Tribunal Upholds KPMG's Final Report as Reliable Despite Divergence from Interim Findings in Liquidation of Asian Natural Resources
In a significant ruling, the National Company Law Tribunal (NCLT) Indore Bench has dismissed an application filed by Vitol S.A., seeking the appointment of an alternate forensic auditor to replace KPMG in the ongoing liquidation proceedings of Asian Natural Resources (India) Limited, formerly known as Bhatia International Limited. The application was based on perceived discrepancies between KPMG's interim and final forensic audit reports.
The Tribunal, comprising Mr. Brajendra Mani Tripathi and Mr. Man Mohan Gupta, upheld the legitimacy of the KPMG Final Forensic Report dated August 3, 2023, which concluded that no fraudulent transactions were found during the review period from April 1, 2008, to May 23, 2017. This final report contradicted the preliminary findings of fraud indicated in KPMG's Interim Report dated September 30, 2020.
Vitol, the largest creditor of Bhatia International, holding a claim exceeding Rs. 536 Crores, argued that the Final Report's conclusions were inconsistent with earlier findings and requested the appointment of a new auditor. They claimed that the Final Report failed to address specific anomalies and findings previously noted by the Bombay High Court concerning fraudulent asset transfers.
However, the Tribunal emphasized that the interim report was explicitly preliminary and subject to revision upon receipt of further information, which was provided only after the Bombay High Court directed the suspended management to furnish additional records. The Tribunal found no evidence of bias or lack of independence by KPMG, noting that the audit was conducted under statutory supervision and approved by the Committee of Creditors.
The NCLT concluded that mere divergence between interim and final reports does not constitute sufficient grounds to undermine the final report's reliability. The Tribunal also clarified that the KPMG Final Report is not conclusive proof but remains a piece of evidence to be weighed in ongoing proceedings regarding the liquidation.
The decision underscores the Tribunal's commitment to maintaining the integrity and finality of the liquidation process under the Insolvency and Bankruptcy Code, 2016, emphasizing the importance of time-bound resolutions.
Bottom line:-
Insolvency and Bankruptcy Code, 2016 - Divergence between an interim forensic report and a final forensic report does not, by itself, render the final report unreliable. A forensic report is a piece of evidence and not conclusive proof of illegality. The burden to prove its unreliability lies on the party impugning the report.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 35, 43, 45, 49, 60(5), 66
Vitol S.A. v. Asian Natural Resources (India) Limited, (NCLT)(Indore) : Law Finder Doc id # 2960895
