17-10-2020 Update from NCLT/IBC Cases by INSOLVENCY PROFESSIONAL RAJNISH BANSAL

The Serious Fraud Investigation Office (SFIO) has initiated a probe into the recently liquidated firm Reid and Taylor India Ltd (RTIL) and its former promoter Nitin Kasliwal for alleged fraudulent transactions of over Rs 3,500 crore, sources told The Indian Express.

The probe was ordered following a directive by the National Company Law Tribunal (NCLT), after the resolution professional (RP) found multiple irregularities in the books of RTIL during its liquidation process. The findings of the RP are based on a July 2019 report by KPMG on RTIL, which was submitted to the RP this February.

The KPMG report, which analysed transactions of RTIL between October 2014 and April 2018, alleged that the company had sale and purchase transactions of about Rs 2,829 crore with at least 22 “non-operating” companies that are “potentially” linked to each other as they had common statutory auditors, registered email addresses and common witnesses — mostly students — to their memorandum of association as on December 2018.

The KPMG report also flagged two agreements signed by RTIL with offshore firms linked to its parent firm S Kumar’s Nationwide Ltd (SKNL) for the use of the 180-year-old Scottish brand Reid and Taylor in India. The consultancy firm said it was not able to find the reason for RTIL’s trademark agreement and technical know-how agreement with Reid and Taylor (International) Ltd in the Bahamas and Reid and Taylor (Holdings) Ltd in the British Virgin Island respectively. Both the offshore firms managed by Trident Trust Company have been linked to SKNL.

The report also alleged that the asset base of RTIL slipped from Rs 3,880 crore in 2013 to Rs 300 crore in 2016 as it spent its reserves and surplus in purchases, wrote off customer dues and wrote down the value of inventory.

For instance, the company wrote down its inventory worth Rs 748 crore in September 2014 to Rs 53 crore at the end of March 2016. According to the management of RTIL, this reduction was on account of deep discount sales to its 13 customers.

?? The appellate tribunal in a judgment on Wednesday set aside a plea challenging the order by National Company Law Tribunal's (NCLT) Principle Bench approving the resolution plan.

The company has a total admitted debt of Rs 3,003 crore.

The appellate tribunal noted that the appellants are aggrieved with the allocation of a "tiny" amount of 0.18 per cent of the outstanding dues.

The collective admitted operational debt of the appellant was Rs 423.82 crore which was 80.88 per cent of the total operational debt of the corporate debtor total being Rs 524 crore. The appellant was also representative of the operational creditor in the meeting of CoC, being holder of more than 10 per cent of the total admitted debt of Rs 3,003 crore.

Five operational creditors moved the NCLAT post the NCLT's approval to the plan alleging that the adjudicating authority has approved the resolution plan, where the appellant is getting hardly 0.18 per cent or 0.19 per cent of its claims. The appellant is logically upset that they are paid 0.19 per cent whereas the Financial Creditors (CoC decision takers) are getting 41.75 per cent of their claims.

The figure cited by the Operational Creditor, that the Financial Creditor have got Rs 1,035 crore from an admitted debt of Rs 2,479 crore (41.75 per cent)

The three-judge bench said that the issue of prior approval from the Competition Commission of India (CCI) under the Insolvency and Bankruptcy Code, 2016 is incorrect and CCI approval is not a condition precedent for the approval of the resolution plan.

"The CCI approval has been procured on June 4, 2019 in compliance with the provisions of the Code. It is submitted that condition requiring CCI Approval is 'directory' and having obtained the same, the provisions Section 31(4) have been complied with," the order said.

After several observations, the NCLAT bench said: "We find that there is no merit in this Appeal and the Appeal is hereby dismissed. Pending IA, if any, are disposed of in terms of above observations and directions. Interim orders, if any, stand vacated. There shall be no order as to costs"

?? You may send me any queries related to: [email protected].

IP CA. RAJNISH BANSAL

B.Com, FCA, DISA, CISA, I.P.

INSOLVENCY PROFESSIONAL

FORENSIC AUDITOR &

SYSTEM AUDITOR

M. 9999925301, 9899400108

E: [email protected]

Add: B-4/281-282, 

Sector-7, Rohini

New Delhi- 110085

Date – 17/10/2020