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2025 Supreme(Online)(NCLT) 510
NATIONAL COMPANY LAW TRIBUNAL
Shri Prabhat Kumar, Justice V.G. Bisht (Retd.), JJ
CS Vaishali Patrikar Liquidator for M/s. Gourmet Renaissance Private Limited – Appellant
Versus
Shri. Suniel Hiroo Bharwani – Respondent
IA(I.B.C) - 2097/2023
For the Petitioner:Ritu Aggarwal
Directors are liable for fraudulent transactions diverting funds from the Corporate Debtor, necessitating contribution to the liquidation estate under Section 66 of the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 66 - Application by Liquidator seeking contribution from suspended directors for fraudulent transactions amounting to Rs. 31,09,13,997/- - Respondents failed to provide evidence supporting their defense and were found liable for diverting funds and assets, constituting fraud against creditors. (Paras 1, 4, 22)
(B) Corporate Insolvency Resolution Process - The Corporate Debtor was admitted to CIRP on 11.03.2019 and subsequently to liquidation on 05.08.2021 - The Liquidator discovered significant assets misappropriated by directors. (Paras 4, 9)
(C) Fraudulent Transactions - The court found that the directors engaged in transactions with related parties that lacked bona fide intent, leading to substantial losses for the Corporate Debtor. (Paras 13, 17, 21)
(D) Response of Respondents - The Respondents claimed incapacity to respond due to health issues and loss of records but failed to substantiate their defense adequately. (Paras 5, 8) (E)
Findings of Court:
The court determined that the Respondents were liable for contributing Rs. 29,39,52,622/- to the Corporate Debtor's assets due to fraudulent activities. (Paras 22) (F)
Issues: Whether the Respondents acted with intent to defraud creditors and to what extent they are liable for the losses incurred by the Corporate Debtor. (Paras 9, 12) (G)
Ratio Decidendi: The court emphasized that the burden of proof lies with the directors to demonstrate the legitimacy of their actions and that failure to do so results in liability for fraudulent transactions. (Paras 12, 22) (H)
Result: Application partly allowed; Respondents directed to remit Rs. 29,39,52,622/- to the Corporate Debtor.
ORDER
Per: Prabhat Kumar, Member (Technical)
1. The present Interlocutory Application was filed by the Liquidator on 16.5.2023 seeking following reliefs:
i. Admit and Allow the Present Application.
ii. Condone delay, if any, for filing this Application.
iii. Direct Respondents, jointly and severally, to make contribution of diverted funds totally amounting to Rs. 31,09,13,997/- to the Liquidation Estate of the Corporate Debtor.
2. This rights under this Application were assigned to M/s VRSA Consulting LLP vide assignment agreement dated 27.1.2024 executed in terms of decision taken by the Liquidator in consultation with Stakeholders Consultation Committee on 23.11.2023 to sell the rights and benefits under the Avoidance Appplication(s) i.e. IA 2097 of 2023 and IA 2638 of 2023 as “Not Readily Reliasable Assets (NRRA)’, accordingly M/s VRSA Consulting LLP was substituted as Applicant in the present application in terms of Order passed by this Tribunal on 17.5.2024 in IA 2473 of 2024 seeking such substitution.
3. Shri Suniel Hiroo Bharwani, Respondent No. 1 & Shri. Richard Vernon Dias, Respondent No. 2 are suspended Board of Directors of the Corporate Debtor.
4. The facts leading to the case in hand are as follows:
i. The Corporate Debtor was admitted to the Corporate Insolvency Resolution Process (CIRP) vide an Order dated 11.03.2019 passed by this Tribunal, and the Corporate Debtor was admitted to Liquidation Process thereafter in terms of Order dated 05.08.2021, appointing the Applicant herein as the Liquidator.
ii. It is submitted that the Balance Sheet of the Corporate Debtor records that the Corporate Debtor owned some assets in nature of Kitchen Equipment worth ₹6,56,36,549/-. However, the Applicant could not locate the said Asset in any premises of the Corporate Debtor. It is further submitted that the Applicant wrote letters to the Respondent No. 1 asking the position of the Assets. However, the Respondent No. 1 finally replied to the Applicant on 13.10.2022 giving status of the Assets of the Corporate Debtor stating that the Kitchen Equipment of the Corporate Debtor, worth of ₹ 3.80 Crores were confiscated by 3 Operational Creditors of the Corporate Debtor, to whom the Corporate Debtor owed certain amounts. The examination of the books of accounts by the Applicant revealed that these assets were written off vide Journal Entry dated 30.09.2017 without any justification thereto. Therefore, as admitted by the R1, the act of keeping the Assets worth ₹ 3,80,00,000/- purposefully in custody and control of the Operational Creditors against their dues is nothing but a fraud played over the other Creditors of the Corporate Debtor and therefore, the Respondents are liable to make contribution to the Liquidation Estate of the Corporate Debtor for such amount.
iii. During this Liquidation Process, the examination of the books of accounts of the Corporate Debtor further revealed certain transactions, whose nature appears to be doubtful / fraudulent, and the Applicant is of the view that these transactions have been carried out either to divert the funds of the Corporate Debtor or to keep the Assets of the Corporate Debtor out of reach of the Stakeholders of the Corporate Debtor. These transactions are as follows:
a. An Advance of ₹ 16,71,72,679/- was outstanding as on 31.03.2018 in the name of M/s. Passion for Lifestyle Private Limited, however, the said amount also written off by Journal Entry in Ledger dated 31.03.2018 on ground of failure of the Corporate Debtor to full-fill its obligations under the Agreement dated 9.10.2014 between the Corporate Debtor and M/s. Passion for Lifestyle Private Limited. It is pertinent to note that the Respondent No. 2 is also director of M/s. Passion for Lifestyle Private Limited; M/s. Passion for Lifestyle Private Limited was operating from the office of the Corporate Debtor, and has been struck off from the Registrar of Companies on account of its failure to file its Annual Returns for the year ended 31.3.2
