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Section 66 of the IBC applies to any party involved in fraudulent transactions, irrespective of their relationship with the debtor

NCLAT held that Section 66 of the IBC applies to any party involved in fraudulent transactions, irrespective of their relationship with the debtor.


National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Ajai Das Mehrotra (Technical Member) was hearing an appeal and held that Section 66 of the Insolvency and Bankruptcy Code, 2016, applies to any party involved in fraudulent transactions, irrespective of their relationship with the debtor. The Bench of the Appellate Tribunal emphasized the Resolution Professional's compliance with regulations and the applicability of Section 66 to recover assets from fraudulent dealings.


The National Company Law Appellate Tribunal (NCLAT) heard an appeal challenging an order dated 07.1.2021 passed by the National Company Law Tribunal (NCLT), Mumbai Bench. The appeal stemmed from proceedings under Section 9 of the Insolvency & Bankruptcy Act, 2016 initiated by Raksha Bullion against Royal Refineries Private Limited (RRPL). RRPL was admitted into the Corporate Insolvency Resolution Process (CIRP) with Mr. Nandkishore Deshpande appointed as Interim Resolution Professional (IRP), later confirmed as RP.


The NCLT order, based on findings from the Department of Revenue Intelligence (DRI), implicated RRPL in fraudulent activities, alleging diversion of duty-free gold and misrepresentation of exports. The Resolution Professional (RP) sought recovery of Rs. 1,58,07,56,469/- from Royal India Corporation Limited (RICL), leading to an order for RICL to return Rs. 1,19,08,05,762/- to RRPL.


RICL contested, arguing a lack of clear determination by RP, absence of supporting evidence, and no establishment of mens rea. They cited legal precedents asserting non-maintainability of proceedings under Section 66 of IBC against third parties.


However, NCLAT upheld the NCLT order, emphasizing RP's compliance with regulations and the applicability of Section 66 against any party involved in fraudulent transactions. It noted discrepancies in RICL's transactions with RRPL post-DRI raids and affirmed the order for recovery. The tribunal dismissed the appeal, citing similar precedents and a lack of grounds for intervention.

 

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