Nalinesh Kumar Paurush Vs Arvind Mittal (NCLAT Delhi)
NCLAT Delhi held that each and every commercial transaction which has resulted in loss may not be labelled as fraudulent or to have been done to deceive creditors. Accordingly, since ingredients of section 66(2) of IBC is lacking, the transaction cannot be labelled as fraudulent.
Facts- The instant appeal has been preferred by the members of the Suspended Board of Directors of the CD against the order dated 09.05.2023 passed by the Hon’ble National Company Law Tribunal, Delhi Bench in I.A. No. 2536/2022 in CP No. (IB)-637(PB) 2020, whereby certain transactions done by the appellants have been designated as fraudulent and they were directed to contribute Rs. 28 lakhs to the liquidation estate of the CD.
Conclusion- Held that the main ingredients of Section 66 (2) of IBC, i.e. (i)director of the CD knew or ought to have known that there is no reasonable prospect of avoiding insolvency proceedings and (ii) that they did not take due diligence to minimize the potential loss to the creditors is conspicuously lacking in this case. Thus no case is emerging under Section 66 (2) of the Code against appellants. It is reiterated that every decision mode in business of taking risk, in order to earn more profit cannot be labelled as fraudulent or to have been done to deceive creditors.
