Case Law Details
Omkarchand Maloo Liquidator For Intelligent Textiles Engineers Pvt. Ltd. Vs Yash Jatinbhai Baxi & Ors. (NCLT Ahmedabad)
The NCLT Ahmedabad considered an application initially filed by the Resolution Professional and subsequently pursued by the Liquidator of Intelligent Textile Engineers Pvt. Ltd. under Sections 43 and 66 of the Insolvency and Bankruptcy Code, 2016. The application sought directions under Sections 44, 67, 73 and 74 of the Code for recovery or restoration of amounts allegedly involved in preferential and fraudulent transactions identified in a Transaction Audit Report.
The Corporate Insolvency Resolution Process commenced on 02.08.2021, and following the liquidation order dated 19.01.2024, the applicant was substituted as the Liquidator. A Transaction Auditor, appointed pursuant to the Committee of Creditors’ decision, submitted a report dated 11.05.2022 identifying alleged preferential and fraudulent transactions. Based on the report, the applicant sought recovery of ₹51,79,000 as preferential transactions and ₹1,99,09,000 as fraudulent transactions.
The Tribunal noted that repeated attempts to serve Respondent Nos. 1 to 3 through the ordinary process were unsuccessful. By orders dated 23.06.2025, 01.07.2025 and 26.09.2025, fresh steps for service were directed. Subsequently, by order dated 30.03.2026, the Tribunal directed substituted service through publication in one English newspaper having national circulation and one vernacular newspaper circulating in the locality of the respondents’ last known residence. The applicant was also permitted to place the issue of publication expenses before the Stakeholders’ Consultation Committee.
However, no decision of the Stakeholders’ Consultation Committee regarding publication expenses was placed on record, and the substituted service directed by the Tribunal was never effected. The matter was heard and reserved on 09.06.2026, with the Tribunal recording that the required consent had not been produced.
The Tribunal held that, since service upon Respondent Nos. 1 to 3 had not been effected despite repeated opportunities and specific directions for substituted service, the application could not be adjudicated on merits. It observed that deciding the allegations under Sections 43 and 66 in the absence of service would be contrary to the principles of natural justice. Accordingly, the application was dismissed for failure to effect service upon the respondents. The Tribunal also directed that a copy of the order be forwarded to the IBBI for information in view of the non-compliance with its directions regarding substituted service.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The present application (LA. No. 644 of 2022 in CP (IB) 657/9/NCLT/AHM/2019) was initially filed by the Resolution Professional of Intelligent Textile Engineers Pvt. Ltd under Sections 43 and 66 of the Insolvency and Bankruptcy Code, 2016 seeking appropriate directions in respect of transactions reported in the Transaction Audit Report seeking the following reliefs: –
a) Your Lordship may be pleased to allow the present application;
b) Your Lordships may be pleased to pass an appropriate directions/ orders in terms of Sections 44, 67, 73 and 74 of the Code including for recovery/ restoration of legitimate amounts due based on transactions which allegedly appears to be preferential/ defrauding transactions on the basis of forensic report;
c) Your Lordship may be pleased to grant any other relief or relief as may deem fit in the interest of justice;
2. The Corporate Insolvency Resolution Process of Intelligent Textile Engineers Private Limited commenced on 02.08.2021 in CP(IB) No. 657/9/NCLT/AHM/2019. Pursuant to the liquidation order dated 19.01.2024 passed in IA No. 587 of 2022, the Applicant has been substituted as Liquidator.
3. It is stated that a Transaction Auditor was appointed pursuant to the decision of the Committee of Creditors. The Transaction Audit Report dated 11.05.2022 identified certain transactions alleged to be preferential and fraudulent.
4. The Applicant has relied upon the findings of the Transaction Auditor and sought recovery of Rs, 51,79,000 on account of alleged preferential transactions and Rs. 1,99,09,000 on account of alleged fraudulent transactions.
5. Notices in the I.A. were issued to the Respondents from time to time. The record reflects that steps were taken for service of the notice through ordinary process upon the Respondents. However, service of notice upon the Respondents through ordinary process could not be effected.
6. The record reflects that by order dated 23.06.2025, this Adjudicating Authority observed that there was no proof of service upon Respondent Nos. 1 to 3 and, accordingly, the matter was de-reserved.
7. Thereafter, by order dated 01.07.2025, fresh notice was directed to be issued to Respondent Nos. 1 to 3. By order dated 26.09.2025, it was recorded that the status of service could not be verified and fresh steps for service were directed to be taken.
8. By order dated 30.03.2026, this Adjudicating Authority recorded that service through ordinary process was not feasible and directed substituted service upon Respondent Nos. 1 to 3 through publication in one English newspaper having national circulation and one vernacular newspaper having circulation in the locality of the last known residence of the Respondents. The Applicant was also permitted to convene a meeting of the Stakeholders’ Consultation Committee for placing the issue relating to publication expenses before the Committee.
9. Thereafter, by order dated 22.04.2026, the Applicant informed this Adjudicating Authority that the representative of COST had stated that approval from the competent authority was required for incurring expenses towards publication. It was recorded that the decision would be communicated subsequently.
10. However, no decision of the Stakeholders’ Consultation Committee regarding incurring publication expenses was placed on record. Consequently, substituted service upon the Respondents through publication in one English newspaper having national circulation and one vernacular newspaper having circulation in the locality of their last known residence was not effected.
11. On 09.06.2026, the matter was heard and reserved for orders. It was also recorded that the consent as required in terms of the earlier orders had not been placed on record.
12. Thus, from the record, it is evident that substituted service as directed by order dated 30.03.2026 was not effected. No publication pursuant to the said order has been placed on record. Consequently, service upon Respondent. Nos. 1 to 3 could not be effected.
13. Since service upon Respondent Nos. 1 to 3 has not been effected in accordance with law despite repeated opportunities and despite specific directions for substituted service, the application cannot be adjudicated on merits. As adjudication of the allegations under Sections 43 and 66 of the Code in the absence of service upon the Respondents would be contrary to the principles of natural justice.
14. Accordingly, IA No. 644/NCLT(AHM)/2022 stands dismissed for failure to effect service upon the Respondents despite opportunities granted by this Adjudicating Authority.
15. Considering the non-compliance of the directions issued by this Adjudicating Authority regarding substituted service, a copy of this order be forwarded to IBBI for information.
Author Bio
