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2025 Supreme(Online)(NCLT) 5943
NATIONAL COMPANY LAW TRIBUNAL
Shri Prabhat Kumar, Hon’ble Member (Technical), Shri Sushil Mahadeorao Kochey, Hon’ble Member (Judicial)
Orion Resolution & Turnaround Pvt. Ltd. – Appellant
Versus
Rudolph Anthony Lima – Respondent
COMPANY PETITION (IB) 437 (MB) OF 2022
For the Appellants/Petitioners: Adv. Prateek Seksaria, Adv. Abhishek Salian, Adv. Kinnari Raut
For the Respondents: Adv. Vinita Hombalkar, Adv. Harsh Kumar, Adv. Ansh Karnawat, Adv. Falak Doshi
The court found that the transfer of shares was fraudulent and aimed at evading creditors, thus declaring it null and void under the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 66 - Corporate Debtor's fraudulent trading and transfer of shares declared null and void - Allegations of undervalued and wrongful trading against promoters upheld - Court deemed transactions were made to defraud creditors and to siphon off assets - The tribunal clarified that any restoration must respect third-party rights to the land involved. (Paras 1-24)
(B) Fraudulent Trading - Transfer of shares must be declared null and void under Section 49 of the Code - The transactions were intended to keep the Corporate Debtor's assets beyond the reach of creditors. (Paras 23.q, 23.r)
(C) Accounting Standards - Write-off of dubious receivables does not constitute fraud if financial statements are not materially misrepresented. (Paras 24, 26)
Facts of the case:
The applicant, Resolution Professional, accused the previous management of illegal transactions to benefit related parties, resulting in significant losses to the Corporate Debtor. Respondents claim transactions were valid and necessary considering the Corporate Debtor's financial situation.
Findings of Court:
The sale of shares to related parties was set aside, while remaining allegations were dismissed due to lack of evidence of fraudulent intent.
Issues: Whether transfers were made with fraudulent intent to defraud creditors and the validity of write-offs of dubious receivables.
Ratio Decidendi: Court ruled that fraudulent intent can be established from the circumstances surrounding transactions, and undervalued transfers made by the Corporate Debtor to related parties fell under the scrutiny of Sections 49 and 66.
Result: IA 623 of 2025 is partly allowed; IA 909 of 2025 rendered infructuous.
| Table of Content |
|---|
| 1. application details including parties and reliefs sought. (Para 1 , 2 , 3) |
| 2. details of transactions impugned for fraudulent intent. (Para 4 , 5) |
| 3. issues related to related party transactions and debts. (Para 6 , 24 , 25 , 26) |
| 4. respondents' defense against audit findings. (Para 8 , 9 , 10 , 11) |
| 5. application of legal provisions regarding fraudulent transactions. (Para 14 , 19 , 21) |
| 6. final order and determination on applications. (Para 27 , 28) |
ORDER
1. This Application IA 623/2025 was filed by Orion Resolution & Turnaround Pvt.Ltd. (“Applicant/RP”), the Resolution Professional of Marshall Breeders Private Limited (“Corporate Debtor”), seeking following reliefs in terms of Section 66 of the Insolvency and Bankruptcy Code, 2016 (“Code”):
a) Declare that the transfer of shares as stated in form MGT-7 A, by Corporate Debtor to Respondent Nos. 3 and 4 are undervalued and fraudulent and thus, null and void;
b) Direct the Respondent Nos. 5 and 6 to register the name of the Corporate Debtor as the holder of the shares as mentioned in the Schedule;
c) In the event, the transfer of shares in Schedule A is held to be irreversible, this Hon'ble Tribunal be pleased to direct Respondent No. 2 to contribute an amount of Rs. 34.2092 Crores towards the fraudulent transfer of share;
d) Declare that business of the Corporate Debtor has been carried on with the intent to defraud the creditors of the Corporate Debtor and to siphon off the funds of the Corporate Debtor to the promoters/Directors/related parties of the Corporate Debtor during the Review Period as set out;
COMPANY PETITION (IB) 437 (MB) OF 2022
e) Direct Respondents to contribute Rs. 70.89 Crores (Rupees Seventy Crores Eighty Nine Lakhs in furtherance of prayer clause (d) above, towards the fraudulent and wrongful trading carried out by him;
f) Any other or further reliefs as this Hon’ble Tribunal deems fit and proper.
2. Respondent No. 1, Rudolph Anthony Lima, is promoter of Corporate Debtor who ceased to be a director of Corporate Debtor in 2022. Respondent No. 2, Terry Elias Dsouza, was the erstwhile Director of the Corporate Debtor along with Late Elias Dsouza (demised on April 21, 2024), who were all involved in the transactions under question in the present Application. Respondent Nos. 3, Michelle Elias Dsouza, is the daughter of Respondent No. 1 and also a Director in Respondent No. 5, M/s C&M Layer Farms Private Limited, since 2021 and in Respondent No. 6, M/s Shivneri Farms Private Limited. Respondent No. 4, Seraphine Sanjay Susainathan, is the daughter of Late Elias DSouza. Respondent No. 5 and 6 are sister concerns, involved in the business of poultry farming, but were wholly owned subsidiaries of the Corporate Debtor. Respondent No. 7, Mr. Rakesh Phirthu Yadav, is a member of the Suspended Board of the Directors of the Corporate Debtor and was inducted in the year 2023.
3. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (“CIRP”) vide order dated 15.05.2024 passed in an Application i.e. C.P. (IB) 437/2022 u/s 7 of the Code filed on 30.3.2022 by Omkara Assets Reconstruction Private Limited (Omkara). The Corporate Debtor was granted loans by Janalaxmi Cooperative Bank, which were classified as NPA on September 30, 2002 and later on these loans were assigned to Omkara in 2018. During the pendency of said application, this Tribunal vide its order dated 10.08.2022 in I.A. No. 1339 of 2022 ordered status-quo in respect of the assets of the Corporate Debtor till the next date of hearing. Further, vide order dated 23.12.2022 in I.A. No. 3369 of 2022, this Tribunal restrained the Respondent COMPANY PETITION (IB) 437 (MB) OF 2022 the said restraint was further continued vide order dated 15.5.2024 by which CIRP commenced.
4. The Applicant replaced the Interim Resolution Professional vide order dated18.7.2024. Based on (i) the disclosures made by Corporate Debtor in a proceedings before Hon’ble DRT, Mumbai that the shareholding of the Corpora
