Absence of Entries Not Proof of Fraud; NCLT Upholds Strict Proof Standard Under Section 66

Kizhakkekkara Kuriakose Jose Vs A.D. Krishnan (NCLT Kochi)

The application before the National Company Law Tribunal (NCLT), Kochi Bench, was filed by the Liquidator of a corporate debtor under Section 66(1) of the Insolvency and Bankruptcy Code, 2016, seeking recovery of ₹30,00,000 with interest from the suspended Managing Director on allegations of fraudulent trading and diversion of funds.

The Liquidator contended that the corporate debtor had received ₹50,00,000 under an agreement for sale of a mortgaged property, out of which only ₹20,00,000 was reflected in the books of account, while the remaining ₹30,00,000 was not recorded. It was alleged that this unaccounted amount had been siphoned off by the Respondent, thereby constituting fraudulent conduct under Section 66(1). The Liquidator relied on the absence of entries in the books, certain documents indicating receipt, and alleged non-cooperation by the Respondent in providing bank records.

The Respondent denied all allegations, contending that the application was speculative, unsupported by evidence, and based on pleadings in a pending civil dispute. It was submitted that all amounts received were credited to the corporate debtor’s bank account and used for business purposes. The Respondent also argued that the Liquidator failed to conduct proper verification, did not involve necessary parties, and relied on incomplete and inconsistent material. It was further contended that serious allegations of fraud require strict proof, which was absent.