Union of India Vs Bhushan Airways Services Private Limited & Ors. (NCLT Delhi)
Summary: The National Company Law Tribunal (NCLT), Principal Bench, New Delhi, in Union of India Through SFIO Vs Bhushan Airways Services Private Limited & Ors., examined the maintainability of proceedings initiated by the Central Government through the Serious Fraud Investigation Office (SFIO) concerning alleged fraudulent transactions involving Bhushan Power and Steel Limited (BPSL), its former promoters, associated companies and other individuals. The proceedings were instituted under Sections 241(2), 242 and 246 read with Section 339 of the Companies Act, 2013. The Tribunal, comprising President Justice Anupinder Singh Grewal and Technical Member Ravindra Chaturvedi, pronounced its order on 30 October 2026. The dispute primarily concerned whether the Government could pursue allegations of fraudulent conduct and seek recovery of allegedly diverted funds despite completion of BPSL’s corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case originated from an investigation ordered by the Ministry of Corporate Affairs (MCA) on 3 May 2016 under Section 212(1)(c) of the Companies Act, 2013. The investigation initially covered 15 companies and was subsequently extended to additional entities allegedly associated with BPSL and its former promoters. Following completion of the investigation, SFIO submitted its report dated 6 May 2022 under Section 212(12). According to the investigating agency, the affairs of BPSL had allegedly been conducted in a manner prejudicial to its creditors, shareholders and public interest. The allegations principally concerned diversion and siphoning of company funds through interconnected entities, accommodation transactions, circular movement of money and acquisition of assets using allegedly diverted funds.
SFIO alleged that former promoter Sanjay Singal, along with Aarti Singal and other associated persons, exercised control over several companies allegedly used to facilitate fraudulent transactions. The investigation referred to substantial borrowings from banks and financial institutions, with BPSL’s outstanding liabilities stated to be approximately Rs. 47,304 crore when insolvency proceedings commenced on 26 July 2017. According to SFIO, funds had allegedly been diverted from BPSL beginning in financial year 2009-10 through arrangements involving related entities and individuals. The Government’s petition sought to hold the persons allegedly responsible personally liable for fraudulent conduct involving approximately Rs. 5,431 crore, together with interest and consequential relief. These amounts represented allegations and claims requiring adjudication, rather than findings establishing the respondents’ liability.
On 19 May 2022, MCA authorised SFIO to initiate proceedings under Sections 241, 242, 246 and 339 of the Companies Act. The company petition was subsequently filed on 11 April 2023 against 76 respondents, including companies allegedly controlled by the former promoters, directors, managerial personnel, intermediaries and BPSL itself. The Government sought orders restraining alienation of assets, freezing bank accounts, disclosure of movable and immovable properties, attachment of assets and recovery of amounts allegedly diverted through fraudulent transactions. The petition also sought personal liability against persons alleged to have knowingly participated in the fraudulent conduct of BPSL’s business. Separately, criminal proceedings arising from the SFIO investigation had been initiated before the Special Court under the Companies Act.
Several respondents filed applications under Rules 11 and 32 of the NCLT Rules, 2016, challenging the maintainability of the Government’s petition. These included C.A. Nos. 223, 228, 231, 261, 315 and 390 of 2023 and C.A. Nos. 08 and 62 of 2024. The applicants argued that Section 241(2) contemplated proceedings concerning a particular company and did not permit multiple independent companies and individuals to be proceeded against through a consolidated petition. They further contended that the allegations were vague, that different respondents were situated in different territorial jurisdictions and that the petition improperly combined separate causes of action. Some applicants also challenged the validity of the investigation and asserted that the necessary approvals under Section 219 of the Companies Act had not been obtained.
A principal objection concerned the territorial jurisdiction of the NCLT Principal Bench. The applicants submitted that the Government could not invoke jurisdiction over numerous companies merely by including BPSL as a pro forma respondent. According to them, the registered offices of the respective companies were situated in different jurisdictions, and proceedings against those companies should therefore have been instituted before the competent territorial benches. The Government maintained that the central subject matter was the alleged fraudulent conduct of BPSL’s affairs and that the other respondents had been joined because of their alleged participation in interconnected transactions. The Tribunal examined the relationship between Section 241(2), Section 246 and Section 339 while determining whether the proceedings could continue before the Principal Bench.
The Tribunal held that the statutory framework permitted the Central Government to initiate proceedings concerning the affairs of a company allegedly conducted fraudulently or in a manner prejudicial to public interest. It explained that the joinder of other companies, individuals and persons allegedly involved in the transactions did not necessarily convert the proceedings into separate petitions concerning each respondent company’s affairs. Section 246 expressly extends the application of Section 339 to proceedings under Section 241, thereby permitting examination of the liability of persons allegedly knowingly involved in fraudulent conduct. The Tribunal also considered the interpretative principle under Section 13(2) of the General Clauses Act, 1897, concerning the use of singular and plural expressions. Consequently, the objections based solely on the presence of multiple respondents and interconnected transactions were rejected.
Another issue concerned whether the Central Government had validly formed the opinion required under Section 241(2) and whether an authorised SFIO officer could institute the petition on its behalf. The applicants questioned the sufficiency of the Government’s satisfaction and the authority under which the proceedings had been presented. The Tribunal held that the statutory opinion under Section 241(2) involves the Government’s subjective satisfaction based on relevant material and does not require compliance with a particular prescribed form. It distinguished the Government’s substantive statutory decision from the administrative act of presenting proceedings through an authorised officer. The Tribunal therefore declined to treat the petition as non-maintainable merely because it had been instituted through SFIO pursuant to the Government’s authorisation.
The Tribunal also examined the contention that Section 241(2), by using the expression “are being conducted”, applies only to fraudulent conduct continuing when the petition is instituted and cannot cover transactions undertaken by former promoters before the company’s insolvency resolution. The applicants argued that the former management had ceased to control BPSL and that the company’s affairs were subsequently being conducted by a new management. The Tribunal rejected an interpretation that would automatically exclude earlier fraudulent conduct merely because management had changed. It considered the continuing consequences of allegedly fraudulent transactions and held that the statutory remedy could extend to past conduct whose prejudicial effects remained relevant when the Government initiated proceedings.
The effect of BPSL’s corporate insolvency resolution process formed another major issue. Insolvency proceedings had commenced on 26 July 2017, and the resolution plan submitted by JSW Steel Limited was approved by the NCLT on 5 September 2019. The National Company Law Appellate Tribunal upheld the plan with modifications on 17 February 2020. Subsequent litigation reached the Supreme Court, which initially set aside the resolution plan on 2 May 2025, recalled that decision on 31 July 2025 and ultimately upheld the NCLAT judgment on 26 September 2025. Against this background, the Tribunal considered whether approval and implementation of the resolution plan prevented the Government from pursuing remedies relating to allegedly fraudulent transactions undertaken before the change in management.
The Tribunal distinguished the protection afforded to a corporate debtor following insolvency resolution from the potential liability of former promoters, directors and other persons allegedly involved in fraudulent transactions. It examined Section 32A of the IBC and held that the statutory protection associated with a qualifying change in management could not automatically operate as immunity for persons allegedly responsible for past fraudulent conduct. The Tribunal further considered the relationship between proceedings under Section 66 of the IBC and remedies available under Sections 241, 242, 246 and 339 of the Companies Act. It concluded that the existence of insolvency-related remedies did not, by itself, extinguish the Central Government’s independent statutory proceedings. At the same time, recoveries concerning the same transactions would have to be appropriately accounted for to avoid double recovery.
The Tribunal further considered the nature of disgorgement and recovery of assets allegedly obtained through fraudulent conduct. It treated disgorgement as a civil and equitable remedy intended to prevent retention of benefits derived from wrongful transactions, rather than merely as a criminal punishment. The Tribunal held that the statutory powers available in proceedings under Sections 241 and 242, read with Sections 246 and 339, were sufficiently broad to permit appropriate relief where the necessary facts and legal requirements were established. However, it emphasised that the allegations against individual respondents, their knowledge, participation and the amounts allegedly diverted would require examination on merits. The maintainability decision did not constitute a final determination that any respondent had committed fraud or was personally liable for the amounts claimed.
Accordingly, the NCLT dismissed C.A. Nos. 223, 228, 231, 261, 315 and 390 of 2023 and C.A. Nos. 08 and 62 of 2024, thereby rejecting the challenges to the maintainability of Company Petition No. 105 of 2023. The Tribunal also allowed Intervention Petition Nos. 60 to 67 of 2026 filed by BPSL and issued consequential procedural directions. The respondents were required to file replies addressing the allegations on merits within four weeks, while SFIO was directed to provide a consolidated statement identifying the specific transactions and allegations concerning the respective respondents. The Tribunal clarified that all allegations remained open for adjudication and that no final findings of fraudulent conduct had been recorded. Existing interim arrangements and further procedural requirements were addressed, and the matter was listed for further consideration on 26 November 2026. The ruling therefore permits the Government’s fraud-related proceedings to continue notwithstanding the objections based on jurisdiction, authorisation, joinder of parties and completion of insolvency resolution.
