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There is nothing in the order to justify the directions for conducting a forensic audit of accounts of the Company due to its cryptic and non-speaking nature. The judgment passed by the NCLAT New Delhi (principle bench), in its decision in   Vijaya Sai Poultries Pvt. Ltd. Vs. Vemulapalli Sai Pramella & Ors (Company Appeal (AT) No. 296 of 2019) by Hon’ble Shri Justice Jarat Kumar Jain

The facts of the case were such that- Petitioners (Respondents thus) have documented Petition against the ‘Vijaya Sai Poultries Pvt. Ltd., Mr. Naveen Kishore, Naveen Kishore HUF, and Mrs. V. Roja Kishore under Sections 59, 241, and 242 of the Companies Act, 2013 (in a nutshell the Act) asserting abuse and botch by Mr. Naveen Kishore. In the appeal, the Petitioners have recorded an application under Rule 131 of the NCLT Rules, 2016 charging that Mr. Naveen Kishore, Overseeing Director of the Company illicitly moved the portions of Respondents in his name by manufacturing marks in the Financial Year 2013-2014 with no thought.

It is additionally affirmed that Mr. Naveen Kishore began selling the immovable and moveable properties of the Appellant company unlawfully and abused the deal continues. Mr. Naveen Kishore bought 50 immovable properties in his name and his significant other’s name by using the functioning capital and assets of the Appellant Company. Mr. Naveen Kishore has been working the funds of the Appellant Company in a discretionary and unconventional way and has redirected Crores of Rupees to having a place with the Appellant Company without representing something similar.

Therefore, it was requested that an advocateCommissioner be appointed to conduct a forensic audit of the Appellant Company by taking assistance of an Auditor for the check period 31.03.2004 till date

Ld. Sr. Counsel for the Appellant presents that there is no at first sight finding of persecution or blunder as needed under Section 242 (4) and 241/242 of the Companies Act. The Impugned Order is without thinking or finding of truth and indeed, contains a one-line request coordinating that legal review is directed. It is settled law that there should be a chronicle of reasons in the request on the side of the end showed up at. The giving of reasons on the side of their decisions by the legal or semi-legal authority is fundamental to forestall injustice or discretion in arriving at the resolutions. It was further submitted that the application has been filed under Rule 131 of NCLT Rules 2016 which relates to the production of documents and form of summons. An order of directing that a forensic audit to be conducted could not have been passed in such an application.

There is an ambiguous claim of manufacturing, share move deeds, and the abdication letter. In the application, it isn’t referenced that in what way Mr. Naveen Kishore redirected the cash from the Appellant Company and when has he bought 50 properties for the sake of his relatives out of the assets of the Company. Indeed, even in the application, it isn’t referenced with regards to how and when the Respondents got the information that Mr. Naveen Kishore has enjoyed fake deal exchanges. Further, on the side of said charges, the Respondents have not to put any archive on record.

Considering the principles laid down by the Hon’ble Supreme Court in the case of Kranti Associates (Supra).

It was held that there is nothing in the order to justify the directions for conducting a forensic audit of accounts of the Company that too for more than 15 years. The Adjudicating Authority must record reasons in support of conclusions. However, in the Impugned Order, no reasons are mentioned for the said directions. The order is cryptic and non-speaking; therefore, it cannot be sustained.

Click here to see the Judgement