Formation Textile alleges fraud in insolvency proceedings by Mandhana; files application with NCLT

by Apparel Resources News-Desk

10-July-2019  |  2 mins read

Workers at a clothing factory
Image Courtesy: lacenlingerie.com

The US-based company Formation Textile, which is set to take over Mandhana Industries, has alleged that the latter’s lenders led by Bank of Baroda as well as its resolution professional, have acted fraudulently during the insolvency process by hiding facts from Formation to get a higher offer for the assets.

This comes after the lenders moved the bankruptcy court to cancel the proposal approved by the National Company Law Tribunal (NCLT) stating that Formation Textile has failed to meet the terms of payout as per the agreed timeline.

The US-based firm has now filed an application in retaliation in NCLT Mumbai, seeking its help to verify facts that have raised questions on the transparency of these insolvency proceedings. It also wants to be allowed to modify the plan to make it viable, according to the actual information associated with the performance of the company.

“After the takeover of the control and management of Mandhana Industries Limited (MIL), the applicant has realised that the CoC and the resolution professional have, during the CIRP of MIL, deliberately, fraudulently and willfully suppressed material facts and information from the applicant,” Formation Textile has said in an application.

The company that took ownership of the textile company has said that the company concealed information pertaining to actual financial position of the asset which Formation has discovered is much lower than what was declared as part of the information memorandum.

The other information is related to the ongoing litigation and investigation initiated by the Government and statutory authorities such as the Income Tax and Customs Departments, disputes by and against Mandhana as well as the company’s prospective liabilities.

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