Chandra Shekhar Jha & Anr. Vs Religare Enterprise Ltd. & Ors. (NCLAT Delhi)
Conclusion: The Adjudicating Authority failed to properly examine whether the transactions underlying the Section 7 application constituted genuine financial debts or were merely sham arrangements involving round-tripping and financial layering among related entities. Since substantial material indicating possible fraud and collusion had been placed on record, the defence raised by the Corporate Debtor could not have been dismissed as illusory or a mere moonshine defence. The appeals challenging the admission of the Section 7 application were therefore held to be maintainable. The Tribunal emphasized the necessity of scrutinizing the true nature and substance of the impugned transactions before permitting the continuation of CIRP proceedings.
Held: Religare Enterprises Ltd. (“Financial Creditor”) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Ligare Aviation Ltd. (“Corporate Debtor”), alleging default in the repayment of amounts advanced under a series of Memoranda of Understanding (“MoUs”) executed between 2009 and 2016. The Financial Creditor and the Corporate Debtor were group companies controlled by the Singh brothers, namely Malvinder Mohan Singh and Shivinder Mohan Singh.
Under an MoU dated 30.03.2009, Religare Arts Investment Management Ltd. (“RAIML”), which was subsequently amalgamated with the Financial Creditor, transferred Rs. 3.60 crores to the Corporate Debtor. Bank statements revealed that the same amount was transferred by the Corporate Debtor on the very same day to Religare Finvest Ltd., another group entity and subsidiary of the Financial Creditor. Similar mirror transactions involving multiple group companies were reflected in the bank records.
