NCLT Is Not A Forum For Adjudication Of Fraud: NCLT Cuttack Reiterates

The National Company Law Tribunal, Cuttack Bench, comprising Shri P. Mohan Raj (Judicial Member) and Shri Satya Ranjan Prasad (Technical Member), while adjudicating an application under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Srimanta Kumar Tripathy and Anusuya Tripathy vs S.S Mining and Infra Private Limited has held reiterated that NCLT is not a forum for adjudication of Fraud or determination of Forgery. It has further reiterated that a joint Demand Notice under Section 8 of IBC, 2016 and Joint petition under Section 9 of IBC, 2016 is not permitted Background Facts Srimanta Kumar Tripathy and Anusuya Tripathy (“Operational Creditor”) supplied materials to and deployed machineries for S.S Mining and Infra Private Limited (“Corporate Debtor”) which was engaged in providing mining services to the Orissa Mining Corporation Limited. There were outstanding due amounting to Rs. 1,98,47,957/- pending in lieu of the services provided by the Operational Creditors. A Demand Notice dated 27.02.2022 was sent by the Operational Creditor to the Corporate Debtor. It was alleged by the Operational Creditor that there was fraud on the part of the Corporate Debtor which remained undiscovered by the Operational Creditors. An MOU was entered between the parties under which fuel worth Rs. 2,47,06,118/- was sold by the Operational Creditor. Payment of Rs. 1,20,78,363/-.was received and the remaining amount of Rs. 1,26,27,755/- was to converted into an unsecured loan. It was contended that the Corporate Debtor did not convert the pending amount into an unsecured loan, did not act as per the MOU, did not pay any dues, stopped all activities from 01.04.2015 and did not submit any return to any statutory authority due to which the Operational Creditor was not able to determine that the Corporate Debtor made fraud by not complying to the MOU. Further the Corporate Debtor took Rs. 2,00,00,000/- on 22.02.2014 for issuance of share capital in favor of the Operational Creditor but it failed to do the same as well. On the Contrary, it was contended by the Corporate Debtor that after the signing of the MOU, the Operational Creditors became the director of the Corporate Debtor to look after the operations, and finances of the Corporate Debtor. All bank accounts in name of the Corroborate Debtor were operated by the Operational Creditors. It was contended that due to these changes, it became easy for the Operational Creditor to forge the documents and issue letters and bill in the name of the Corporate Debtor. The Operational Creditors had mismanaged the Corporate Debtor and had siphoned off huge funds from the bank accounts of the Corporate Debtor. Findings of the Tribunal It was observed by the Tribunal that the debt pertains to the year 2014-15 and the petition has been filed after 8 years on 14.11.2022. The Operational Creditor had relied on Section 17 of the Limitation Act, 1963 to claim that the when the suit is based on fraud, the limitation does not begin until the applicant discovers the fraud. It had been contended by the Operational Creditor that the fraud remained undiscovered as the Corporate Debtor did not file its statutory returns with the Registrar of Companies, also not filed its Income Tax Returns and did not appear in the Arbitration Proceedings, which ended on 04.01.2019. It was observed by the Tribunal that NCLT is not the forum for Adjudication of Fraud. Reliance was placed on the NCLAT judgment of Shelendra Kumar Sharma v DSC Ltd (2019 SCC OnLine NCLAT 1274) wherein it was held that NCLT or NCLAT cannot determine whether documents are forged or not. It was observed that there is nothing on the records which established fraud and there is no specific date which the Operational Creditors have specified on which the fraud had been discovered. Thus Section 17 of the Limitation Act, 1963 was not applicable and the petition was barred by limitation. It was further observed that this is a joint petition and the law was clear that a Demand Notice under Section 8 can only be sent individually. The debt is allegedly due from 4 entities and a common Demand Notice had been issued for the dues of these 4 entities pursuant to which a common petition had been filed. Reliance was placed on the NCLAT judgment of Uttam Galva Steels Limited vs. DF Deutsche Forfait AG & Anr. 2017 (SCC OnLine NCLAT 212) wherein it was held that a notice under Section 8 and a petition under section 9 both have to be issued and filed individually by the Operational Creditor. With the aforesaid observations, the Tribunal dismissed the petition. Case: Srimanta Kumar Tripathy and Anusuya Tripathy vs S.S Mining and Infra Private Limited Case No. CP (IB) No. 38/CB/2022 Counsels for the Applicants; Adv. Chittranjan Panda, Counsel for the Respondent ; Adv. Satya Smruti Mohanty, Adv. Swayamjit Rout, Adv. Goutam Rai, Adv....

NCLT Is Not A Forum For Adjudication Of Fraud: NCLT Cuttack Reiterates

Udai Yashvir Singh

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NCLT Is Not A Forum For Adjudication Of Fraud: NCLT Cuttack Reiterates

Udai Yashvir Singh

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