Mumbai NCLT Orders Forensic Audit Of Narangs International Hotels Accounts Over Alleged Financial Irregularities

Mumbai: The Mumbai Bench of the National Company Law Tribunal (NCLT) has directed a forensic audit of the accounts of Narangs International Hotels Pvt Ltd for 2023-24 and 2024-25, following allegations of financial irregularities and mismanagement raised by family shareholders.

The order was passed on October 6 by a bench comprising Judicial Member Vinay Goel and Technical Member Charanjeet Singh Gulati in an interim application filed by Mona Rama Narang and Rahul Rama Narang in pending oppression and mismanagement proceedings concerning the company.

“The disputes alleged by the Applicants arose subsequent to the demise of Mr. Rama Narang on 05.03.2023 and relate, inter alia, to financial transactions and accounting matters concerning the Respondent Company subsequent thereto. Having regard to the nature of the allegations and the material placed on record, we consider it appropriate to direct a forensic audit of the accounts of Respondent Company for the Financial Years 2023–24 and 2024–25,” the order copy reads.

The tribunal said that after considering the material placed on record, the NCLT found it appropriate to have the company’s accounts independently examined.

Allegations Over Financial Matters

The applicants had raised concerns over several financial and corporate matters, including the alleged utilisation of funds raised through a rights issue, a disputed land transaction, advances made by the company, write-off of receivables, accounting treatment, disclosures relating to the company’s airport-related business and related-party transactions.

The company and its management opposed the application and denied the allegations. They maintained that the financial statements had been duly audited and that several of the issues raised by the applicants had already been addressed.

After considering the rival submissions, the tribunal directed a forensic audit of the company’s accounts for the two financial years.

The company, its directors and officers have been directed to fully cooperate with the forensic auditor. The applicants will bear the professional fees and expenses of the auditor, while the audit report has to be submitted before the tribunal within 45 days.

Audit Not Finding Of Guilt

Importantly, the NCLT clarified that its direction for a forensic audit should not be construed as a finding that the allegations against the company or its management have been established.

The tribunal said the forensic audit does not mean that the company or its directors and officers have been found guilty of oppression, mismanagement, diversion or siphoning of funds. The findings of the auditor will be considered by the tribunal while deciding the main company petition.

“It is clarified that the appointment of the Forensic Auditor shall not be construed as a finding that any allegation made by the Applicants has been established or that Respondent Company or any of its directors/officers has committed oppression, mismanagement, diversion or siphoning of funds. The findings of the Forensic Auditor shall remain subject to consideration by this Tribunal in the main Company Petition,” the order copy reads.

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The company, its directors and officers have been directed to fully cooperate with the auditor. The applicants will bear the auditor’s professional fees and expenses, and the report has to be submitted to the tribunal within 45 days.

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