[S.66 IBC] NCLAT Upholds NCLT's Order Directing Corporate Debtor To Restore ₹3.18 Crore Generated From Fraudulent Transactions

The present appeal has been filed under section 61 of the IBC against an order passed by the National Company Law Tribunal (NCLT) in an Interlocutory Application by which it found the Appellant to be involved in fraudulent transactions.

The Appellant submitted that the transactions, certainly a poor business decision, do not amount to fraud in the absence of actual loss or allegations of siphoning of the funds.The goods were taken on credit with payment contingent on sales therefore no loss was caused to the Bank or the Corporate Debtor.

Per contra, the Respondent submitted that the Appellant failed to provide any explanation for suspicious sale or purchase of LED Bulb transactions flagged by the Financial Auditor. The Appellant entered into transactions with fictitious and non-existent entities through deliberate and wilful misconduct and that has also been confirmed by the Audit Report and on ground verification conducted by the Auditor.

The Tribunal noted that the Forensic Audit disclosed the suspicious financial entries showing purchase of Rs. 9.33 crores and sales of Rs. 9.88 crores which were nullified by debit notes of Rs. 6.28 crores and credit notes of Rs. 10.06 crores. Despite this offset of accounts, the payment to the tune of Rs. 3.43 crores were paid to the fictitious vendors and Rs. 0.52 still remained to be recovered from the fictitious customers.

It further observed that the Audit clearly revealed a net financial loss of Rs. 3.18 to the Corporate Debtor thereby debunking the Appellant's claim that it was just a notional loss. The issuance of debit and credit notes in the absence of stock and delivery records and dealings with parties that were non-existent clearly indicated a fraudulent scheme to fabricate business activity.Mere assertions of commercial intent or revival strategy cannot stand against proven evidence that no genuine trade occurred.

Coming to the next issue that the Adjudicating Authority arbitrarily directed the Appellant to contribute Rs. 3.18 crores to the assets of the corporate debtor, the Tribunal held that the computation of the said amount is precise, not based on assumption and reflected actual funds that exited from the corporate debtor's accounts without return either as goods, cash or receivables thereby causing financial loss to the corporate debtor.

It further held that the Adjudicating Authority in its detailed order noted the Appellant's failure to debunk the claim of fictitious entities or submit records of genuine trade. It focused solely on restoring the estate of the corporate debtor.

It concluded that the Adjudicating Authority passed the impugned judgment based on facts and proper appreciation of law. Therefore, the directions passed by the Adjudicating Authority to contribute Rs. 3.18 crores towards assets of the corporate debtor cannot be categorised as punitive as they were issued to recover the demonstrated loss to the corporated debtor.

Accordingly, the present appeal was dismissed.

Case Title: Mr. Gopal Kalra Versus Mr. Akhilesh Kumar Gupta

Case Number: Company Appeal (AT) (Ins.) No. 567 of 2024

Judgment Date: 03/07/2025

For Appellant: Mr. Rahul Kumar, Advocate. Mr.

For Respondent:Varun Sharma, Ms. Vanshika Gupta & Ms. Vaishnavi Gupta, Advocates. Mr. Akhliesh Kumar Gupta, (Liquidator in-person).

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