KPMG and the financial creditors of city based NBFC companies – Srei Infrastructure Finance and Srei Equipment Finance – on Thursday argued against the erstwhile promoter’s appeal before the Calcutta bench of the National Company Law Tribunal to set aside the forensic audit process and conducted by KPMG and refrain the lenders from publishing the report to the Central Repository of Information on Large Credits.

Senior advocate Ramji Srinivasan appearing for KPMG said that the firm’s attachment to the application is “incidental” on account of the action of the lenders and an injunction restraining KPMG from continuing with the audit and publishing any information in connection with the audit is not workable because the reports are already available with the lenders.

“What the banks do with it and whether they can use it further in the CIRP proceedings, whether they can compare the data contained in the report subsequently with the data in the RP commissioned audit etc are matters to consider at appropriate time,” said Srinivasan.

He added that the report coming after the initiation of CIRP does not change the nature of information the banks have collected and makes no difference to the rights that were always exercisable and are available to the banks to gather factual information in respect of the loans to the borrowers, which are public money.

KPMG was appointed for the audit in April 2021 and was supposed to submit its report by June 2021 as per the RBI master direction on frauds of 2016-17.

In the meantime the company was placed under the corporate insolvency resolution process in October 2021 and the resolution professional appointed by the Reserve Bank of India selected BDO India LLP for carrying out the transaction audit of the corporate debtor.

From the financial creditor’s side, senior advocate Abhinav Vasisht said that the redflagging of the accounts by various banks started only after the NCLAT in September 2021 had set aside a previous order of NCLT preventing any coercive steps by the lenders including classification of accounts.

“It is only thereafter that the red flagging could be done which started from 12th October onwards. There are six banks which have red flagged the accounts between October 12 and November 17,” said Vasisht.

The banks received the forensic audit report in December, within the timeline of 3 months as per the RBI directive starting from the red flagging of the accounts. He also said that it cannot be argued that the procedures envisaged under RBI directive and therefore under the statute of Banking Regulation Act in any manner will delay the insolvency process which will continue.