Go First may face forensic scrutiny

Forensic audit to be triggered if transactions raise concerns

- Shayan Ghosh

Banks could initiate forensic audit of Go Airlines (India) Ltd if a transaction audit to track undervalued or preferential transactions as part of the insolvency resolution process throws up adverse findings, a banker aware of the development said.

Lenders met Go Airlines management to find out why it unilaterally sought insolvency but are yet to get a satisfactory response, the banker said, requesting anonymity. Although some had foreseen impending stress, most banks were surprised when the airline approached the National Company Law Tribunal (NCLT) in May despite not defaulting on repayments.

"We could look at a forensic audit depending on the report of the transaction audit. A transaction audit and a valuation report are expected to be commissioned by the resolution professional after the next meeting of the committee of creditors (CoC)," the banker said.

Transaction audits are done under the provisions of the bankruptcy code, as the resolution professional needs to form an opinion on whether there are any transactions that are either preferential, undervalued, fraudulent, or extortionate. However, forensic audits by banks are independent exercises to determine if transactions violate the conditions of the loan or Reserve Bank of India (RBI) rules.

"Sometimes, banks opt for a forensic audit even when a company faces insolvency proceedings and the transaction auditor has already given a report. This is to ensure lenders have their audit report," said Ashish Pyasi, associate partner at law firm Dhir and Dhir Associates.

The CoC unanimously voted on 9 June to replace the interim resolution professional, Abhilash Lal of consulting firm Alvarez and Marsal. On 15 June, NCLT's principal bench approved the appointment of Shailendra Ajmera of EY as the resolution professional.