Kolkata, March 03 The fact that the forensic audit report by KPMG on the Srei group companies comes after the initiation of insolvency proceedings, is not likely to change the nature of information that banks have collected. Moreover, since the report was already submitted to banks before an application was moved to the Kolkata bench of National Company Law Tribunal (NCLT) it was redundant on the part of the applicant to ask for stalling the proceedings or in this case withholding submission of the report.
In his submissions before the Kolkata bench of NCLT, the counsel appearing on behalf of KPMG said, “The timeline misconception on the basis of which the application came to be filed is not correct as things and events turned out. As a matter of fact I (KPMG) have submitted the report the day when they approached this court and the banks were in receipt and they had further acted upon the report itself.”
‘Scope cannot be enlarged’
According to Ramji Srinivasan, the counsel appearing on behalf of KPMG, the final hearing cannot now enlarge the scope of the application and the focus and scope of the application, without an amendment, cannot be enlarged with affidavits and rejoinders or some other documents that come to light unless they move an application and say they want to address the court on some other issues and invite court’s observations or adjudications thereupon.
“So if the prayer was to not to ask KPMG to continue with the proceedings and which proceedings are over and therefore my role is over,” he said.
Hemant Kanoria, founder and erstwhile director of Srei, had recently filed an application seeking to set aside the KPMG audit into the company citing the issue of parallel auditing as it is currently undergoing the corporate insolvency resolution process (CIRP) and since the administrator has appointed BDO India LLP as the transaction auditor under the insolvency and bankruptcy code (IBC).
However, according to Srinivasan, the KPMG report would serve just as one more material that the banks will have to consider and compare with a transaction audit report which may be ordered by the resolution professional, in this case the administrator.
“The fact that the report comes after the commencement of CIRP will that change the nature of information that the banks have collected? All that the banks have done was to ask for a report in respect of finances they have extended. So the accident of submission of report one day before or after the commencement of CIRP makes no difference to the rights that were exercisable and always available to the banks to gather factual information in respect of the loans they have lent to the borrowers which are public money. Now what they do with it whether they can use it further in CIRP proceedings, whether it is permissible for them, whether they can compare the data contained in this vis-a-vis the data that is obtained subsequently by the IRP commissioned auditor etc are matters for them to consider at the appropriate time,” he argued.