NCLT Orders director to Refund Diverted Rental Income

Ganesh Venkata Siva Rama Krishna Remani Vs Puneet P. Bhatia & others (NCLT Mumbai)

The application before the National Company Law Tribunal (NCLT), Mumbai Bench, was filed by the Resolution Professional in the Corporate Insolvency Resolution Process (CIRP) of Barracks Retail India Private Limited under sections 66(1), 68, 70, 72, 73, and 74 of the Insolvency and Bankruptcy Code, 2016. After approval of the resolution plan, ASREC (India) Private Limited continued the proceedings in place of the original applicant. The application sought directions against the former director and other respondents for alleged diversion of rental income from properties belonging to the corporate debtor.

The corporate debtor had commercial premises at Bhiwandi comprising multiple galas across ground, first, and second floors. The Tribunal noted that the corporate debtor was admitted into CIRP on 09.01.2024. The applicant alleged that Respondent No. 1, who was a director of the corporate debtor at the commencement of CIRP, executed leave and license agreements in his personal capacity shortly before commencement of CIRP in order to derive personal gains from the properties owned by the corporate debtor.

According to the application, Respondent No. 1 initially provided forged and fabricated leave and license agreements to the Resolution Professional, indicating that the entire building, except the third floor, had been leased to M/s Associated Assemblies & Repackers under agreements dated 17.11.2022. Upon further inquiry into prevailing market rates and tenancy arrangements, the Resolution Professional discovered that the documents supplied were allegedly forged. It was found that separate agreements actually existed with M/s Bhandari Packaging Solutions for Gala No. 8, M/s NPS Impex LLP for Gala Nos. 10, 11, and 12, and M/s Associated Assemblies & Repackers for other specified galas.

The applicant further alleged that rental payments relating to Gala No. 8 and Gala Nos. 10, 11, and 12 were not being made to the corporate debtor. Instead, Respondent No. 1 received rent in his personal name or through an entity identified as M/s BNT Connections. It was also alleged that Respondent Nos. 3 and 4 failed to cooperate with the Resolution Professional by not furnishing agreements, ledgers, or bank statements.

The Tribunal recorded that despite opportunities granted on multiple dates, Respondent Nos. 1 and 2 failed to effectively contest the proceedings and the matter proceeded ex parte. Although replies were later filed, the respondents argued that there was no proper pleading of fraud, no quantified loss, and no prior determination that the transactions were fraudulent or preferential under sections 43 to 51 of the Code. Respondent No. 2 also contended that no specific allegations were made against her apart from her relationship with Respondent No. 1.

The Tribunal also examined minutes of the Committee of Creditors meeting held on 04.08.2025, which recorded that the suspended management had concealed the true leave and license arrangements and had admitted non-disclosure of complete information. The minutes further recorded allegations that rental income belonging to the corporate debtor had been diverted and that certain tenants were not cooperating with the Resolution Professional.

After considering the material on record, the Tribunal held that Respondent No. 1 knowingly provided forged documents to conceal the genuine transactions and details of rental income that should have accrued to the corporate debtor. The Tribunal found that Respondent Nos. 3 and 4 had paid Rs.9,67,500 and Rs.40,68,750 respectively to Respondent No. 1 or entities connected with him. The leave and license agreement dated 04.01.2024 executed in the personal name of Respondent No. 1 further established receipt of rental income personally rather than by the corporate debtor.

The Tribunal concluded that the rental income belonging to the corporate debtor had been siphoned away to the prejudice of creditors and that the conduct demonstrated fraudulent intent. Accordingly, Respondent No. 1 was directed to contribute the diverted amounts, along with any further rental income received under the impugned agreements, to the assets of the corporate debtor within 30 days together with interest at 12% per annum from the date of receipt until payment.

The Tribunal also directed that the matter be referred to the Insolvency and Bankruptcy Board of India (IBBI) for appropriate action under sections 70, 72, 73, and 74 of the IBC against Respondent No. 1. The application was accordingly allowed and disposed of.

FULL TEXT OF THE NCLT JUDGMENT/ORDER

1. This Application IA 4016/2025 was filed by Mr. Ganesh Venkata Siva Rama Krishna Remani (Applicant)/Resolution Professional in the Corporate Insolvency Resolution Process (“CIRP”) of Barracks Retail India Private Limited, under section 66(1), 68, 70, 72, 73, & 74 of the Insolvency and Bankruptcy Code 2016. Consequent to approval of resolution plan in case of corporate debtor, this application is further prosecuted by M/s ASREC (India) Private Limited and was substituted in place of the applicant. The Applicant has sought following reliefs:-

a. That this Hon’ble Tribunal may be pleased to direct the Respondent No.1 to make a contribution of Rs.50,36,250/- to the assets of the CD, for the period covering the rental agreement with Respondents No. 3 & Respondent No. 4 till 31st July 2025, and for the subsequent periods, till they vacate and hand over the asset of the Corporate Debtor to the Applicant, u/s. 66(1) of the I & B Code, 2016 by exercising the powers vested in the tribunal under section 67 of the Code.

b. That this Hon’ble Tribunal may be pleased to pass such further orders u/s. 67 of the Code for giving effect to the order passed u/s 66(1) of the Code;

c. That this Hon’ble Tribunal may pass appropriate orders for the offences committed under section 68, 70, 72,73 and 74 of the I & B Code 2016, by Respondents 1 as outlined in the application.

d. That this Hon’ble Tribunal may pass such other orders, at it deems fit, against Respondent No. 3 & Respondent No. 4 to meet the ends of justice under section 235A of the I & B Code, 2016.

e. Any other order or further direction that this Hon’ble Tribunal may deem fit and proper.

2. The Respondent no.1 & Respondent No. 2, namely Mr. Puneet P. Bhatia & Ms. Aashima Puneet Bhatia, were directors of the Corporate Debtor on commencement of CIRP. Respondent no. 3, namely Ms. Golechha Khushboo, is Proprietor of Bhandari Packaging Solutions, the licensee under the license agreement in respect of gala no. 8 rented to them by Respondent no. 1. Respondent No. 4, namely Mr. Sunil Agarwal, is Partner of NPSIMPEX LLP, the licensee under the license agreement in respect of galas no. 10, 11 and 12 rented to them by Respondent no 1.

3. The Corporate Debtor was admitted to CIRP vide order dated 9.1.2024 passed by this Tribunal, Mumbai Bench on an application filed by ASREC (India) Limited, the financial creditor u/s 7 of IBC, appointing the original applicant as Interim Resolution Professional, who was later confirmed as resolution professional.

4. The Corporate Debtor, among others, has property situated at Bhiwandi comprising of a ground plus three floor commercial premise. There are 5 galas bearing Nos.8, 9, 10, 11 and 12 on the ground floor. There are 4 galas bearing Nos. 109, 110, 111 and 112 on the first floor. There are 4 galas bearing Nos.209, 210, 211 and 212 on the second floor. The top floor (3rd) is vacant as the terrace is not properly covered.

5. It is stated by the applicant that he was involved in day-to-day functioning of the Corporate Debtor, knew that the Corporate Debtor would be admitted to CIRP and with a view to make personal gains holding himself out as the owner of the properties owned by the corporate debtor, entered into leave and license agreement with Respondent no. 3 & 4, namely Ms. Golechha Khushboo & Mr. Sunil Agarwal, for a period of 5 years, just before the Corporate Debtor was admitted to CIRP. The Respondent no.1 provided forged and fabricated leave and license agreements to the Applicant in respect of license agreement with Associated Assemblies and Repackers to mislead the Applicant in to believing that the entire building is on lease with Associated Assemblies and Repackers.

6. It is stated that the leave and license agreement provided by the Respondent no.1 indicated that the entire building excluding 3rd floor is given on lease by the Corporate Debtor to a proprietorship concern in the name and style of M/s. Associated Assemblies & Repackers,( hereinafter referred to as AAR) through two leave and license agreements dated 17/11/2022 covering godown nos. 8 to 12 on the ground floor , 108 to 111 and 208 to 211 on the first floor and second floor respectively, and such rent as stated in the said agreement prima facie appeared to be less than the market rate prevailing at that time, accordingly, the Applicant inquired about the correct market rate for the similar properties, and in course of such enquiry, it came to light that the leave and license agreements received from Respondent were forged documents. In fact, the original agreements entered into by the suspended management was with M/s Bhandari Packaging Solutions through its Proprietor Ms. Golechha Khushboo in respect of Gala 8; with M/s NPS Impex LLP in respect of Gala 10, 11 and 12; and with M/s Associated Assemblies & Repackers in respect of Gala 9, 109 to 112, and 209 to 212. It is further stated by the Applicant that the rental rate per square feet as per these agreements appears to be in line with the prevailing market rates. It is further stated that while Respondent No. 3 entered into the agreement with Respondent No. 1 and not with the corporate debtor, despite the fact that the property belonged to the Corporate Debtor, Respondent No. 4 never entered into any Leave and License Agreement with the corporate debtor but appears to be paying all the rentals to Respondent no. 1 through banking channels after deducting TDS and not to the Corporate Debtor.

7. It is noted from the case records that the counsel appearing for the Respondent Nos. 1 & 2 had sought time on 14.01.2026 and 04.02.2026 to argue the matter recording that no further time shall be granted, however, none appeared for them on 26.02.2026 and the matter was proceeded ex-parte. Right to file reply of Respondent Nos. 3 & 4 was closed on 14.01.2026. After hearing the counsel for the Applicant the matter was closed for argument and to be listed on 17.03.2026 for written submission. On 17.03.2026 the applicant counsel had sought time for placing on record their written submission, accordingly, the matter was adjourned to 26.03.2026 and Reserved for Order on that day, further, recording that the Respondent may, if they wish to, also filed their written submission by end of the day. However, it is noted that the Respondents have not placed on record any written submission.

8. Respondent Nos. 1 and 2 filed reply dated 12.06.2026 stating that there is no specific pleading of fraud as required in law; no qualification of loss allegedly caused to the Corporate Debtor; no pleading of benefit allegedly derived by Respondent Nos. 1 or 2; no prior determination that the impugned transactions are preferential, undervalued or fraudulent under Sections 43— 51 IBC. It is further stated that the Applicant as sought to invoke penal provision without jurisdictional foundation while the penal provision being quasi criminal in nature require strict pleading and strict prove. It is further stated that Respondent No. 2 is sought to be implicated solely on account of her relationship with Respondent No. 1 as there is not a single specific act, omission, document or role attributed to Respondent No.2 in the entire application, therefor, her impleadment is vexatious and liable to be struck off.

9. Heard the learned Counsel and perused the material on record.

10. It is noted that the CoC minutes meeting held on 04.08.2025 took note of the issues raised in the present application as is evidence from the minutes of said meeting. The relevant extracts of the minutes are reproduced hereinbelow:-

9. To take note of the violation by Suspended Management of S.14 of the IB Code and concealment of the property of the Corporate Debtor

Resolution Professional during its investigation came across about the concealment of the true leave and license agreement by Suspended Management and that he was shared the forged document by the Suspended Management and provided the details as follows:

a. The Corporate Debtor had property at C2-Bhagwan Estate, Bhiwandi in the form of Galas at Ground Floor, First Floor, Second Floor and Third Floor (Terrace).

b. As per the leave and license agreement received by the Resolution Professional from Suspended Management, the entire Ground Floor, First Floor and Second Floor are leased to M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship). Top Floor is not used by anyone as there is no proper cover of the terrace.

c. Ground floor has 5 galas bearing numbers 8,9,10,11, and 12; First Floor has four galas bearing number 109,110,111 and 112; Second Floor has Four galas 209,210,211 and 212.

d. As per the Leave and License Agreement provided by the Suspended Management to RP, the entire building was tenanted by M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship) through two lease agreements.

e. However, RP came across to the information that M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship) entered into agreement for Ground Floor Gala No. 9 and First and Second Floor. The Gala No. 8 is being occupied by some unknown person i.e. Mr. Nitin Bhandari and Gala No. 10,11 and 12 are being occupied by unknown person Mr. Sunil Agarwal.

f. Upon confrontation, Suspended Management confessed that he had not disclosed the true information to RP and he is ready to repay the total amount that he has received over the rental period since Insolvency Commencement Date in favour of Corporate Debtor

g. RP sought details from M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship) to validate the statements of the Suspended Management but M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship) is not cooperating and thus acting in concert with Suspended Management

h. Similarly, Mr. Nitin Bhandari of Gala No. 8 and Mr. Sunil Agarwal. of Gala No. 10,11 an are also not cooperating with RP by providing information such as Leave and Lice Agreements, Ledgers and Bank Statements and thus acting in concert with Suspended Management

i. Despite repeated requests none of the tenants are cooperating sharing the details to RP so as to validate the statements made by Suspended Management.

j. Further, Suspended Management during the meeting have shared the lease agreement of Mr. Nitin Bhandari of Gala No. 8 which clearly establishes that the lease agreement done in the personal name of Suspended Management instead of the Corporate De name despite the underlying Gala No. 8 being owned by the Corporate Debtor.

RP further stated that

(A) On Suspended Management

The act of executing such a forged agreement during CIRP amounts to:

• • Fraudulent trading under Section 66 of the IBC,
  • Misconduct under Section 70,
  • Contravention of Section 14, read with Section 74.

The Suspended Management has thus:

• • Obstructed the RP in taking control of CD’s assets,
  • Misled the stakeholders,
  • Facilitated unauthorized occupation of the CD’s property, and
  • Potentially diverted rental income due to the CD estate.

(B) On Tenant M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship)

The RP submits that such wilful non-cooperation:

• • Obstructs the RP’s duty under Section 18 and 25 of the IBC,
  • Aids in the violation of Section 14,
  • Suggests collusion with the Suspended Management.

As a third party violating the moratorium and withholding documents without lawful justification, M/s ASSOCIATED ASSEMBLIES & REPACKERS (Proprietorship) falls within the scope of Section 235A of the IBC, being a person contravening a provision (Section 14) not otherwise punishable under Section 74.

(C) On other unknown persons using the premises Their conduct indicates:

• • Knowledge of the ongoing CIRP and moratorium,
  • Refusal to cooperate with the RP in violation of the IBC,
  • Participation in the diversion of funds due to the CD.

Since these individuals are not creditors or officers, but have contravened Section 14, and no penalty is prescribed elsewhere in the Code, their acts are punishable under Section 235A.

Suspended Management agreed to his violations and have accepted his mistake of not disclosing complete details and withdrawing funds belonging to the Corporate Debtor for personal use and thus alienating the wealth of the corporate debtor in violation of S.14 and other provisions of IB Code. Suspended Management gave an assurance that he shall cooperate completely and provide all the information at the earliest. The members of the Committee and Resolution Professional categorically stated that since last date of CIRP is 25.08.2025, there cannot be delayed responses by Suspended Management any further.

RP stated that he shall reach out to each of the tenant and persuade again to cooperate with RP in decoding the entire fraudulent act and if such non compliance persists, he shall take suitable actions against all the tenants and unknown persons occupying the premises in accordance with law.

The members of the Committee took note of the same and advised on the voice vote with 100% voting rights advised Resolution Professional to proceed further in hiring a Counsel at a suitable fee and file application before Hon’ble NCLT for recovery of dues and all such actions as needed against all the parties.

11. Indubitably, The Respondent no. 1 was well aware that he needs to disclose the details of all the assets of the corporate debtor to the Applicant; however, Respondent no. 1 chose to provide the forged documents to the Applicant, thus concealing the genuine nature of the transaction as well as details of the rentals accruing from license of these properties, which were to accrue to the Corporate Debtor but were never received in its account.

12. It is noted that the Respondent No. 3 & 4 have paid a sum of Rs.9,67,500/- and Rs.40,68,750/- respectively till the date the Applicant discovered the fraud. The ledger account statement in the name of M/s BNT Connections (Puneet Bhatia) provided by Respondent 4 to the Applicant clearly shows that the rent has been paid to this party, which is identified by Respondent No. 4 in its books connected to Mr. Puneet Bhatia, the Respondent No. 1. It is also noted that Leave & License Agreement dated 04.01.2024 was entered with Respondent No. 3 by Respondent No. 1 in his personal name, thereby establishing that the rentals accruing under said agreements were also received by him. This clearly, establishes that the rentals under the license arrangement with Respondent Nos. 3 and 4 in respect of properties owned by corporate debtor were received by Respondent No. 1 in his personal name or in the account of M/s BNT Connections, which is identified by Respondent No. 4 in its books connected to Mr. Puneet Bhatia.

13. Undoubtedly, this amount as well as the rentals accruing under original license agreement ought to have accrued to the Corporate Debtor, but was siphoned away from the Corporate Debtor at the behest of Respondent No. 1 to the prejudice of creditors of the Corporate Debtor. These facts clearly establishes the fraudulent intent on the part of the Respondents and demonstrates the carrying of the business of the Corporate Debtor in relation to these properties for fraudulent purpose with an intent to defraud the creditors of the corporate debtor. Accordingly, we considered it appropriate to direct the Respondent No. 1 to contribute these amounts as well as any further amount, received from Respondent Nos. 3 and 4 pursuant to afore stated Leave and License Agreement, to the assets of the corporate debtor within 30 days along with interest @ 12% per annum on each of such amounts from the date of receipt thereof till the date of payment to the corporate debtor. It is clarified that any payment made after 30 days of this order by the Respondent No. 1 shall be first be appropriated against the interest accruing on the unpaid amount from the date of this order.

14. Considering the facts of this case we consider it appropriate to refer this matter to the IBBI for taking appropriate action against the Respondent No. 1, being an officer of the corporate debtor in terms of Sections 2(59) of the Companies Act, 2013, in terms of Sections 70, 72, 73 and 74 of IBC. The Registry is directed to serve a copy of this order to the IBBI for necessary information and action.

15. In terms of the above IA 4016 of 2025 is allowed and disposed of.