ORDER

PER: MS. REENA SINHA PURI, MEMBER (T)

IA-6485/2023 The present IA No. 6485 of 2023 has been preferred by Ms Reshma Mittal, the Resolution Professional (Applicant/RP) of the Corporate Debtor, M/s Starlit Power Systems Ltd (CD) before this Adjudicating Authority under Section 66 of the IBC, [Insolvency and Bankruptcy Code, 2016] for declaring certain transactions as fraudulent transactions and directing the Respondents to make contribution of Rs 12.29 crores to the assets of the CD.

2. The factual backdrop of the case is the admission of the CD into CIRP by order dated 20.03.2023 of this Adjudicating Authority Tribunal and appointment of Mr Khushvinder Singhal Nas as the Interim Resolution Professional (IRP) in terms of the aforementioned order. On 17.05.2023, the IRP appointed M/s Ashok Shyam & Associate as Transaction Auditor to conduct transaction audit of the CD and assist him in identifying whether the CD had been subjected to any transactions covered under sections 43, 45, 50 or 66 of the IBC. The transaction audit report was submitted on 26.07.2023. On the same day, Ms Reshma Mittal, Applicant here, was appointed as RP. Following queries by the RP, the TA issued an addendum to the audit report on 17.10.2023. The present application refers to the findings of the transaction audit report and also its addendum.

3. The Applicant/RP has alleged various fraudulent transactions on the part of the CD and identified these under various heads – lease of the mortgaged factory premises without prior permission of the bank; absence of any security deposit; undervalued rent of the factory premises and its infrastructure; ambiguity in ownership of machinery; non-maintenance of assets of the CD by the tenant; possibility of double financing; non-genuine debtors; transactions routed through bank account of group company; locking up funds in capital WIP; conversion of stock into scrap; false claim of fire on the factory premises etc.

About Lease of Mortgaged Factory Premises and related issues

4. The Resolution Professional (RP) has alleged that the mortgaged property and hypothecated assets of the Corporate Debtor (CD) were leased2 to M/s Future Energy (tenant) on 22.11.2021 without the consent of the

2 Copy of Lease agreement dated 22.11.2021 annexed as A-5 of the Application

secured lender and without a proper security deposit, save for an undated, conditional cheque of Rs. 10 lakh. Despite repeated queries3, the Respondents failed to provide any permission letter or satisfactory explanation.

5. The lease, covering the factory premises and entire infrastructure, was executed at a nominal rent of Rs. 1.5 lakh per month, whereas the fair market rent, based on borrowing cost and depreciation per the CD’s balance sheets⁴ should have been around Rs. 17.94 lakh per month. Although the lease deed required the tenant to bear routine expenses—such as maintenance, salaries of watch and ward staff, electricity, and statutory renewals—these do not justify the undervaluation. The RP has calculated⁵ a rental shortfall of Rs. 2.63 crore up to the CIRP commencement date. It is stated by the RP that the tenant earned a profit of Rs. 1.85 crore in FY 2022–23, suggesting a diversion of value to a third party. RP states that the absence of lender approval, inadequate rent, and overall structuring of the transaction indicate it was executed with an intent to defraud the creditors of the CD, potentially attracting the provisions of Section 66 of the IBC as a case of fraudulent trading.

6. Further concerns include the omission of the CD’s machinery list from the lease agreement, creating ambiguity in asset ownership; inclusion of both the CD’s and tenant’s lender banks in a combined insurance policy, raising the risk of undisclosed double financing; and the tenant’s failure to maintain the premises in accordance with the lease terms. The Respondents, according

3 Copy of email dated 26.10.2023 by the RP to the ex-management annexed as A-10 of the Application

4 Balan