# In the matter of Carnation Auto India Pvt. Ltd. IA No. IA-06-2019 connected with IB-302-(ND)-2017

> NCLT judgment dated 2021-02-09. Citation: TCN-2021-NCLT-03089. K.G. Somani & Co., appointed as Forensic Auditor of Carnation Auto India Pvt. Ltd. by Punjab…

- **Court:** NCLT
- **Order date:** 9 Feb 2021
- **Citation:** TCN-2021-NCLT-03089
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/carnation-auto-india-pvt-ltd-ia-no-ia-06-2019-connected-with-ib-302-nd-2017-a8020fef

## Summary

### Background

K.G. Somani & Co., appointed as Forensic Auditor of Carnation Auto India Pvt. Ltd. by Punjab National Bank, filed an application seeking to direct Arvind Garg, the Liquidator for Carnation Auto India Pvt. Ltd., to admit and pay Rs. 5,31,000/- arising out of an invoice dated 09.01.2018. The applicant was engaged for conducting a Forensic Audit of the books of accounts of Carnation Auto India Pvt. Ltd. for a period of six years. During the audit, the company was admitted to the Corporate Insolvency Resolution Process (CIRP) by an order passed by the NCLT on 25.09.2017. A fee of Rs. 3,00,000/- was negotiated by Punjab National Bank with the applicant for conducting the audit under the Insolvency and Bankruptcy Code, 2016. The applicant remained aligned with the IRP/RP

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## Facts

K.G. Somani & Co. was appointed as the Forensic Auditor of Carnation Auto India Pvt. Ltd. by Punjab National Bank. The appointment was made on 18.07.2017 for a period of six years. The applicant was appointed as Forensic Auditor of Carnation Auto India Pvt. Ltd. by Punjab National Bank. The CIRP was initiated against Carnation Auto India Pvt. Ltd. on 25.09.2017. The applicant raised an invoice of Rs. 5,31,000/- on 09.01.2018 for the Forensic Audit Report dated 03.01.2018. The applicant sought payment of the invoice from the Liquidator, Arvind Garg. The respondent denied that the expenses incurred on forensic audit activity assigned to the Applicant by the financial creditor, Punjab National Bank form part of Insolvency Resolution Process Cost within the purview of

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## Issues and analysis

### Issue 1: Whether the Forensic Audit activity performed by the applicant falls within the purview of …

**Ratio:** Section 5(13) of the IBC, 2016 defines 'insolvency resolution process costs'. Circular

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**Reasoning:** The Tribunal reasoned that the work assigned to the applicant of Forensic Audit by the

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**Interpretation:** The interpretation of Section 5(13) of IBC and Circular No. IBBI/IP/013/2018 is

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**Application:** In this case, the applicant was appointed as the Forensic Auditor before the

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## Parties

- **Judges:** P.S.N. P…; V.K. SUB…
- **Appellants:** K.G. SOMANI…
- **Respondents:** CARNATION AUTO…; ARVIND…

## Timeline

- **2017-07-18 — Appointment of Forensic…**: K.G. Somani & Co. was appointed as Forensic Auditor of Carnation Auto India Pvt. Ltd. by…
- **2017-09-25 — Initiation…**: CIRP was initiated against Carnation Auto…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(13) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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