The Mumbai Bench of the National Company Law Tribunal (NCLT) has clarified that where a director/suspended management, while aware of impending or ongoing CIRP, conceals true asset-related transactions of the corporate debtor, furnishes forged leave and license documents to the RP, and diverts rental income from properties owned by the corporate debtor into his personal account or a connected account, such conduct constitutes carrying on the business of the corporate debtor for a fraudulent purpose with intent to defraud creditors, warranting a contribution direction under Section 66(1) of the IBC.
On the facts before it, the Tribunal directed Respondent No. 1 to contribute the amounts already received from Respondent Nos. 3 and 4, as well as any further amounts received under the leave and license arrangements, to the assets of the corporate debtor within 30 days, together with interest at 12% per annum from the date of receipt until payment. The Tribunal further held that, given the concealment, diversion of funds, and obstruction in relation to the corporate debtor’s assets during CIRP, the matter merited referral to the IBBI for appropriate action under Sections 70, 72, 73 and 74 of the IBC.
The Division Bench comprising Justice Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member) observed that Respondent No. 1 was fully aware of his obligation to disclose details of all assets of the corporate debtor to the RP, but instead furnished forged documents, thereby concealing the genuine nature of the transactions and the rental income that should have accrued to the corporate debtor.
The Tribunal noted that Respondent Nos. 3 and 4 had paid Rs. 9.67 lakhs and Rs. 40.68 lakhs respectively until discovery of the fraud. It also noted that the ledger statement of M/s BNT Connections showed payments linked to Mr. Puneet Bhatia, and that the leave and license agreement dated 04.01.2024 with Respondent No. 3 was entered into by Respondent No. 1 in his personal name. On that basis, the Tribunal found that rentals in respect of properties owned by the corporate debtor were received by Respondent No. 1 personally or in the account of M/s BNT Connections.
The Tribunal expressly held that the amounts ought to have accrued to the corporate debtor but were siphoned away at the behest of Respondent No. 1 to the prejudice of creditors. It found that these facts clearly established fraudulent intent and demonstrated carrying on the business of the corporate debtor in relation to these properties for a fraudulent purpose with intent to defraud creditors. The Tribunal also considered it appropriate to refer the matter to the IBBI for action against Respondent No. 1, treating him as an officer of the corporate debtor for the purposes of Sections 70, 72, 73 and 74 of the IBC.
Briefly, an application was filed in the CIRP of Barracks Retail India Private Limited by the Resolution Professional under Sections 66(1), 68, 70, 72, 73 and 74 of the Insolvency and Bankruptcy Code, 2016. After approval of the resolution plan, ASREC (India) Limited was substituted in place of the original applicant and continued the application. The reliefs sought included contribution by Respondent No. 1 to the assets of the corporate debtor in respect of rental income received from galas owned by the corporate debtor, and appropriate orders for offences under the IBC.
Respondent No. 1, Mr. Puneet P. Bhatia, and Respondent No. 2 were directors of the corporate debtor at the commencement of CIRP. Respondent No. 3 was the proprietor of Bhandari Packaging Solutions and Respondent No. 4 was a partner of NPS Impex LLP, both being licensees in respect of certain galas allegedly rented by Respondent No. 1. The corporate debtor was admitted into CIRP by order dated 09.01.2024 passed on a Section 7 application filed by ASREC (India) Limited, and the original applicant was appointed as IRP and later confirmed as RP. The corporate debtor owned commercial premises at Bhiwandi comprising multiple galas on the ground, first and second floors, with the top floor being vacant.
The applicant alleged that Respondent No. 1, knowing that the corporate debtor would be admitted to CIRP, held himself out as owner of the corporate debtor’s properties and entered into leave and license arrangements with Respondents No. 3 and 4 for five years shortly before admission to CIRP. It was also alleged that forged and fabricated leave and license agreements were supplied to the applicant to create the impression that the building was leased to Associated Assemblies and Repackers.
On inquiry, the RP found that the agreements initially provided were forged. The order records that the actual arrangements were: Gala 8 with Bhandari Packaging Solutions, Galas 10, 11 and 12 with NPS Impex LLP, and Gala 9 along with first and second floor galas with Associated Assemblies & Repackers. The order further records that Respondent No. 3 contracted with Respondent No. 1 and not the corporate debtor, and Respondent No. 4 appeared to be paying rentals to Respondent No. 1 through banking channels after deducting TDS and not to the corporate debtor.
The CoC minutes recorded that the suspended management had concealed the true leave and license agreements, provided forged documents, and admitted non-disclosure and withdrawal of funds belonging to the corporate debtor for personal use. The CoC advised the RP to proceed with legal action for recovery and other steps.
Appearances:
CS Devarajan Raman, for Applicant
Adv. Hasti Bhanushali, for Respondent
