹ 30.78 Lakh was refunded and the details of the amount paid had also been given.

The Applicant Resolution Professional submits that the ledger statement of M/s. VKS Agencies (India) Pvt. Ltd. in the books of the Corporate Debtor shows that the amounts as stated to have been paid have not come into the hands of the Corporate Debtor; on the other hand, it is also seen that the amount of ₹ 30.78 Lakh seems to have been diverted to the personal accounts, that too post commencement of the CIRP, i.e., after 15^th April 2019 or without the knowledge of the IRP / RP and in violation of IBC, 2016.

Similarly, about M/s. Golden Note Books, Sivakasi, it is alleged that the Respondents had paid a sum of ₹ 15 lakh on 05^th January 2018 as an advance paid for the purchase of waste papers. However, as per the statements for the Financial Year 2018-2019, the same seems to have been written off without any documentary proof.

About Mr K. Viswanathan, it is alleged that a sum of ₹ 4.50 lakh had been remitted to his account for the Financial Year 2016-2017. However, the nature of transactions have not been specified and, as in the previous instance, is similar to M/s. VKS Agencies (India) Pvt. Ltd. and M/s. Golden Note Books, Sivakasi, a sum of ₹ 4.50 lakh, has been written off during the Financial Year 2018-2019.

The Ex Directors of the Corporate Debtor did not hand over the cash balance of ₹ 12.31 lakh to the IRP when the CIRP commenced.

From the balance sheet as of 31^st March 2019, it is pointed out by Learned Counsel for the Applicant RP that for the year ended 31^st March 2019, the 'cash' and 'cash equivalent' available in the hands of the Company/ Corporate Debtor was to the extent of ₹ 23,12,085/- and upon further reference to the notes to the balance sheet, it is pointed out by Learned Counsel for the Applicant that cash in hand is reflected as a sum of ₹12,41,097/-. It is alleged that the said amount has not been handed over to the IRP by the Respondents at the time of initiation of the CIRP by this Tribunal on 15^th April 2019.

Finally, there are allegations of diversion of stocks to the extent of ₹2,70,46,147/- alleged by the Applicant against the Respondents/ suspended Directors of the Corporate Debtor.

However, as reflected on 31^st March 2019, the stocks are the inventory carried by the Corporate Debtor that had been not handed over to the IRP/RP upon the initiation of the CIRP, save a meagre stock. In this connection, a comparative chart as pointed by the Counsel for the Applicant as reproduced in the written submissions filed by the Applicant, which is as follows:-

As may be seen from the table, as the above position of stock on various dates, whereby there is a precipitous decline in the amount of stock to ₹3,63,13,889.91 while the value of the same as per the balance sheet as on 31^st March 2019 is ₹ 4,11,12,248/-, which is stated in the report of the Statutory Auditors of the Company dated 23^rd December 2019.

It is also pointed out that there is a sudden decrease in the value of stocks, as evidenced from the above table as of 28^th February 2019 compared to the stock position as of 31^st March 2019. It is also pointed out that the stock position reflected on 28^th February 2019 is from the statement of affairs filed by the Respondents along with the Application under Section 10 seeking the initiation of the CIRP.

It is also submitted by the RP that a valuer was appointed to value the stocks. As per the valuation report dated 30^th September 2019, the value of stocks is revealed to be ₹ 55.80 lakh as available with the Corporate Debtor while taking over possession.

It is submitted that there has been a diversion of stock on the part of the Respondents. Thus the Respondents are guilty of knowingly making false statements by fudging the stock figures before various Authorities. The sole motive for the above, it is alleged, is to deceive and defraud the Creditors of the Corporate Debtor. In the circumstances, the value of ₹ 2,70,46,147/- is to be recovered from the Respondents and contribute to the Corporate Debtor's assets under Section 66 (2) of IBC, 2016.

Learned Counsel for the Appellant has placed reliance on the judgment of this Hon'ble Appellate Tribunal in case of CA (AT) (Ins) No. 498 of 2019 M. Srinivas Vs. Smt. Ramanathan Bhuvaneshwari. In this case, this Appellate Tribunal has held that;

Learned Counsel for the Appellant has also placed reliance on the judgment of this Appellate Tribunal passed in CA (AT)(Ins) No.949 of 2019 in the case of Vijay Pal Garg vs Pooja Bahry date of decision 4^th February 2020.

In the above case, this Tribunal has held that under Section 210(c) of the Companies Act, 2013 the Central Government can order appropriate action without resorting to an investigation. Further, under Section 210(1)(b) of the Act, the Central Government can investigate independently. As per Section 210(3), the Central Government has no option but to direct an investigation, appoint an Inspector, and obtain his report. The Inspectors are empowered to scrutinise the materials gathered from a Company and prepare the report. Section 210 of the Act specifies a procedure for an investigation by SFIO. As per Section 60(1) of the Code, "National Company Law Tribunal" is an "Adjudicating Authority" possessing concurrent jurisdiction under the Companies Act, 2013 and also under the I&B Code, 2016. The Tribunal/Adjudicating Authority on receipt of an Application/complaint of breach of the relevant provisions of the IBC, 2016 and the Companies Act and after satisfying itself that there are attendant circumstances pointing out fraudulent/wrongful trading has been committed then, it is well within jurisdiction to refer the matter to Central Government for an investigation by Inspectors to be appointed by the Central Government. If an investigating Authority after completion of the investigation concludes that any offence punishable in terms of Section 213 read with 447 of the Companies Act or Sections 68, 69, 70, 71, 72 and 73 of the Code is made out then, the Central Government may refer the matter to the Special Court itself or may even require the IBBI or to authorise any person as per Section 236(2) of the Code to file a complaint.

In the instant case, the Applicants/RP filed an Application under Sections 43, 45 and 66 of the I&B Code 2016 but has restricted its relief only to Section 66(2). Therefore, considering the serious nature of the transaction as brought forth in the Forensic Audit Report, the investigation has been ordered to the concerned Registrar of Companies.

Hon'ble Supreme Court in case of Embassy Property Development Private Limited vs state of Karnataka Embassy Property Developments (P) Ltd. v. State of Karnataka, (2020) 13 SCC 308 had considered the aspect of fraud about both initiations of the petition as well as about the fraud committed by the Corporate Debtor and whether the Adjudicating Authority can inquire into it.

In the said case, Hon'ble Supreme Court has held that even fraudulent tradings carried on by the Corporate Debtor can be inquired into by the Adjudicating Authority under Section 66. NCLT is vested with the power to inquire into (i) fraudulent initiation of proceedings as well as (ii) fraudulent transactions. Therefore, it is clear that NCLT and NCLAT would have jurisdiction to inquire into fraud questions; they would not have jurisdiction to adjudicate upon disputes.

The law laid down has been followed in the subsequent decision rendered by the Hon'ble Supreme Court in Beacon Trusteeship vs Eartcon Infracon Private Limited, (2020) 158 CLA 382 (SC).

Both the above decisions categorically point out that the Tribunal is required to consider the aspect of fraud of which it is vested with the jurisdiction not only about the initiation of CIRP but also of the Corporate Debtor and its Promoter/Management in its dealings that NCLT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes.

In the instant case, it is evident that CIRP has been initiated by the Corporate Applicant/Corporate Debtor through its Promoters/Directors U/S 10 of the Code on 4^th March 2019. When the Corporate Debtor applies for Initiation of Corporate Insolvency Resolution Process on its own, the Corporate Debtor is required to make it complete disclosure of its affairs as mandated under the provisions of the I&B Code 2016. The disclosures, in particular, Form 6 of the said Rules and the Annexures filed thereunder, are of significant importance in coming to a conclusion on the existence of insolvency of the Corporate Debtor and initiating the Corporate Insolvency Resolution Process. Thus, furnishing any misleading, wrongful or fraudulent information will in itself vitiates the petition and the proceedings if any initiated thereunder.

It would not be out of context to mention that the Hon'ble Delhi High Court in case of Venus Recruiters Private Limited vs Union of India, 2020 SCC OnLine Del 1479 held that if the CoC or the RP are of the view that there are any transactions, which are objectionable in nature, the Order in respect thereof would have to be passed before the approval of the Resolution Plan.

It is also evident that serious irregularities have been found in the forensic audit report. Given the judgement of Hon'ble Delhi High Court, the Order in respect of objectionable Transactions would have to be passed before the approval of the Resolution Plan. Based on the above, the Adjudicating Authority ordered that the companies' Registrar exercise its power as available to it under Sections 206 and 207 of the Companies Act 2013. It is also important to mention that under Section 206 of the Companies Act, the Registrar is empowered to act on any information he receives. Considering the circumstances of the case, we do not find any irregularity or illegality in passing the impugned Order.

For the above reasons, we find no merit in this Appeal. The Appeal shall accordingly stand dismissed—no order as to costs.