Ammeet Kamal Agarwal vs Ssarvi Resolution Services Llp ...

(Arising out of order dated 19.12.2024 passed by the National Company Law Tribunal, Mumbai Bench, Court-II in I.A. No. 3653 of 2024 in CP (IB) No. 368 (MB)/2023)

In the matter of:

Ammeet Kumar Agarwal Residing at 901, Bikaner Bhawan, Opp Jain Temple, J.B. Nagar, Andheri (East), Mumbai 400059. ...Appellant

Vs.

Ssarvi Resolution Services LLP Resolution Professional of Supreme Transport Organisation Private Limited through its Partner and Authorised Signatory Mr. Prashant Jain Having his address at A-501, Shanti Heights Plot No 2, 3, 9b/10, Sector 11, Koparkharine, Navi Mumbai 400707 ...Respondent

Present:

For Appellant: Mr. Krishna Sharma, Advocate.

For Respondents: Ms. Shloka Dixit, Advocate for RP.

Mr. Rishi Sood and Mr. Prafful Singh Chandel, Advocates for Interveners.

Page 1 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 J U D G M EN T (3rd August, 2026)

INDEVAR PANDEY, MEMBER (T)

INTRODUCTORY BACKGROUND

This appeal has been preferred by Mr. Ammeet Kumar Agarwal, the

Suspended Director of Supreme Transport Organisation Private Limited

(Corporate Debtor), under Section 61 of the Insolvency and Bankruptcy

Code, 2016 (herein after referred to as ('Code'), assailing the order dated

19.12.2024 passed by the National Company Law Tribunal, Mumbai Bench,

Court-II (Adjudicating Authority) in I.A. No. 3653 of 2024 arising out of CP

(IB) No. 368/MB/C-II/2023. The impugned order was passed on an

application instituted by Ssarvi Resolution Services LLP, acting through its

Partner and Authorised Signatory Mr. Prashant Jain, in its capacity as the

Resolution Professional of the Corporate Debtor, under Sections 66, 74

and 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Section 213

of the Companies Act, 2013.

2. By the aforesaid order, the Adjudicating Authority directed the

Appellant and other respondents therein to jointly and severally contribute a

sum of Rs.8,05,11,748/- to the account of the Corporate Debtor within thirty

days and further directed the Insolvency and Bankruptcy Board of India

(IBBI) and the Ministry of Corporate Affairs (MCA) to initiate prosecution

against the Appellant under Section 74 of the Code. Aggrieved by the findings

Page 2 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 and directions contained in the impugned order, the Appellant has preferred

the present appeal.

FACTS OF THE CASE

3. Brief facts of the case necessary to decide this Appeal are as under:

i. The Corporate Debtor had availed credit facilities from Axis Bank Ltd.

and over a period of time had defaulted in repayment to the financial

creditor. Consequent to the default by the corporate debtor Axis Bank

under Section 7 of the Code against the Corporate Debtor. The

Adjudicating Authority, vide its order dated 08.09.2023, admitted CP (IB)

No. 368/MB/C-II/2023, initiating the Corporate Insolvency Resolution

Process (CIRP) against the Corporate Debtor. Consequent upon the

admission of the petition, Mr. Prashant Jain was appointed as the

Resolution Professional of the Corporate Debtor.

ii. The Appellant, in his capacity as the Suspended Director of the

Corporate Debtor, preferred Company Appeal (AT) (Insolvency) No. 1216

of 2023 before this Appellate Tribunal challenging the admission order

dated 08.09.2023.

iii. This Appellate Tribunal, by an interim order dated 15.09.2023,

stayed the constitution of the Committee of Creditors subject to the

Appellant depositing a sum of Rs.10,49,26,262/- in the form of a Fixed

Deposit in the name of the Registrar, NCLAT, New Delhi within thirty

days. The interim protection granted by the Appellate Tribunal was thus

made conditional upon securing the admitted dues by way of deposit.

Page 3 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 iv. The Appellant was unable to comply with the condition relating to

deposit of the fixed amount. Accordingly, this Appellate Tribunal, by its

order dated 16.10.2023, granted a further extension of thirty days for

furnishing the Fixed Deposit. However, by the same order, the Tribunal

declined the Appellant's request made through I.A. No. 4871 of 2023

seeking permission to sell two other unencumbered properties of the

Corporate Debtor, which the Appellant intended to utilise for arranging

the requisite deposit. This Appellate Tribunal rejected the IA No. 4871 of

2023 on the ground that the prayers to sell unencumbered properties

cannot be accepted as the CIRP has commenced.

v. The erstwhile management of the corporate debtor initially did not co-

operate with the RP and did not handover the custody of the corporate

debtor's office and assets and did not provide relevant information and

details of the corporate debtor as required by IRP under Section 19 of the

Code. At the same time the suspended directors continued to operate the

business, utilising funds from the bank accounts of the corporate debtor

and also proceeded to sale the assets of corporate debtor in the teeth of

the moratorium under Section 14 of the Code.

vi. The sale proceeds of the asset sold by corporate debtor to M/s

Golden Gate Developers during the moratorium was received in the bank

account of corporate debtor maintained with Bank of Baroda. Thereafter,

the appellant made a fixed deposit of Rs. 7,59,26,262/- in the name of

Registrar, NCLAT and by a new application sought additional time to

deposit the remaining sum of Rs. 2.90 crores by December 3, 2023.

Page 4 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 vii. Since the condition relating to the Fixed Deposit was ultimately not

fulfilled, this Appellate Tribunal, by its order dated 06.12.2023, vacated

the interim protection granted on 15.09.2023, thereby permitting the

CIRP to proceed in accordance with law. In a subsequent order on

09.04.2024 this Tribunal further directed the Resolution Professional to

maintain the sale proceeds received from the Panvel Property in an

interest-bearing account with a nationalised bank.

viii. The Appellant claims to have fully cooperated with the Resolution

Professional by furnishing all relevant records, documents and

information concerning the Corporate Debtor. The Appellant relies upon

various email communications exchanged between 11.11.2023 and

18.12.2023 to demonstrate that possession of the Corporate Debtor's

office was duly facilitated and all information sought by the Resolution

Professional was supplied from time to time.

ix. Meanwhile, the Resolution Professional instituted I.A. No. 3653 of

2024 before the Adjudicating Authority under Sections 66, 74 and 60(5)

of the Insolvency and Bankruptcy Code, 2016 read with Section 213 of

the Companies Act, 2013. Through the said application, it was alleged

that an aggregate sum of Rs.8,05,11,748/- had been wrongfully

withdrawn from the account of the Corporate Debtor during the

moratorium period, and directions were sought for investigation into the

alleged transactions as well as for directing the Appellant and other

concerned persons to restore the said amount to the Corporate Debtor.

Page 5 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 x. After hearing the parties in I.A. No. 3653 of 2024, the Adjudicating

Authority pronounced the impugned order dated 19.12.2024, holding the

Appellant and other respondents jointly and severally liable to contribute

Rs.8,05,11,748/- to the account of the Corporate Debtor within thirty

days. The Adjudicating Authority further directed the IBBI and the

Ministry of Corporate Affairs to initiate prosecution against the Appellant

under Section 74 of the Code.

xi. Aggrieved by the findings recorded, the directions issued, and the

legal consequences flowing from the impugned order dated 19.12.2024,

the Appellant instituted the present appeal under Section 61 of the

Insolvency and Bankruptcy Code, 2016, contending that the

Adjudicating Authority exceeded its jurisdiction, erroneously invoked the

provisions relating to offences under Section 74 of the Code, and wrongly

attributed liability for alleged misappropriation despite the factual

position regarding the sale proceeds and other payments.

Submissions of the Appellant

4. The Ld.Counsel submits that the present Appeal has been preferred by

Mr. Ammeet Kumar Agarwal, the Suspended Director of Supreme Transport

Organization Private Limited, assailing the Impugned Order dated 19.12.2024

passed by the Ld.National Company Law Tribunal, Mumbai Bench in I.A. No.

3653 of 2024. The said application was filed by the Resolution Professional

under Sections 66, 74 and 60(5) of the Insolvency and Bankruptcy Code, 2016

alleging fraudulent transactions. However, despite the application being

founded on Section 66 of the Code, the Ld.NCLT proceeded to pass directions

Page 6 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 on the basis of an alleged breach of the moratorium under Section 14 of the

Code, without adjudicating whether the statutory ingredients of Section 66

were satisfied. It is submitted that the Impugned Order is contrary to the

provisions of the Code and is therefore liable to be set aside.

5. He submits that during August and September 2023, while functioning

as a Director of the Corporate Debtor, the Appellant issued several cheques

towards payment of outstanding dues of creditors and salaries of employees

in the ordinary course of business. Subsequently, on 08.09.2023, the

Corporate Debtor was admitted into Corporate Insolvency Resolution Process

under Section 7 of the Code and the moratorium under Section 14 came into

effect. Thereafter, on 10.05.2024, the Respondent-Resolution Professional

filed an application under Sections 66, 74 and 60(5) of the Code alleging that

an amount of Rs.8,05,11,748 had been withdrawn from the bank account of

the Corporate Debtor during the CIRP period.

6. It is submitted that the Appellant filed a detailed reply on 08.10.2024

specifically denying the allegations and clearly stated that the transactions

referred to by the Resolution Professional were payments made through

cheques which had been drawn prior to the insolvency commencement date.

Despite this categorical defence, the Ld.NCLT, by the Impugned Order dated

19.12.2024, held the Appellant liable for breach of the moratorium under

Section 14 without examining the defence or deciding the application under

Section 66, which was the very basis of the proceedings.

7. The Ld. Counsel submits that the Respondent consciously invoked

Section 66 of the Code and alleged that the Appellant had fraudulently

Page 7 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 withdrawn funds from the Corporate Debtor. By invoking Section 66 itself,

the Respondent accepted that the transactions in question related to acts

attributable to the Appellant prior to the insolvency commencement date,

since Section 66 deals with fraudulent or wrongful trading undertaken before

commencement of CIRP. The entire application was therefore required to be

examined strictly within the parameters of Section 66.

8. He submitted that the Ld. Adjudicating Authority, while passing the

Impugned Order, expressly observed that it was not necessary to determine

whether the ingredients of Section 66 were made out. Having recorded such

a finding, the Ld. Adjudicating Authority nevertheless proceeded to direct the

Appellant to make contribution on the premise of breach of the moratorium

under Section 14. Such an approach is wholly impermissible in law, as relief

under a different provision could not have been granted when the very

foundation of the application under Section 66 remained unadjudicated.

9. The Ld. Counsel submits that the issue is no longer res integra. This

Hon'ble Appellate Tribunal, in "Sudhir Dinanath Chaturvedi v. True IPE

LLP, Liquidator of Adya Oils & Chemicals Ltd. & Ors., Company Appeal

(AT) (Ins.) No. 540 of 2025", has categorically held that where the ingredients

of Section 66 are found not to be established, the application cannot

nevertheless be allowed by resorting to Section 60(5) or any other provision of

the Code. The Tribunal held that once the statutory requirements under

Section 66 are not satisfied, the application itself cannot survive and any

order granting relief therein is unsustainable.

Page 8 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

10. In the present case, the Ld. Adjudicating Authority adopted precisely

the course which has been disapproved by this Appellate Tribunal. Without

determining whether the alleged transactions were fraudulent within the

meaning of Section 66, it proceeded to hold the Appellant liable under Section

14. Such a finding travels beyond the scope of the pleadings, changes the very

nature of the proceedings and deprives the Appellant of the opportunity to

defend the case on the statutory ingredients actually pleaded. Consequently,

the Impugned Order suffers from a fundamental jurisdictional error and

deserves to be set aside.

11. The Ld. Counsel respectfully submits that the entire case of the

Resolution Professional proceeds on an erroneous assumption that the

transactions in question were carried out during the CIRP period. In fact, the

payments referred to in Paragraph 5.21 of the application were made through

cheques that had been issued by the Appellant prior to the commencement of

the Corporate Insolvency Resolution Process. These cheques were issued

towards discharge of legitimate liabilities of the Corporate Debtor, including

payment of salaries to employees and outstanding dues of creditors, in the

ordinary course of business. The Appellant had specifically raised this defence

in the reply filed before the Ld. Adjudicating Authority, yet the same was not

considered while passing the Impugned Order.

12. It is submitted that the Respondent itself invoked Section 66 of the

Code, which necessarily relates to transactions undertaken prior to the

insolvency commencement date. The statutory ingredients of Section 66

clearly contemplate acts committed before the commencement of CIRP, where

Page 9 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 the business of the Corporate Debtor has been carried on with an intent to

defraud creditors or for a fraudulent purpose, and where the directors knew

or ought to have known that there was no reasonable prospect of avoiding the

commencement of CIRP and nevertheless failed to exercise due diligence in

minimizing losses to creditors. Thus, the very invocation of Section 66

demonstrates that the alleged transactions were treated by the Respondent

as pre-CIRP transactions.

13. Ld. Counsel further submits that this Appellate Tribunal, in "Mr.

Nalinesh Kumar Paurush & Ors. v. Mr. Arvind Mittal, Resolution

Professional of Temple Leasing and Finance Limited & Ors., Company

Appeal (AT) (Ins.) No. 346 of 2024", has authoritatively explained the

essential ingredients required for invoking Section 66. The Tribunal held that

it must be established that the business of the Corporate Debtor was carried

on with an intent to defraud creditors or for a fraudulent purpose, that before

the insolvency commencement date the directors knew or ought to have

known that CIRP was unavoidable, and that they failed to exercise due

diligence in minimizing potential losses to creditors. The same principle has

also been reiterated by this Appellate Tribunal in "Suniel Dhhandhania &

Anr. v. Dr. Vichitra Narayan Pathak & Ors., Company Appeal (AT) (Ins.)

No. 841 of 2024".

14. It is submitted that none of these statutory requirements have been

established in the present case. There is no finding that the Appellant acted

with any fraudulent intent or that the payments were made for any purpose

other than meeting genuine business liabilities. The payments were made in

Page 10 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 the ordinary course of business and were intended to discharge legitimate

dues of employees and creditors. In the absence of any material

demonstrating fraudulent conduct or lack of due diligence, the Ld. NCLT

could not have held the Appellant liable merely because the cheques were

encashed after the commencement of CIRP. By overlooking these crucial facts

and statutory requirements, the Ld. NCLT erroneously proceeded to hold the

Appellant responsible for breach of the moratorium under Section 14 instead

of adjudicating the application on the touchstone of Section 66. The Impugned

Order, therefore, cannot be sustained in law.

15. Ld. Counsel submits that the Impugned Order has caused serious

prejudice to the Appellant. The proceedings were initiated under Section 66

of the Code alleging fraudulent trading, whereas the Ld. NCLT ultimately

imposed liability under Section 14 of the Code without first determining

whether the ingredients of Section 66 were satisfied. The Appellant was thus

denied an opportunity to defend the case on the basis on which liability has

eventually been fastened.

16. The Ld. Counsel places reliance upon the judgment of the Hon'ble Delhi

High Court in Sh. Rajeev Shukla v. Sh. Gopal Krishna Shukla, CM (M) No.

2342 of 2024, wherein; it was held that mentioning an incorrect provision of

law is not fatal unless it causes prejudice to the opposite party or the Court.

In the present case, the prejudice is manifest, as the Respondent invoked

Section 66 but the Ld. NCLT granted relief under Section 14 without

adjudicating the case under Section 66.

Page 11 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

17. It is further submitted that the Ld. NCLT wrongly shifted the burden of

proof upon the Appellant. Under Section 66, the burden lies upon the

Resolution Professional to establish fraudulent trading through cogent and

tangible evidence. This Appellate Tribunal, in "Regen Powertech Private

Limited v. M/s Wind Construction Private Limited & Ors., Company

Appeal (AT) (CH) (Ins.) No. 349 of 2022", held that allegations of fraudulent

trading require a high degree of proof and must be supported by specific

material placed on record. Instead of requiring the Respondent to discharge

this burden, the Ld. NCLT drew an adverse inference against the Appellant

for not proving that the cheques had been drawn prior to commencement of

CIRP.

18. Ld. Counsel lastly submits that the Ld. NCLT failed to appreciate that,

after commencement of CIRP, the Appellant ceased to have possession or

control over the records of the Corporate Debtor, as the management stood

vested in the Resolution Professional under Section 17 of the Code. Despite

recording this position, the Ld. NCLT faulted the Appellant for not producing

documents which were admittedly no longer in his custody. The findings are

therefore legally unsustainable and the Impugned Order deserves to be set

aside.

Submissions of Respondent

19. Ld. Counsel submitted that the Appellant's contention during oral

arguments that the Respondent's application before the Adjudicating

Authority was filed solely under Section 66 of the Insolvency and Bankruptcy

Code, 2016 is wholly misconceived and contrary to the record. The said

Page 12 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 submission is not only factually incorrect but is also inconsistent with the

Appellant's own pleadings before this Hon'ble Tribunal.

20. He submitted that the cause title of I.A. No. 3653 of 2024 itself

unequivocally records that the application was filed under Sections 66, 74

and 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule

11 of the NCLT Rules, 2016. There is, therefore, no ambiguity that the

Respondent had invoked multiple provisions of the Code, and not Section 66

alone, as is now sought to be contended by the Appellant.

21. It is further submitted that the same position is reaffirmed in the

impugned order itself, wherein the Adjudicating Authority has expressly

recorded that the Interlocutory Application was filed under Sections 66, 74

and 60(5) of the Code seeking reimbursement of the amount withdrawn from

the Corporate Debtor's bank account during the subsistence of the

moratorium. Thus, both the application and the impugned order clearly

establish the statutory basis on which the proceedings were instituted.

22. It was further submitted that the Appellant's own Memorandum of

Appeal completely demolishes the argument now sought to be advanced. In

the List of Dates, the Appellant himself has specifically pleaded that the

Respondent filed I.A. No. 3653 of 2024 under Sections 66, 74 and 60(5) of the

Code read with Section 213 of the Companies Act, 2013. The Synopsis

accompanying the Appeal reiterates the very same position. Having made

such categorical averments on affidavit, the Appellant cannot now be

permitted to contend that the application was confined only to Section 66 of

the Code.

Page 13 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

23. The Ld. counsel submitted that it is a settled principle of law that a

litigant is bound by his own pleadings and cannot be allowed to take a stand

contrary thereto during oral submissions. Since the Appellant's own Appeal

acknowledges that the Respondent's application was filed under Sections 66,

74 and 60(5) of the Code, the contrary submission advanced during the

hearing deserves to be rejected outright as being contrary to the record.

24. Ld. Counsel submitted that the Appellant has erroneously contended

that the Ld. Adjudicating Authority exceeded its jurisdiction by directing

prosecution under Section 74 of the Code. A plain reading of the operative

portion of the impugned order demonstrates that no such direction has been

issued. The Ld. Adjudicating Authority has merely directed that a copy of the

order be forwarded to the Insolvency and Bankruptcy Board of India (IBBI)

and the Ministry of Corporate Affairs (MCA) for taking appropriate steps under

Section 74 of the Code.

25. He submitted that such a reference is fully consistent with the law laid

down by this Appellate Tribunal in "Almas Global Opportunity Fund SPC

v. CA Kannan Triuvengadam & Anr., Company Appeal (AT) (Ins.) No. 683

of 2022", wherein it was held that the Adjudicating Authority can, at best,

draw the attention of the IBBI or the Central Government to the facts of a case

for considering whether it is appropriate to initiate proceedings under Section

236 of the Code. The Tribunal further clarified that such a direction is merely

a reference for consideration and cannot be construed as an order directing

prosecution.

Page 14 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

26. He therefore, submitted that the impugned order does nothing more

than make a permissible reference to the IBBI and the MCA for taking such

action as may be considered appropriate in accordance with law.

Consequently, the Appellant's contention that the Ld. Adjudicating Authority

usurped the jurisdiction of the Special Court is wholly misconceived and

deserves to be rejected.

27. Ld. Counsel submitted that the Appellant's challenge proceeds on an

erroneous assumption that the direction to contribute Rs.8,05,11,748/- was

issued under Section 66 of the Code. A plain reading of the impugned order,

however, makes it abundantly clear that the Ld. Adjudicating Authority

consciously refrained from adjudicating upon the allegations of fraudulent

transactions under Section 66 of the Code. Instead, it expressly held that the

controversy before it pertained to the unauthorized withdrawal of funds from

the Corporate Debtor's bank account during the subsistence of the

moratorium and that it was unnecessary to determine whether the

transactions fell within the ambit of Section 66.

28. He submitted that the Ld. Adjudicating Authority specifically confined

its findings to the admitted violation of the moratorium under Section 14 of

the Code and, on that basis, directed the Appellant and the other suspended

directors to contribute the withdrawn amount to the account of the Corporate

Debtor by exercising its jurisdiction under Section 14 read with Section 60(5)

of the Code. The direction for contribution, therefore, is founded entirely on

the breach of the statutory moratorium and not on any finding of fraudulent

trading under Section 66.

Page 15 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

29. It is submitted that since the impugned direction is based upon the

violation of Section 14 and the residuary jurisdiction vested in the

Adjudicating Authority under Section 60(5) of the Code, the Appellant's

challenge premised on the applicability of Section 66 is wholly misplaced and

deserves to be rejected.

30. Ld. Counsel submitted that the violation of the moratorium under

Section 14 of the Code stands conclusively established on admitted and

undisputed facts. It is not disputed that the Appellant sold the Panvel

Property, which was mortgaged to Axis Bank, on 2 November 2023, i.e., after

the commencement of the CIRP and during the subsistence of the

moratorium. The sale was effected despite the order dated 16 October 2023

passed by this Appellate Tribunal specifically declining permission to sell any

property of the Corporate Debtor. The Appellant, therefore, acted in complete

disregard of both the statutory moratorium and the orders passed by this

Appellate Tribunal.

31. He submitted that upon commencement of the CIRP, Section 17 of the

Code suspended the powers of the Board of Directors, and the management

and affairs of the Corporate Debtor vested exclusively in the Interim

Resolution Professional/Resolution Professional. Consequently, the Appellant

had no authority whatsoever to deal with the assets of the Corporate Debtor

or to operate its bank accounts. The sale of the mortgaged property and the

subsequent withdrawal and utilization of the sale proceeds were, therefore,

patently unauthorized and in clear violation of the provisions of the Code.

Page 16 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

32. Ld. Counsel further submitted that the Appellant's defence that the

withdrawn amounts were utilized towards payment of salaries and

operational dues through cheques allegedly issued prior to the insolvency

commencement date remained wholly unsubstantiated. No cheques, bank

instructions, contemporaneous records or any other documentary evidence

were produced before the Ld. Adjudicating Authority to support this plea. In

these circumstances, the Ld. Adjudicating Authority rightly drew an adverse

inference against the Appellant and held that the unauthorized withdrawals

during the moratorium stood established.

ANALYSIS AND FINDINGS

33. We have heard the Ld. Counsels for the parties and gone through

records of the case including the written submission of the parties.

34. The present Appeal arises from the Impugned Order dated 19.12.2024

passed in I.A. No. 3653 of 2024. By the said order, the Adjudicating Authority

directed the Appellant and the other suspended directors to contribute a sum

of Rs.8,05,11,748/- to the account of the Corporate Debtor on the ground

that the said amount had been withdrawn or dealt with during the

subsistence of the moratorium under Section 14 of the Code. The Adjudicating

Authority also directed that a copy of the order be forwarded to the Insolvency

and Bankruptcy Board of India ("IBBI") and the Ministry of Corporate Affairs

("MCA") for taking such action as may be considered appropriate under

Section 74 of the Code.

35. The challenge of the Appellant proceeds on the basis that the Resolution

Professional had invoked Sections 66, 74 and 60(5) of the Code before the

Page 17 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 Adjudicating Authority, but the ultimate direction requiring contribution of

the aforesaid amount was founded upon violation of the moratorium under

Section 14 of the Code without recording any finding on the ingredients of

Section 66. It has been contended that once the Adjudicating Authority

observed that it was not necessary to determine, whether the transactions

constituted fraudulent or wrongful trading within the meaning of Section 66,

it could not thereafter grant substantive relief by invoking Section 14 of the

Code. The Appellant has also questioned the direction forwarding the matter

to the IBBI and the MCA by contending that such a direction travels beyond

the jurisdiction vested in the Adjudicating Authority.

36. The Respondent has contradicted the above submissions by contending

that the application before the Adjudicating Authority was never confined to

Section 66 of the Code but was expressly instituted under Sections 66, 74

and 60(5) of the Code read with Rule 11 of the National Company Law

Tribunal Rules, 2016. According to the Resolution Professional, the

application sought multiple reliefs arising from the conduct of the suspended

management after commencement of the Corporate Insolvency Resolution

Process, including reimbursement of the amounts withdrawn from the bank

account of the Corporate Debtor during the subsistence of the moratorium. It

has further been contended that the Adjudicating Authority consciously

confined its adjudication to the issue of violation of the moratorium and

exercised its jurisdiction under Section 14 read with Section 60(5) of the Code,

while the direction under Section 74 is only a reference to the competent

authorities for consideration in accordance with law.

Page 18 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

37. The principal contention of the Appellant is that the application filed by

the Resolution Professional was one under Section 66 of the Insolvency and

Bankruptcy Code, 2016 ("the Code") and, therefore, once the Adjudicating

Authority observed that it was unnecessary to examine the allegations of

fraudulent or wrongful trading, no further relief could have been granted. The

submission necessitates an examination of the nature of the proceedings

before the Adjudicating Authority.

38. We now take a look at the I.A. No. 3653 of 2024 filed by the RP. Relevant

extracts of the same are extracted below:

"IA No. 3653 of 2024

APPLICATION UNDER SECTION 66, 74, AND 60(5) OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 SECTION 213 OF THE COMPANIES ACT, 2013 AND READ WITH RULE 11 OF THE NATIONAL COMPANY LAW TRIBUNAL RULES, 2016 SEEKING NECESSARY DIRECTIONS IN RESPECT OF CORPORATE INSOLVENCY RESOLUTION PROCESS OF SUPREME TRANSPORT ORGANIZATION PRIVATE LIMITED

DETAILS OF APPLICATION

1. The present application ("Application") is filed by Ssarvi Resolution Services LLP, Resolution Professional through its Partner and Authorised Signatory, Prashant Jain ("Applicant"/ "IRP") of Supreme Transport Organization Private Limited ("Corporate Debtor"/ "STOPL"), under Section 213 of the Companies Act 2013 read with Section 74 and Section 60(5) of the Insolvency and Bankruptcy Code, 2016 ("IBC/Code") read with Rule 11 of the National Company Law Tribunal Rules, 2016 ("NCLT Rules") seeking reimbursement of the amount withdrawn from the bank account of the Corporate Debtor during the subsistence of the moratorium.''

Page 19 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

39. It is seen from the records that I.A. No. 3653 of 2024 was instituted

under Sections 66, 74 and 60(5) of the Code read with Rule 11 of the National

Company Law Tribunal Rules, 2016, and not exclusively under Section 66 of

the Code. In the initial title portion of the IA, the sections 66,74 and 60(5) of

the Code are clearly mentioned along with Rule 11 of the NCLT Rules.

Paragraph 1 of the IA also records the main prayer of the RP seeking

reimbursement of the amount withdrawn from the bank account of the

Corporate Debtor during the subsistence of the moratorium. Impugned order

has also duly noted the same statutory provisions under which the

application was preferred.

40. The pleadings before this Appellate Tribunal also proceed on the same

basis. In the Memorandum of Appeal, the Appellant himself has described the

Impugned Order as one arising out of an application filed under Sections 66,

74 and 60(5) of the Code. The record, therefore, leaves little room for doubt

that the proceedings before the Adjudicating Authority were not confined to

Section 66 alone. The mere fact that Section 66 formed one of the statutory

provisions invoked in the application does not, by itself, determine the source

of every relief that could ultimately be granted by the Adjudicating Authority.

41. The question which, therefore, arises is whether the relief granted in

the present case necessarily depended upon a determination under Section

66. The Appellant's submission proceeds on the assumption that unless the

ingredients of Section 66 stood established, the Adjudicating Authority was

denuded of jurisdiction to pass any substantive order.

Page 20 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

42. We note that Section 66 empowers the Adjudicating Authority to pass

appropriate orders where the business of the Corporate Debtor has been

carried on with intent to defraud creditors or for any fraudulent purpose, or

where the persons responsible for the management of the Corporate Debtor

have failed to exercise due diligence before the commencement of the

insolvency proceedings. The jurisdiction under the said provision is, therefore,

directed towards examining the conduct of the persons in management and

the consequences flowing therefrom.

43. Sections 14 and 17, on the other hand, operate in a different field. Upon

commencement of the Corporate Insolvency Resolution Process, the

moratorium under Section 14 comes into force and the management of the

affairs of the Corporate Debtor vests in the Resolution Professional. The object

of these provisions is to preserve the assets of the Corporate Debtor during

the resolution process and ensure that the insolvency estate remains available

for resolution in accordance with the provisions of the Code. Their operation

is independent of a prior finding of fraud or wrongful trading.

44. It is, therefore, evident that while the same set of facts may give rise to

issues under more than one provision of the Code, the jurisdiction exercised

under one provision is not necessarily dependent upon the exercise of

jurisdiction under another. Whether the relief granted by the Adjudicating

Authority in the present case is relatable to Section 66 or to its jurisdiction

under Sections 14 and 60(5) has to be gathered from the grounds of the prayer

and the relief sought therein.

Page 21 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

45. The grounds for the prayer in IA No. 3653 of 2024 are given in para 6

of application which is extracted below:

6. The Application is necessitated because of the following reasons:

6.1 Section 14(b) clearly states that any transfer of property/assets of the Corporate Debtor is prohibited after the commencement of the moratorium. The rationale behind implementing such prohibitions as laid down in Section 14 during the moratorium is to maintain the sanctity of the CIRP and to ensure the avoidance of frivolous and fraudulent transactions that will leave the Corporate Debtor in a devastated state by further sabotaging the CIRP process.

It is submitted that the whole purpose of the moratorium would be defeated if members of the previous management of the Corporate Debtor are left free to transfer the funds of the Corporate Debtor.

6.2 Further in Sandeep Khaiwn v. JSVM Plywood Industries Ltd, it was stated that the impact of the moratorium includes prohibition of transferring, encumbering, alienating or disposing of by the Corporate Debtor of any of its assets.

6.3 ---

6.4 ---

6.5 As previously mentioned, the transaction involving the sale of the encumbered assets of the Corporate Debtor, was consciously done despite having full knowledge of the Admission Order, and the intentional usage of monies in the bank account of the Corporate Debtor's assets, displays the mala fide intention of Respondent Nos. l to 3, that warrants serious action and contravenes the moratorium in place. This contravention impedes the Applicant from effectively executing their responsibilities in accordance with the provisions outlined in the Code.

6.6 In light of the above submissions, withdrawal of money from the Bank of Baroda account, is hit by the moratorium imposed under Section 14 in the course of CIRP which is punishable under Section 74 of the Code, making the Respondents liable for the same.

6.7 Since strict timelines and value maximization of the Corporate Debtor (by way of a time-bound resolution process) are the essence of the Code, the Applicant is compelled to file the present Application for the Applicant to continue discharging his functions as the IRP. It is humbly reiterated that such directions are necessary for effectively conducting the CIRP of the Corporate Debtor in the best interests of all its stakeholders, including creditors and workmen/ employees.

Page 22 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

6. 8 ---

6.9 It is humbly submitted that this Hon'ble Adjudicating Authority has the necessary power and jurisdiction to grant the reliefs as prayed for in this Application. No harm or prejudice will be caused to any person if the present Application is allowed. On the contrary, grave prejudice and irretrievable loss shall be caused to the Corporate Debtor and its numerous stakeholders (including its creditors and workmen/ employees) if the reliefs prayed for in this Application are not granted and the Corporate Debtor is consequently pushed into liquidation.

46. It is seen from the above that the very first ground for filing the

application was that the assets of the corporate debtor were transferred by

the erstwhile management in express violation of moratorium under section

14 during the CIRP period.

47. The RP in the aforesaid application made the following prayers:

"PRAYER

8. In view of the above facts and circumstances and submissions made, the Applicant most humbly prays that this Hon'ble Adjudicating Authority may be pleased to:

(a) Pass a direction to Secretary or Joint Secretary Ministry of Corporate Affairs or other such person to investigate the affairs more specifically the appropriation of INR 8,05,11,748/- (Eight Crores Five Lakhs Eleven Thousand Seven Hundred Forty-Eight only) amount by the Respondents in violation of Moratorium under section 14 of the Code;

(b) Pass an order reversing the appropriation of the amount of INR 8,05,11,748/- (Eight Crores Five Lakhs Eleven Thousand Seven Hundred Forty-Eight only) by the Respondents and further direct the Respondents to contribute the above sum to the Corporate Debtor's bank account;

(c) Pass an order directing the Respondents to provide details regarding the disbursal of INR 8,05,11,748/ - (Eight Crores Five Lakhs Eleven Thousand Seven Hundred Forty-Eight only) amount that was withdrawn from the bank account;

(d) Pass an order for costs; and

(e) Pass such further order(s) and/ or direction(s) as this Hon'ble Adjudicating Authority may deem fit and proper."

Page 23 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

48. We note from the prayer 8(b) above that the RP had specifically prayed

for reversal of the transaction of Rs.8,05,11,748/- and payment of the same

by the respondents in the account of CD.

49. It comes out very clearly from the grounds of appeal as well as the

prayers in the application that this relief has been sought on the ground of

violation of moratorium under section 14 read with section 60(5) of the Code

and Rule 11 of NCLT Rules.

50. We further note that the Ld. Adjudicating Authority, while discussing

the issue in paragraphs 9 to 12 of impugned order, consciously refrained from

adjudicating the allegations of fraudulent or wrongful trading under Section

66. Instead, it proceeded to examine whether the funds of the Corporate

Debtor had been dealt with during the subsistence of the moratorium and

whether the amount withdrawn was liable to be restored to the account of the

Corporate Debtor. The reasoning adopted by the Adjudicating Authority thus

shows that the relief ultimately granted was not founded upon Section 66 but

upon the consequences flowing from the violation of the statutory

moratorium.

51. We now take notice of section 60(5) of the Code and Rule 11 of NCLT

Rules 2016 which are extracted below:

Section 60: Adjudicating Authority for Corporate Persons

(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of--

(a) any application or proceeding by or against the corporate debtor or corporate person;

(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and

Page 24 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

Rule 11 of NCLT Rules,2016 Inherent Powers- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.

52. The jurisdiction exercised by the Adjudicating Authority must be tested

with reference to the source of the relief granted. Section 60(5) of the Code

confers wide jurisdiction upon the Adjudicating Authority to entertain or

dispose of any question of law or fact arising out of or in relation to the

insolvency resolution process. Preservation of the assets of the Corporate

Debtor is one of the fundamental objectives of the Code. Where the

Adjudicating Authority finds that the assets or funds of the Corporate Debtor

have been dealt with in breach of the statutory framework governing the CIRP,

it is not powerless to issue consequential directions for protecting or restoring

the insolvency estate.

53. The Appellant's interpretation would lead to the consequence that

merely because an application refers to Section 66, every other relief claimed

therein would automatically become dependent upon the satisfaction of the

ingredients of that provision. Such an interpretation neither flows from the

language of the Code nor advances the object sought to be achieved by it. The

scope of the jurisdiction exercised by the Adjudicating Authority has to be

determined with reference to the nature of the relief granted and not merely

by reference to the provisions cited in the application.

Page 25 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

54. The next contention advanced by the Appellant is that the direction

requiring the Appellant and the other suspended directors to contribute a sum

of Rs.8,05,11,748/- to the account of the Corporate Debtor is, in substance,

an order under Section 66 of the Code and, therefore, could not have been

passed in the absence of a finding satisfying the requirements of that

provision. The submission requires an examination of the true nature of the

relief granted by the Adjudicating Authority.

55. In this regard, we note that the Appellant sold the Panvel Property,

which was mortgaged to Axis Bank, on 02.11.2023, i.e., after the

commencement of the CIRP and during the subsistence of the moratorium.

The sale was effected despite the order dated 16.10.2023 passed by this

Appellate Tribunal vide which permission was specifically declined to sell any

property of the Corporate Debtor. The Appellant, therefore, acted in complete

disregard of both the statutory moratorium and the orders passed by this

Appellate Tribunal.

56. A reading of the operative part of the Impugned Order, together with the

discussion preceding it, shows that the Adjudicating Authority did not

determine the civil liability of the Appellant on account of fraudulent or

wrongful trading. Instead, it directed restoration of the amount which,

according to the material placed before it, had been withdrawn or dealt with

during the subsistence of the moratorium. The emphasis of the Adjudicating

Authority was on the effect of the transactions on the assets of the Corporate

Debtor during the CIRP and not on adjudicating the personal liability of the

Appellant under Section 66.

Page 26 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

57. The distinction is not merely one of form but of substance. A direction

requiring restoration of funds to the account of the Corporate Debtor is

intended to protect and preserve the insolvency estate so that the resolution

process is conducted on the basis of the assets legally available to the

Corporate Debtor. Such a direction is qualitatively different from a finding

that a person has carried on the business of the Corporate Debtor with

fraudulent intent or has incurred liability for wrongful trading. The latter

requires an adjudication on the ingredients of Section 66, whereas the former

is concerned with safeguarding the assets of the Corporate Debtor during the

CIRP.

58. The Appellant has sought to explain the withdrawals by contending that

they represented payments towards salaries, statutory liabilities and other

business expenses, and that some of the corresponding cheques had been

issued prior to the commencement of the CIRP. The Adjudicating Authority

considered this defence but was not persuaded to accept it in the absence of

satisfactory material substantiating the explanation. Apart from making a

general assertion regarding the nature of the payments, no relevant record

was produced to establish that the withdrawals were authorised or otherwise

permissible despite the operation of the moratorium. The finding recorded by

the Adjudicating Authority is essentially one based on appreciation of the

material placed before it, and no perversity in such appreciation has been

demonstrated before us warranting interference in the exercise of appellate

jurisdiction.

Page 27 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

59. The Appellant has also not pointed out any specific error in the

quantification of the amount directed to be restored. The challenge is

principally founded on the jurisdiction of the Adjudicating Authority to pass

such a direction and not on the computation itself. Once the jurisdictional

challenge is considered in the light of the statutory scheme discussed above,

the validity of the consequential direction has to be examined on the basis of

the findings actually recorded by the Adjudicating Authority and the material

available on record.

60. The appellant has placed reliance on the judgment of this Appellate

Tribunal in Sudhir Dinanath Chaturvedi v. True IPE LLP, Liquidator of

Adya Oils & Chemicals Ltd. & Ors., Company Appeal (AT) (Ins.) No. 540

of 2025. In the said case, the application before the Adjudicating Authority

was essentially founded on Section 66 of the Code and the relief granted was

directly relatable to the allegations of fraudulent trading. After holding that

the ingredients of Section 66 were not established, the Adjudicating Authority

nevertheless granted the very relief sought under that provision by invoking

Section 60(5), which was found to be impermissible by this Appellate

Tribunal. The present case stands on a different footing. As noticed earlier,

I.A. No. 3653 of 2024 was instituted under Sections 66, 74 and 60(5) of the

Code and sought multiple reliefs. The Adjudicating Authority consciously

refrained from adjudicating the allegations under Section 66 and examined

the issue of violation of the moratorium independently, directing restoration

of the amount to the account of the Corporate Debtor in exercise of its

jurisdiction under Sections 14 and 60(5) of the Code. The impugned direction

Page 28 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 was, therefore, not founded upon Section 66, and the ratio of Sudhir Dinanath

Chaturvedi does not govern the controversy involved in the present Appeal.

61. Reliance has also been placed on the decision of the Hon'ble Delhi High

Court in Rajeev Shukla v. Gopal Krishna Shukla, CM(M) No. 2342 of

2024. The said decision lays down the settled principle that mere mention of

an incorrect provision of law would not be fatal unless it causes prejudice to

the opposite party or affects the jurisdiction of the Court. In the present case,

there is neither any dispute regarding the provisions invoked in the

application nor any case of misdescription of the statutory source of

jurisdiction. The application was expressly filed under Sections 66, 74 and

60(5) of the Code, and the Appellant contested the proceedings on merits with

full knowledge of the reliefs claimed therein. The controversy before us is not

one of an incorrect or omitted statutory provision, but whether the

Adjudicating Authority was justified in granting relief independently under

Sections 14 and 60(5) after declining to adjudicate Section 66. The principle

laid down in Rajeev Shukla, therefore, has no application to the issue arising

in the present Appeal.

62. Appellant has also relied on the decision of the Chennai Bench of this

Appellate Tribunal in Regen Powertech Private Limited v. Wind

Construction Private Limited & Ors., Company Appeal (AT) (CH) (Ins.) No.

349 of 2022. The observations relied upon therein relate to the degree of

proof required for establishing fraudulent or wrongful trading under Section

66 of the Code and the obligation of the Resolution Professional to plead and

prove such allegations by placing cogent and tangible material on record.

Page 29 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025 There can be no disagreement with the said proposition. However, the

Adjudicating Authority in the present case has consciously refrained from

returning any finding under Section 66 and has not imposed liability upon

the Appellant on the basis of fraudulent or wrongful trading. The impugned

direction is founded upon the consequences of the alleged violation of the

moratorium and the restoration of the assets of the Corporate Debtor during

the CIRP. Since the present Appeal does not involve adjudication of the

ingredients of Section 66, the principles governing the standard of proof under

that provision, as explained in Regen Powertech, are not determinative of the

issues arising for consideration herein.

63. The Appellant has also assailed paragraph 12(ii) of the Impugned Order

whereby the Adjudicating Authority directed that a copy of the order be

forwarded to the Insolvency and Bankruptcy Board of India ("IBBI") and the

Ministry of Corporate Affairs ("MCA") for taking appropriate action under

Section 74 of the Code. According to the Appellant, once the Adjudicating

Authority declined to return any finding under Section 66 and did not

adjudicate the issue of fraudulent conduct, it could not have issued any

direction referable to Section 74.

64. We note that section 74 of the Code has been omitted vide The

Insolvency and Bankruptcy Code (Amendment) Act, 2026 which has come

into effect from 26 May 2026. As the aforesaid section is not part of the statute

anymore, the directions contained in the impugned order relating to the said

section have become infructuous.

Page 30 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025

65. In view of the findings above, we are of the view that the Adjudicating

Authority has examined the issues which arose for determination before it;

consciously confined its adjudication to the consequences flowing from the

violation of the moratorium and passed consequential directions which, in the

facts of the case, are well within the jurisdiction conferred by the Code.

66. We, therefore, find no merit in the Appeal. The Appeal is accordingly

dismissed. All pending IA's, if any, also stand disposed of. There shall be no

order as to costs.

[Justice Yogesh Khanna] Officiating Chairperson

[Indevar Pandey] Member (Technical)

Place: New Delhi

Harleen/ Pragya (LRA)

Page 31 of 31 Company Appeal (AT) (Ins.) No. 86 of 2025