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NCLAT Upholds ₹4.37 Crore Liability on Linkson International Directors Over
The has confirmed a ₹4.37 crore against the suspended directors of , ruling that the company engaged in a "crystal-clear case of " designed to defraud creditors. A bench comprising Justice Mohd. Faiz Alam Khan and Technical Member Arun Baroka dismissed the appeal filed by Yashwant Lalchand Sangla and others, who challenged an earlier order of the .
A Loan That Came Back Around
The case stems from the liquidation of , which was admitted into the following a petition by . Liquidator Manish Baldeva commissioned a by , which uncovered a web of suspicious transactions involving properties at Shri Gopal Complex and Megh Complex in Nagpur.
In , the corporate debtor purchased 12 flats in Shri Gopal Complex for ₹3.5 crore — nearly double the stamp-duty value of ₹1.50 crore. sanctioned a ₹2.45 crore loan for the purchase. The loan amount was transferred to the vendor, Sudhir Hiranwar, on the very day the sale deed was registered. Within hours, Hiranwar transferred ₹1 crore to , a related party where Yashwant Sangla was a common director. Another ₹10 lakh went to , and ₹6 lakh was routed back to Linkson International itself.
A similar pattern emerged with the Megh Complex properties, where godowns and flats were purchased for ₹2.41 crore and ₹1.61 crore respectively — again at prices far exceeding market value. Loan amounts of ₹1.68 crore and ₹1.12 crore were transferred to the vendor, who promptly sent ₹1.50 crore to Linkson Ispat and Energy and ₹7 lakh back to the corporate debtor.
The forensic auditors also noted that the properties remained in the possession of the vendors, who continued to collect rent from tenants. No had been effected in the sub-registrar's records.
Fictitious Cash Expenses
Beyond the property transactions, the audit flagged ₹103.15 lakh in cash expenses recorded under heads like "business expenses," "labour charges," and "salary." The liquidator argued that these entries were lump-sum debits without supporting documents, and the erstwhile management failed to provide any verification. The NCLAT agreed that the manner of recording these expenses indicated they were fictitious, designed to siphon cash from the corporate debtor.
The Appellants' Defence
The suspended directors contended that the impugned order was passed , citing serious health issues including cancer, glaucoma, and heart surgery as reasons for their non-appearance before the NCLT. They argued that the report was based on incomplete data and could not be treated as conclusive evidence. They also claimed that the transactions were genuine, had been approved by the bank, and that the used by the auditors did not reflect actual market prices.
The Court's Reasoning
The NCLAT rejected these arguments, noting that the NCLT had provided ample opportunity for the directors to contest the proceedings.
"It is due to their own fault they did not contest the proceedings,"
the bench observed.
On the evidentiary value of the forensic report, the tribunal clarified that while an is not conclusive per se, it assumes significance when the party in possession of relevant documents fails to produce them. The report was supported by sale deeds, bank records, sub-registrar entries, and title verification reports.
"The
those facts which are in the specific knowledge of the party is on it and the other party could not be compelled to prove those facts which are impossible for it to prove,"
the bench stated, adding that the directors had not placed any material to discredit the audit findings.
The NCLAT concluded that the property sales were
"nothing but an
"
enabling the corporate debtor to raise loans and receive the money back through the sellers. The overvaluation of properties, the timing of fund transfers, and the routing of money to related entities all pointed to a deliberate scheme.
Key Observations
"It appears to be a crystal-clear case of
of money, and the sole purpose of it was to defraud the creditors."
"If the facts of the execution of the sale deeds, their timings, and the transfer of money from the bank to the vendor and by the vendor to the bank and also to the related entities and CD is considered in its normal parlance, it will emerge that the purpose of the loan advanced by the Nagpur Sahkari Bank was not for the purchase of the property."
"The
Report in this case is prepared on facts, material and documentary evidence collected by the Forensic Auditors and this evidence, material and facts have also not been disputed by the Appellants nor any material has been placed before us, which may be sufficient to discard this
Report."
Verdict
The NCLAT dismissed the appeal with no order as to costs, upholding the NCLT's direction that the suspended directors contribute ₹4.37 crore to the corporate debtor. The amount includes adjustments for the bank's recovery from the mortgaged properties. The decision reinforces the strict scrutiny applied to transactions that appear designed to defraud creditors, and underscores the importance of cooperating with forensic audits during insolvency proceedings.
