The National Company Law Tribunal (NCLT), New Delhi Bench, has directed several former directors and associated parties of a corporate debtor to contribute more than ₹60 crore to the insolvency estate after finding that a series of transactions constituted fraudulent trading and wrongful conduct under Section 66 of the IBC.
The bench of Manni Sankariah Shanmuga Sundaram (Judicial Member) and Atul Chaturvedi (Technical Member) has observed that the conduct of the directors and other respondents fell within the scope of Section 66 of the IBC, which empowers the Tribunal to hold persons liable where business has been carried on with intent to defraud creditors or for any fraudulent purpose.
The order was passed on June 1, 2026, on an application filed by the Resolution Professional seeking reversal of multiple transactions allegedly carried out by the suspended management of the company. The application contended that large sums were advanced to vendors and other entities without adequate documentation, commercial rationale, or subsequent recovery efforts, resulting in substantial losses to the corporate debtor.
The Tribunal examined several transactions undertaken during different periods before the commencement of insolvency proceedings. It noted that substantial amounts remained outstanding in the books of the corporate debtor for years without any convincing explanation from the former management. In many cases, no agreements, invoices, contracts, correspondence, or recovery records were produced to justify the advances or establish their business purpose.
The Resolution Professional argued that despite repeated opportunities, the suspended directors failed to provide supporting records explaining why the funds were advanced or what steps were taken to recover them. The Tribunal found merit in these submissions and observed that the absence of transparency and accountability surrounding the transactions raised serious concerns regarding their bona fides.
Among the transactions scrutinised by the Tribunal were advances made to vendors and other entities that remained unrecovered for extended periods. The order records that these amounts continued to appear as outstanding in the company’s accounts despite the passage of several years. The Tribunal observed that neither documentary evidence nor any reasonable justification was provided to establish that the advances were made in the ordinary course of business.
The Tribunal further noted that the management’s inability to demonstrate efforts for recovery of these dues strengthened the inference that the transactions were not conducted for legitimate commercial purposes.
The Bench observed that directors are fiduciaries entrusted with safeguarding the interests of the company and its stakeholders. Their failure to maintain proper records, explain the transactions, or recover significant sums advanced from company funds indicated conduct that could not be treated as ordinary business activity.
The Tribunal consequently directed various respondents, including former directors and associated entities involved in different transactions, to contribute substantial sums to the corporate debtor. The contribution directions include amounts exceeding ₹55 crore in one transaction, over ₹3.19 crore in another, along with several additional amounts relating to separate transactions examined in the proceedings. Interest was also directed to be paid at rates to be determined by the Tribunal.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
Read More: GSTAT May Waive Certified Copy Requirement for Orders Available on GST Portal [READ OFFICIAL MoM]
