Manipulation of accounts by company which raised inference o diversion of funds, petition to direct Central Government to take steps to investigate into affairs of company was to be allowed

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Manipulation of accounts by company which raised inference o diversion of funds, petition to direct Central Government to take steps to investigate into affairs of company was to be allowed

Manipulation of accounts by company which raised inference o diversion of funds, petition to direct Central Government to take steps to investigate into affairs of company was to be allowed

 Where there were allegations of manipulation of accounts by company which raised inference of misappropriation and diversion of funds with intent to defraud creditors, petition to direct Central Government to take steps to investigate into affairs of company was to be allowed
[2018] 97 taxmann.com 673 (NCLT – New Delhi)
Central Bank of India
v.
Surya Pharmaceutical Ltd.
 NO. 43 (ND) OF 2016
AUGUST  29, 2018
Section 213 of the Companies Act, 2013/Section 237 of the Companies Act, 1956 – Investigation into company’s affairs in other cases – Whether Tribunal is empowerd under section 213 to investigate into affairs of a company on an application made by certain number of members of company; and, on an application made by any other persons – Held, yes – Applicant bank sanctioned Term Loan Facility to respondent company – Since, respondent company failed to repay, loan account of respondent company was classified as NPA – After scrutiny of audited balance sheets of respondent company, Bank found certain financial irregularities – Bank alleged that respondent company had given interest free loans and advances to its group companies, whereas it was paying interest to banks for money borrowed and there was no material on record to suggest that respondent company had taken steps to recover advances in order to revive cash flows and stability of company – Bank had also shown that there had been diversion of funds from short term sources to long term uses – It was further revealed that though there was realization of stock receivables but there had not been any corresponding reduction in working capital limits, which suggested mismanagement in affairs of company – Bank had placed on record details of adverse comments made by auditor in audited balance sheet of respondent company – Further, not only company had collected huge amount from creditors but also had failed to repay debts and facts prima facie showed that business of respondent company was being conducted to deceive its creditors – Whether material on record suggested that deeper probe in affairs of respondent company was necessary – Held, yes – Whether thus, instant petition was allowed by holding that it was a fit case to direct Central Government to take steps to investigate into affairs of respondent company – Held, yes [Para 53]

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