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2025 Supreme(Online)(NCLT) 6743
NATIONAL COMPANY LAW TRIBUNAL
Shri Prabhat Kumar, Hon’ble Member (Technical), Shri Sushil Mahadeorao Kochey, Hon’ble Member (Judicial)
Mukesh Verna – Appellant
Versus
Chirag Pittie – Respondent
IA (IBC) No. 2508/MB/2025 in CP (IB) No. 440/(MB)/2023
For the Applicant: Mr. Agam Maloo
For the Respondents: Mr. Rushad Irani
Court emphasized on burden of proof for establishing fraudulent intent in corporate insolvency matters under relevant sections of the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 66 and 67 - Fraudulent trading - Application for declaring transactions as fraudulent under Section 66 - Applicant, the Resolution Professional, found to have laid the burden of proof regarding fraudulent intent - Respondents contended application was filed beyond mandatory time period and lacked independent opinion. (Paras 9, 10, 15, 17)
(B) Findings - The Application for fraudulent transactions was scrutinized against transactional audit findings establishing fraud - Respondents argued the business losses were attributed to external factors including COVID-19. (Paras 12, 13)
Facts of the case:
The Application sought relief against directors of Corporate Debtor accused of fraudulent actions involving substantial amounts during the corporate insolvency resolution process. Losses and doubtful receivables highlighted the alleged mismanagement.
Findings of Court:
Respondents held liable for certain transactions while maintaining that other allegations lacked sufficient evidence.
Issues: Main issues included fraudulent trading allegations, maintainability of the application, and the burden of proof regarding the transactions.
Ratio Decidendi: The court emphasized the necessity of establishing intent in proving fraudulent trading as required under the Code.
Result: The Application was partly allowed, with specific contributions ordered from Respondents.
| Table of Content |
|---|
| 1. application filed regarding fraudulent trading and financial misconduct. (Para 1 , 2 , 5) |
| 2. fraudulent actions alleged based on transaction audit findings. (Para 6 , 12) |
| 3. establishing burden of proof and maintaining necessary elements of fraud in trading. (Para 10 , 11 , 13) |
| 4. determination of directors' liability and court's order regarding transactions. (Para 15 , 16 , 17) |
ORDER
1. This Application IA 2508/2025 was filed on 29.04.2025 by Mr. Mukesh Verma (“Applicant/RP”), the Resolution Professional of M/s Shrivallabh Pittie Industries Limited (“Corporate Debtor”) under the Provision of Section 66 Read with 67 of the Insolvency and Bankruptcy Code, 2016 (“Code”) r/w Regulation 35A of Insolvency and Bankruptcy Board Of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, for fraudulent and wrongful trading seeking following reliefs:-
a) Be pleased to declare aforesaid transactions as done by Respondents mentioned in paragraphs 4 to 21, as fraudulent transactions under the provisions of section 66 (1) and (2) of the Code.;
b) Be pleased to pass consequential orders against Respondent No. 1 to 5 to jointly and severally contribute INR 285,61,59,000/- under the provisions of Section 67 of the Code, which has been diverted by them from the Corporate Debtor and utilized for their own purposes as their actions have been with ulterior motives with the sole intent of defrauding the Creditors and siphoning off of the entire amount and the public money was utilized by the Respondent No. 1 to 5 for their own gains, in the account of the Corporate Debtor, maintained by the Applicant.
c) For such other and further reliefs as this Hon'ble Tribunal deems fit and necessary.
d) For the cost of this Application.
2. A Section 7 application under the Insolvency and Bankruptcy Code, 2016 was filed against the Corporate Debtor by the State Bank of India on occurrence of default in payment of its outstanding dues. The said application was admitted on 07th March 2024 by the NCLT, Mumbai Bench.
3. Respondent Nos. 1 to 5, the directors of the Corporate Debtor as on insolvency commencement date, together were in management and control of the Corporate Debtor as on the insolvency commencement date. The Corporate Debtor had availed loans from a consortium of banks.
4. The Applicant herein had appointed JTST & Co. LLP, Chartered Accountants having office at 506, Tower A1, Spaze I-Tech Park, Sector 49, Gurugram -122 018 vide a letter dated 01.06.2024, for carrying out the transaction audit of the Corporate Debtor. On 22.11.2024, Transaction Auditor submitted the final Transaction Audit Report to the Resolution Professional after obtaining the comments of the Directors of the CD.
5. In compliance with the provisions of the Code, the Applicant observed that there are several fraudulent transactions as per the provisions of Section 66 of the Code. In compliance with the provisions of regulation 35A of the said CIRP Regulations, the Applicant RP on 11th May 2024 formed an opinion that the Corporate Debtor had been subjected to following transactions inter alia, covered under the provisions of sections 66 of the Code upon review of the Transaction Audit Report as well as the books of accounts of the Corporate Debtor and taking into consideration the reply of the suspended directors submitted to the Transaction Auditor :
a) Gross loss during financial ended 31st March 2022 and 31st March 2023 amounting to Rs. 157.95 Lacs, and Rs. 6400.60 Lacs respectively;
b) Embezzlement of inventory of the Corporate Debtor by Respondents amounting to Rs. 2,35,68,691/-;
c) Doubtful Trade Receivables amounting to Rs. 2,17,66,36,131/-.
6. The Applicant has also observed that there are no preferential transactions as per the provisions of Section 43 of the Code, undervalued transactions as per Section 45 of the Code and extortionate credit transactions as per Section 50 of the Code.
7. The Respondents have filed common and joint reply raising
