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10. It is the case of the Appellants that in the meantime, the Respondent also got forensic audit of Corporate Debtor conducted in accordance with Section 25 (2)(d) of the Code and Regulation 35 A of the IBBI Regulation, 2016 and accordingly M/s VMRS & Association, Chartered Accountants were appointed to conduct forensic audit of the Corporate Debtor, who gave the Forensic Audit Report on 22.09.2020. It is the case of the Appellants that they submitted their detailed response on 20.11.2020 to the Respondent vis- à-vis finding of Forensic Audit Report, bringing out fallacies and inaccuracies in the Forensic Audit Report.

22. The Appellants submitted that the Forensic Audit Report did not consider the submissions made by the Appellants and the Report is inaccurate and misleading.

Comp. App. (AT) (Insolvency) No. 1070 of 2021 & Comp. App. (AT) (Insolvency) No. 1121 of 2023

23. The Appellants have given detailed averments regarding Forensic Audit Report. During the hearing, the Respondent also gave her side about scientific approach adopted in Forensic Audit Report and basis for forming an opinion by the Respondent regarding fraudulent transactions and determinations of frauds leading to application under Section 66 to the Adjudicating Authority. Since, Forensic Audit Report is the crux of the matter in both the Appeals, this Appellate Tribunal will deal the Forensic Audit Report along with averments of the Appellants, and the Respondent and our own findings on the same in independently at later stage after noting other averments of both the Appellants and Respondent. At present, it will be sufficient to observe that we have taken note of the averments of the Appellants on Forensic Audit Report along with the written submissions of the Appellants.

The Appellants further stated that this mis-apprehension of Forensic Audit Report was due to fact that proper records were not available by the Corporate Debtors which does not mean that there was illegal diversion of stock for fraudulent purposes. The Appellants stated that the Statutory Auditors have not pointed out any such diversion of stock.

Per-contra, the Respondent pointed out that with regard to diversion of stock of Rs. 5,48,50,824, on perusal of finding No. 1 of the Forensic Audit Report, it is clear that the Corporate Debtor manipulated the Stock Valuation and Material consumption including their Opening and Closing stock which consist of Work in Progress and rest is Finished Stock Inventory. The Corporate Debtor excessively consumed 193% as compared to previous year trend i.e. 73%, 79%, 70% raw material in financial year 2018-2019 and further also the excessive consumption of finished goods i.e. 97% in financial year 2018-2019 as compared to previous year trend i.e, 22%, 19% thus it is clear that the stock has been manipulated to the tune of Rs 5,48,50,824/-, which was sold by the Corporate Debtor in cash and the amount received was pocketed in cash by the Appellants, hence a wilful Comp. App. (AT) (Insolvency) No. 1070 of 2021 & Comp. App. (AT) (Insolvency) No. 1121 of 2023 attempt was made by the Appellant No. I and 2 (Suspended directors) to harm the various stakeholders. The Respondent pointed out this was backed by Forensic Auditors in their detailed technical analysis from page no. 9 to 22 of the Forensic Audit Report.

53. It is the contention of the Appellants that the Statutory Auditor did not find any fraudulent transactions contrary to the Forensic Audit Report submitted by M/s VMRS & Associates, Chartered Accountants and therefore Forensic Audit Report was not correct. In this regard, we observe that the role of Forensic Audit becomes relevant only when such situation occurs about alleged preferential, undervalued, fraudulent and extortionate type of transaction takes place and on most occasions the process of Forensic Audit is required to be undertaken after the annual financial statement of the Corporate Debtor are duly compiled and audited. In view of this, the contention of the Appellant is not convincing. Moreover, we also take note of the submissions of the Respondent that in the Statutory Auditors did not provide suitable cooperation to the Respondent as Resolution Professional Comp. App. (AT) (Insolvency) No. 1070 of 2021 & Comp. App. (AT) (Insolvency) No. 1121 of 2023 and further the Statutory Auditors themselves gave qualified Audit Report. In view of this, we are unable to accept the contention of the Appellant that in absence of pointing out fraudulent transactions by the Statutory Auditors, the alleged fraudulent transactions should not have been taken into consideration by the Respondent or by the Adjudicating Authority.