The National Company Law Tribunal (NCLT) has ordered a former director of Barracks Retail India Pvt. Ltd. to repay over ₹50.36 lakh along with 12% annual interest, after finding prima facie evidence of alleged fraudulent diversion of rental income during insolvency proceedings. The ruling has also triggered a referral to the Insolvency and Bankruptcy Board of India (IBBI) for further disciplinary and legal action.
The case emerged from insolvency proceedings initiated under the Insolvency and Bankruptcy Code, 2016, where the Resolution Professional raised allegations of asset concealment and unauthorized financial transactions by the suspended management. The financial creditor, ASREC (India) Ltd., later pursued the matter following approval of the resolution plan.
Leave‑and‑Licence Dealings and Fund Diversion
According to the tribunal’s findings, Puneet P. Bhatia, a former director of the company, had allegedly entered into leave and licence agreements in his personal capacity for properties owned by the corporate debtor in Bhiwandi. These agreements were executed shortly before the commencement of the Corporate Insolvency Resolution Process (CIRP), raising serious questions over intent and transparency.
The tribunal observed that rental income generated from these properties was not credited to the company’s account but was instead diverted to accounts linked to the former director. In its order, the bench noted that this conduct indicated deliberate concealment of financial information and manipulation of tenancy arrangements.
FCRF Academy Launches Premier Anti-Money Laundering Certification Program
It was further recorded that multiple portions of the same property were allegedly leased to different parties, while the former director reportedly submitted forged documents to the Resolution Professional to create the impression that the premises had been leased to a single entity. The tribunal held that such actions misled stakeholders and obstructed the insolvency process.
Misappropriated Rental Income and 12% Interest Order
The order also highlighted that tenants had made payments amounting to approximately ₹9.67 lakh and ₹40.68 lakh, which were traced to accounts associated with the former director rather than the corporate debtor. The tribunal concluded that these funds legally belonged to the company and were wrongfully diverted, adversely impacting creditor interests.
Taking serious note of the conduct, the tribunal observed that the actions constituted alleged fraudulent trading under Section 66 of the Insolvency and Bankruptcy Code and amounted to violations of the moratorium provisions under Section 14. It noted that the suspended management had failed to ensure transparency and had not fully disclosed relevant financial details during the CIRP.
The NCLT directed the former director to deposit the entire diverted amount along with any additional sums received, within a period of 30 days. It also imposed an interest rate of 12% per annum from the date of receipt until repayment is completed, significantly increasing the financial liability.
IBBI Referral, Regulatory Scrutiny, and Legal Precedent
In a strong regulatory escalation, the tribunal referred the matter to the Insolvency and Bankruptcy Board of India (IBBI) for initiating action under relevant provisions dealing with misconduct during insolvency proceedings, including Sections 70, 72, 73, and 74 of the Code.
The tribunal further noted that the conduct of the former director obstructed the Resolution Professional’s functioning and created hurdles in the fair valuation and resolution of corporate assets. It emphasized that such actions undermine the integrity of insolvency proceedings and harm creditor recovery mechanisms.
Legal experts note that the ruling reinforces strict judicial scrutiny over asset diversion cases during insolvency processes, especially where personal control over corporate assets is suspected. It also highlights increasing regulatory focus on ensuring accountability of suspended management during CIRP.
The case adds to a growing number of insolvency-related fraud findings in India, where tribunals and regulatory bodies have intensified action against alleged misuse of corporate assets during restructuring proceedings.
Authorities are expected to continue monitoring similar cases closely, with further regulatory action likely depending on the outcome of IBBI’s review and any additional findings from ongoing scrutiny of financial records and transactional trails.
