Can't term bad business calls fraud: NCLT

Asia's Tech News Daily

nclt, rtil, india, subba rao, cb singh, rp

The bankruptcy court has clarified in an order related to RTIL Ltd (erstwhile Reid & Taylor India) that a ‘bad commercial business decision’ may have led to a loss for the company, but it cannot be considered fraudulent on that account.

The Mumbai bench of the National Company Law Tribunal (NCLT) dismissed a plea filed by the Resolution Professional of RTIL to declare business transactions to the tune of ₹1019.48 crore ‘fraudulent’.

The RP of the company Venkatesan Sankaranarayanan, through lawyers, argued in the tribunal that he has relied upon a forensic audit report that highlighted certain transactions as potentially fraudulent.

“The assets base of the corporate debtor was reduced due to write-off by the debtors of the corporate debtors amounting to ₹1,019.48 crore as of March 2016,” argued the RP. “There was an increase in the purchase of raw material by during the years 2013 and 2014 and subsequently as of March 31, 2016, the value of inventory was reduced by ₹551.74 crore by giving deep discounts.”

“The Bench observes that it is a fact that management has taken a certain decision which has not worked out as intended by the management and eventually loss occurred,” said the tribunal preceded by members, HV Subba Rao and CB Singh, in its order of November 29. “However, such bad commercial business decisions cannot be considered to be fraudulent or wrongful trading under provisions of Section 66 of the IBC.”

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