NCLT Mumbai Refuses To Initiate Investigation Into Former Management of 'Smaaash Entertainment'

The National Company Law Tribunal (NCLT) at Mumbai has recently refused to order an investigation into the erstwhile management of Smaaash Entertainment Private Limited, a gaming company known for its virtual reality-based entertainment centres.

However, it has directed that a copy of its order be sent to government authorities to examine possible irregularities and non-compliances by the company's former management.

Smaaash, which had undergone insolvency proceedings, was revived after a resolution plan submitted by Nazara Technologies Private Limited was approved on May 7, 2025. The application before the Tribunal was filed by the company's former Resolution Professional (RP), Bhrugesh Amin, who sought directions against the suspended directors for non-cooperation and failure to provide statutory records during the insolvency process.

In an order dated November 4, 2025, a coram comprising Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer observed that although there are several non-compliances that warrant investigation,since the company had already been revived and the management replaced, an investigation into the previous management would serve no practical purpose.

“On a comprehensive view of the case, it can be seen that the violations under the various provisions of the Companies Act, 2013 and the fraudulent transactions executed by the Respondents may warrant investigation to unearth the true nature of the business operations of the Corporate Debtor prior to the insolvency commencement date.We are of considered view that no useful purpose would be served by ordering investigation of the Corporate Debtor under section 213 of the Companies Act, 2013 since the business and operations of the Corporate Debtor is now vested with the new management and the corporate debtor will also get the benefit of section 32A of the Code.,” the tribunal noted.

However, the court directed that a copy of the order be sent to the Ministry of Corporate Affairs, the Registrar of Companies, the Regional Director (Western Region), and the Income Tax Department “to take appropriate steps as may be permitted under law against those in charge at the relevant time.

The RP had alleged that the company's former directors and senior officers failed to cooperate during the Corporate Insolvency Resolution Process (CIRP) and did not provide crucial financial and statutory records. These included minutes of board meetings, registers of contracts and related-party transactions, internal audit reports, transfer pricing reports, and tax audit reports for multiple financial years.

He stated that despite repeated requests and reminders, the management withheld essential data, making it difficult to complete due diligence and transaction audits. He alleged that the non-cooperation obstructed the resolution process and suggested an intent to conceal material information about the company's affairs, subsidiaries, and asset transfers.

In response, the suspended directors said they had provided all available documents and that some records were unavailable due to the company's financial distress during the COVID-19 pandemic, which led to the layoff of the company secretary. They argued that the RP could have independently accessed certain information from public sources or the financial creditor. They also objected to the earlier notice issued by the tribunal seeking an investigation, calling it vague and procedurally flawed.

The RP countered that the missing records related to periods predating the pandemic and that the management's explanations were inconsistent. He claimed the pattern of selective disclosure suggested deliberate concealment. The absence of key documents, he said, prevented proper examination of transactions such as the assignment of the “Smaaash” brand and other asset transfers, which had already been declared fraudulent by the tribunal in separate proceedings.

The court noted that in earlier orders it had found certain transactions, including the transfer of the “Smaaash” brand and payments of Rs 8.42 crore, to be fraudulent. It also observed that the former directors had “done all that they could possibly do to create hurdles in smooth insolvency resolution process of the Corporate Debtor.”

Since Smaaash has now been successfully revived, the tribunal said a fresh investigation would serve no practical purpose. Nonetheless, it directed that its order be forwarded to the Ministry of Corporate Affairs and other government authorities for any appropriate action under law

Case Title: Bhrugesh Amin v Shripal Sevantilal Morakhia and Ors 

Case Number: IA/742/2023 IN C.P.(IB)/935(MB)/C-III-2020

For Applicant: Advocate Shyam Kapadia along with Advocates Kunal Kaul, Virgil Braganza instructed by JSA 

For Respondents: Advocate Akshata Shah instructed by Advocate Sujit Lahoti & Associates  

Click here to read/download order