NCLT Imposes Rs50 Lakh Penalty on Financial Creditor Electroparts for Fraud in Infinity Infotech Insolvency Case
Moneylife Digital Team 28 July 2022
The National Company Law Tribunal (NCLT) disposed insolvency proceedings against Infinity Infotech Parks Ltd, saying that the application was admitted based on fraudulent documents. The Kolkata bench of NCLT also held Electroparts (India) Pvt Ltd, the financial creditor (FC), guilty of practising and committing fraud and imposed a penalty of Rs50 lakh. 
 
The NCLT, Kolkata bench of Rohit Kapoor (member - judicial) and Harish Chander Suri (member - technical) says, "The entire transaction as narrated in the Section 7 application is plainly imaginary, concocted and fraudulent. The CD does not appear to have had any genuine liability towards the alleged FC and the entire documentation has evidently been prepared by the alleged FC in collusion with Videocon Group entities. The alleged documents disclosed in the supplementary affidavit of the alleged FC, far from helping its case, further demonstrate the fraudulent nature of the documents."
 
"In the circumstances, the alleged FC is guilty of practising and committing fraud on this Tribunal and therefore, as per Section 65 of the Insolvency and Bankruptcy Code (IBC), a penalty of Rs50 lakh is imposed on the alleged FC and the CIRP stands vitiated and terminated due to the fraud committed. In any event, even apart from the aspect of fraud as discussed above, the Section 7 petition was not maintainable due to the prohibition in Section 10A of the Code." 
 
The interlocutory application was filed by Infinity Infotech, a 50% shareholder of corporate debtor (CD) Videocon Infinity Infrastructure Pvt Ltd. Infinity Infotech submitted that the FC, Electroparts, obtained an order of corporate insolvency resolution process (CIRP) from the adjudicating authority by way of practising blatant fraud. The adjudicating authority had passed the order of CIRP in respect of the corporate debtor on 14 September 2021.
 
Infinity Infotech also submitted that an order of admission was obtained based on fraudulent and manufactured documents for a fictitious and imaginary transaction in collusion with unknown third parties claiming to represent Videocon Infinity Infrastructure without any authority, who fraudulently admitted liability though there was none.
 
NCLT noted that Electroparts and Videocon Infinity Infrastructure had obtained orders of CIRP fraudulently and in complicity with each other by filing a collusive petition and, later on, settled the matter by paying Rs30 lakh. 
 
"There is no question of allowing any 'settlement' to take place based on the alleged documents…since the same is evidently a sham and a mala fide ruse to avoid adverse scrutiny by this Tribunal on the wholly fraudulent action of the alleged financial creditor in instituting the section 7 petition and initiation of CIRP based thereon by practising fraud on the Tribunal. The story of the settlement also clearly appears to be an afterthought," NCLT says.
 
In 2020, Electroparts claimed a default of Rs300 million by Videocon Infinity. The Kolkata bench of NCLT, in September 2022, admitted the insolvency petition. However, in its latest order, the bench noted that the default was part of a 'fictitious and imaginary transaction in collusion with unknown third parties'. 
 
The bench observed that both parties had given a somewhat shady picture which does not bring out the real truth in this matter; thus, the matter needs to be investigated further.
 
The Tribunal decided to refer the case to the corporate affairs ministry for further action, saying, "…it would be proper for a full investigation to be conducted into the transaction set up by the alleged financial creditor in Section 7 petition."
 
C.P. (IB) No. 140/KB/2021 Date: 18/07/2022
 
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