NCLAT determined that the Adjudicating Authority failed to properly assess the requirements of Section 66 of the IBC regarding fraudulent transactions.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) reviewed a bunch of two appeals and observed that the Adjudicating Authority failed to establish the necessary elements under Section 66 of the Insolvency and Bankruptcy Code for declaring transactions as fraudulent, necessitating the revival of the application for fresh consideration to ensure due process and justice.
The appeal was filed by the ex-director of the corporate debtor, challenging the National Company Law Tribunal's order dated April 17, 2023, which allowed a fraudulent transaction application submitted by the liquidator under Section 66 of the Insolvency and Bankruptcy Code. The application referred to certain transactions that were purportedly fraudulent, but the appellant failed to respond, leading the tribunal to proceed ex parte. The Adjudicating Authority's decision primarily relied on the findings of transaction auditors, stating that there was no appearance from the respondents and validating the auditors' observations.
In assessing the appeal, the NCLAT noted that the Adjudicating Authority did not adequately consider whether the transactions met the necessary criteria under Section 66 to be classified as fraudulent. The appellant argued that the tribunal overlooked critical elements required for such a declaration, particularly since no balance sheets had been filed after March 31, 2019, and there was no evidence of any board resolutions approving the alleged write-offs. The liquidator contended that balance sheets had been filed after this date, but the NCLAT found that these were not referenced in the order.
Ultimately, the NCLAT concluded that the Adjudicating Authority failed to substantiate its findings regarding the fraudulent nature of the transactions in question. Therefore, it set aside the order of April 17, 2023, reviving the liquidator's application for reconsideration and allowing the appellant to submit a reply within three weeks. The NCLAT emphasized the need for the Adjudicating Authority to thoroughly examine the facts and evidence before making a determination. Additionally, the tribunal instructed the Adjudicating Authority to expedite the process due to the prolonged nature of the application.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
Comments