NCLAT Delhi Rejects Fraudulent Transaction Plea Under Section 66 of IBC Due to Insufficient Evidence

The National Company Law Appellate Tribunal (NCLAT), New Delhi, recently delivered a crucial judgment in the matter of Ashok Kumar Agarwal Vs Narayan Chandra Saha & Ors. The appellate tribunal evaluated an appeal challenging an earlier directive issued by the Adjudicating Authority (NCLT Kolkata) on 10.12.2024. The core of the dispute revolved around the dismissal of a petition initiated by the Liquidator, who sought to classify a specific corporate settlement as a fraudulent transaction under Section 66 of the Insolvency and Bankruptcy Code, 2016.

The Factual Background

To comprehend the tribunal's stance, it is essential to examine the underlying financial maneuvers:

  1. The Outstanding Debt: The Corporate Debtor was legally entitled to recover a pending sum amounting to ₹37.50 lakhs from a distinct entity named Orient Exports Pvt. Ltd.
  2. The Settlement Mechanism: Rather than executing a standard cash remittance to clear the dues, Orient Exports Pvt. Ltd. opted for an alternative liquidation strategy. The debt was purportedly resolved by transferring equity shares that it held in another affiliated corporate entity, Imperial Commercial Pvt. Ltd., directly to the Corporate Debtor.
  3. Nature of the Entities: It is pertinent to note that all the corporate bodies involved in this tripartite settlement mechanism were unlisted private companies.