Gopal Trading Company Through Its ... vs Mr. Ravindra Kumar Goyal Resolution ...

[Arising out of the Impugned Order dated 15.12.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench in I.A. Nos. 1316(AHM)/2024 and 643(AHM)/2025 in C.P. (IB) No. 251/(AHM)/2022] In the matter of: GOPAL TRADING COMPANY Through its Proprietor Mr. Gopalbhai Jayantibhai Selani Address: Shastrinagar, Gondal Rajkot, Gujarat - 360311 Email: shelanigopal@gmail.com .... Appellant

Versus

1. MR. RAVINDRA KUMAR GOYAL, RESOLUTION PROFESSIONAL OF MATRUSHRI FIBRES PRIVATE LIMITED R/o: Eighth Floor, I 807, Godrej Garden City, Behind Nirma University, Jagatpur Village, Ahmadabad, Gujarat, 382481 Office at: Eden I-807, Godrej Garden City Jagat Pura, SG Highway, Ahmedabad Gujarat - 382470 Email: ravindra1960_goyal@yahoo.co.in .... Respondent No.1 2. ASSISTANT COMMISSIONER OF GST Having its office at: CGST Division, Rajkot - II GST Bhawan, Race Course, Ring Road, Rajkot - 360001 .... Respondent No.2

3. ASSISTANT COMMISSIONER OF STATE TAX DEPARTMENT Having its office at: State Tax Officer-3, Unit -94, Taluka Seva Sadan, 2nd Floor Station Pilot, Gondal - 360311 .... Respondent No.3 Present:

For Appellant : Mr. Karan Valecha and Mr. A. Dwivedi, Advocates.

For Respondent : None.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code 2016 ("IBC" in short) by the Appellant arises out of the Order dated

15.12.2025 (hereinafter referred to as "Impugned Order") passed by the

Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-I)

I.A. Nos. 1316(AHM)/2024 and 643(AHM)/2025 in C.P. (IB) No.

251/(AHM)/2022. By the impugned order, the Adjudicating Authority has

allowed I.A. Nos. 1316(AHM)/2024 and 643(AHM)/2025. Aggrieved by the

impugned order, the present appeal has been preferred by the Appellant-

Operational Creditor.

2. Coming to the brief facts of the case, Gopal Trading Company-Operational

Creditor/Appellant had filed a Section 9 application under IBC which led to

admission of the Corporate Debtor-Matrushri Fibres Private Limited into CIRP

on 25.09.2023. The Interim Resolution Professional after verification and

collation of claims constituted the Committee of Creditors ("CoC" in short). The

IRP was later confirmed as Resolution Professional ("RP" in short). The CoC

consisted only of two Operational Creditors viz. Assistant Commissioner of GST

and Assistant Commissioner of State Tax holding 95.01% and 4.99% vote-share

Page 2 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 respectively. During the conduct of CIRP proceedings, the IRP had issued several

communications to the suspended management of the Corporate Debtor seeking

statutory financial records which did not elicit any response from the suspended

management. The RP had also issued communications to the Appellant for

deposit of CIRP costs which the Appellant did not initially deposit on grounds of

financial constraints. This had led the RP to initiate contempt proceedings

against the Appellant following which Rs. 2 lakh was deposited towards CIRP

cost on 29.08.2024. On finding that the CIRP was not making much meaningful

progress due to non-cooperation from the suspended management in making

available necessary information/ documents/records of the Corporate Debtor,

the Respondent No.1-RP preferred IA No. 1316 of 2024 against the members of

CoC seeking directions for inter-alia the closure/termination of the CIRP; for

direction to the CoC members to pay the RP fees and expenses incurred besides

discharge of the RP from the CIRP of the Corporate Debtor. The Appellant was

however not impleaded as party in IA No. 1316 of 2024. While the IA No. 1316

of 2024 was being heard, the RP-Respondent No.1 also filed an IA No. 643 of

2025, in which the Appellant was arrayed as a party, seeking directions of the

Adjudicating Authority to declare that the Section 9 petition was initiated by the

Appellant-Operational Creditor fraudulently with malicious intent and for

purpose other than resolution of the Corporate Debtor and for levy penalty in

terms of Section 65 on the Appellant. The Adjudicating Authority after hearing

both IA No. 1316 of 2024 and IA No. 643 of 2025 disposed them of with a

common impugned order terminating the CIRP of the Corporate Debtor

alongwith direction to the Appellant to pay a penalty of Rs. 10 lakhs for Page 3 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 fraudulent initiation of CIRP; pay CIRP related costs of Rs.6 lakhs which was in

addition to the Rs. 2 lakhs which had already been paid earlier. Aggrieved by

this impugned order, the present appeal has been preferred by the Appellant.

3. Submission was made by the Ld. Counsel for the Appellant that the

Appellant was a small-time business entity which had already suffered

business/financial losses and hence the cumulative burden of Rs. 18 lakhs

toward penalty, RP's fees and CIRP expenses imposed by the Adjudicating

Authority vide the impugned order had caused grave and irreparable injury to

the Appellant. Assailing the impugned order, submission was pressed that when

the Adjudicating Authority had itself admitted the CIRP after due adjudication

of the existence of the operational debt and default way back in 25.09.2023 and

this CIRP admission order had already acquired finality, the impugned order by

reversing its earlier order by holding the CIRP initiation to be

fraudulent/malicious suffered from inconsistency and incongruity both in terms

of fact and law. Stagnation of CIRP was the central reason on which the CIRP

admission order was reversed by the impugned order. However, this stalemate

was not caused by any act of omission or commission on the part of the Appellant

but was entirely caused by persistent non-cooperation from the suspended

management. Yet inspite of the purported non-cooperation from the suspended

management, the RP did not take any coercive or corrective steps under Section

19(2) of the IBC to ensure cooperation of the suspended management. Hence,

the RP being responsible for the slow and negligible progress of CIRP, it could

not have held the Appellant responsible for contributing to the stagnation of CIRP

and made liable to suffer penalty under Section 65 of IBC. Pressing further that Page 4 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 the Appellant was not impleaded as a party in IA No. 1316 of 2025 which had

been filed by the RP for closure/termination of the CIRP, the matter having been

heard ex-parte against them, the Appellant was unfairly subjected to substantial

and disproportionate financial liability by imposition of CIRP related costs and

levy of penalty on the Appellant.

4. We have duly considered the arguments advanced by the Learned Counsel

for the Appellant and perused the records carefully.

5. To commence with our analysis on the tenability of the contentions raised

by the Appellant, we would like to begin by first outlining the prayers contained

in I.A No. 1316 of 2024 and IA No. 643 of 2025. The prayers are as reproduced

below:

I.A. No.1316 of 2024

"a. Pass appropriate orders to close/terminate the CIRP initiated against the Corporate Debtor and pass other and further consequential orders including in relation to discharge of the Applicant as Resolution Professional;

b. Pass appropriate orders directing the COC members of the Corporate Debtor to pay the RP fees and reimburse the CIRP expenses incurred by the Resolution Professional as mentioned at Annexure LL;

c. Pass any other order(s) that this Hon'ble Tribunal may deem fit."

I.A. No.643 of 2025 "a. Pass appropriate order declaring that CP(IB) No. 251 of 2022 has been initiated by the Respondent fraudulently and/or with malicious intent for purpose other than for the resolution of insolvency of the Corporate Debtor and further this Adjudicating Authority be pleased to pass appropriate order levying penalty as per Section 65 of the IB Code on the Respondent;

Page 5 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 b. Pass any other order(s) that this Hon'ble Tribunal may deem fit."

6. Next, we advert our attention to the prayers urged by the Appellant as

contained in the present appeal petition which is before us for our consideration

which is as reproduced below:

"a. Be pleased to allow this Appeal.

b. Be pleased to quash and set-aside the Impugned Final Order and Judgment dated 15.12.2025 passed by the Ld. National Company Law Tribunal, Ahmedabad Bench, Court-I in I.A. No. 643/ 65/ NCLT(AHM)2025 IN CP(IB) No. 251/9(AHM)2022.

c. Be pleased to quash and set aside the imposition of penalty of Rs 10,00,000 and the direction fastening Resolution Professional fees and CIRP costs amounting to Rs 6,00,000 upon the Appellant, as directed under the Impugned Order;

d. Be pleased to pass such other or further or orders as may be necessary and expedient in the facts of this case."

7. When we look at the prayers above, it is adequately clear that the Appellant

has sought that the order of the Adjudicating Authority passed in IA No. 643 of

2025 be set aside. This order of the Adjudicating Authority which has been

impugned held that the CIRP proceeding had been initiated fraudulently and/or

with malicious intent for purpose other than insolvency resolution by the

Appellant besides imposition of penalty of Rs 10 lakhs and fastening of fees of

RP and CIRP costs amounting Rs 6 lakhs on the Appellant. The prayers in the

present appeal, however, makes no reference to IA No. 1316 of 2024.

8. It is the case of the Appellant that the Adjudicating Authority had exceeded

their jurisdiction in holding the initiation of CIRP to be fraudulent and malicious

Page 6 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 at a time when the same Adjudicating Authority had itself admitted the CIRP

vide its order dated 25.09.2023 after recording existence of debt and default. In

such circumstances, it was not correct on the part of the Adjudicating Authority

to hold that the CIRP proceeding was fraudulently initiated. The Respondent

No.1-RP had conducted the CIRP proceedings over a long period of two years

during which several CoC meetings were also held. Thus, after CIRP had

effectively run its course for two years, the invocation of Section 65 by the RP

thereafter and holding the CIRP initiation to be fraudulent was arbitrary and

untenable. It was also contended that Section 65 of IBC requires strict

construction and IA No. 643 of 2025 could not have been admitted merely on the

grounds of non-filing of claim by the Appellant-Operational Creditor. Further

contention had been raised that when the Appellant had chosen to stay out of

CoC proceedings and had also paid advance CIRP cost, they were being dragged

into unnecessary litigation by the Respondent No.1 by filing IA No. 643 of 2025

under Section 65 of IBC. It was also their vehement contention that the

Adjudicating Authority could not have directed the Appellant to discharge the

CIRP costs as it is the CoC which is obligated to bear the fees of RP and CIRP

expenses. The impugned order while imposing the penalty also failed to record

reasons to justify imposition of such heavy penalty without disclosing the basis

for quantifying the penal amount.

9. When we look at the material on record, we find that Respondent No.1-RP

had filed IA No. 643 of 2025 in which a prayer had been clearly made that the

CIRP initiation order having been fraudulently and maliciously initiated other

than for purposes of resolution of insolvency of the Corporate Debtor, the Page 7 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 Adjudicating Authority may order closure of the CIRP and levy penalty on the

Appellant in terms of Section 65. At the very threshold, we would like to observe

that insofar as IA No. 643 of 2025 is concerned, it is an undisputed fact that the

Appellant had been impleaded as a party therein and therefore afforded an

opportunity to appear before the Adjudicating Authority. The Appellant having

also filed their reply in IA No. 643 of 2025 cannot claim any prejudice on grounds

of breach of principles of natural justice.

10. Now we come to the main bone of contention as to whether the CIRP was

initiated by the Appellant in a fraudulent/malicious manner which attracted

Section 65 of the IBC. When we glance at the contours of Section 65 of the IBC,

we find that this statutory provision embodies a clear legislative fiat that

insolvency resolution process shall not be invoked fraudulently or with malicious

intent for any purpose other than resolution of insolvency. This statutory

provision therefore empowers the Adjudicating Authority to interdict the abuse

of CIRP process at any stage, if the Adjudicating Authority is satisfied from the

surrounding facts and circumstances on record, of fraud and/or malicious

intent on the part of any party seeking admission of CIRP of the Corporate

Debtor. Quite apart from the fact that Section 65 application can be entertained

at any time or at any stage of the CIRP proceeding, the plain reading of Section

65 also leaves no doubts in our minds that there is no need of any formal

application for its invocation and the Adjudicating Authority is well within its

rights to take suo-moto cognizance of any such development at any stage of the

proceedings.

Page 8 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026

11. When we look at the facts of the present case, it is an indisputable fact

that the RP had filed the IA No. 643 of 2025 for declaring the CIRP as one tainted

by fraudulent and malicious invocation. It is an undisputed fact that the

statutory period of 180 days had already expired and the CIRP had entered into

a phase of stagnation with no signs of registering further progress. It is the case

of the Appellant that when the RP had continued on with the conduct of CIRP

for a protracted period of 2 years, the RP could not have abruptly turned volte

face thereafter to claim that the CIRP admission was fraudulent in nature.

12. We have already noticed in the preceding paragraph that in terms of the

statutory construct of Section 65 of IBC, there is no ring-fencing in terms of

timing as to when the Adjudicating Authority can initiate Section 65 proceedings.

This coupled with the over-arching principle that the Adjudicating Authority is

obligated to take necessary safeguard to ensure that the IBC framework is not

abused or leveraged in any manner to perpetrate fraud, leaves no room for the

Appellant to raise the bogey that the Adjudicating Authority could not have

initiated the Section 65 proceedings after a period of two years. Merely because

CIRP had been admitted and CIRP proceedings was thereafter continued by the

RP, that clearly did not preclude the filing of a Section 65 application and the

Adjudicating Authority is also not barred in any manner from adjudicating upon

such Section 65 application.

13. Another defence taken by the Appellant is that they had at no stage acted

in the manner which obstructed or delayed the CIRP process and that they had

complied to all directions issued during CIRP including deposit of CIRP cost. It

was contended that merely because the CIRP did not reach its logical Page 9 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 culmination, this cannot constitute a valid ground for invocation of Section 65

of IBC. Moreover, the Appellant cannot be put to blame if the RP for his own

shortcomings could not effectively proceed with the conduct of CIRP proceedings.

It is the case of the Appellant that it was the RP who was responsible for the

stagnation of the CIRP process since he failed to invoke the statutory remedy

available to him under Section 19(2) of the IBC to take corrective steps against

the suspended management of the Corporate Debtor for not cooperating with the

RP in furnishing relevant information necessary for pursuing the CIRP

proceedings.

14. The issue before the Adjudicating Authority was not what caused the delay

in the CIRP proceedings but whether the CIRP proceedings had been

fraudulently and/or maliciously initiated and was fit to be terminated in view of

the same. The Section 9 application having been initiated by the present

Appellant, the Adjudicating Authority has rightly focussed on the facts and

circumstances on record to view the conduct of the Appellant.

15. We find that the Adjudicating Authority in the impugned order took notice

of the fact that the Appellant had filed the Section 9 application on the basis of

an outstanding operational debt of Rs 3.80 Cr. and that after the Section 9

application was admitted and moratorium had commenced, the Appellant

surprisingly slipped into a hibernation mode and did not file any claim in

pursuance of public announcement made by the RP. The reasons for not filing

their claim have also not been disclosed before the RP by the Appellant. This

glaring omission to file claims on part of the present Appellant had rightly

arrested the attention of the Adjudicating Authority in finding the conduct of the Page 10 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 Appellant to be unusual. This conclusion of the Adjudicating Authority was well

justified as the standard and usual response of any operational or financial

creditor is to file their claims as and when a Corporate Debtor is admitted into

insolvency particularly so when it is their own Section 9 application which led to

CIRP of the Corporate Debtor. The Adjudicating Authority had rightly concluded

that the intent behind filing the Section 9 application was not genuine in view of

the fact that the Appellant who had initiated the Section 9 application, for

inexplicable reasons, absented themselves from further participation in the CIRP

proceedings including abstention from the filing of claims. In this backdrop, the

Adjudicating Authority did not commit any infirmity in proceeding to examine

whether this omission on the part of the Appellant to file their claims was

deliberate and whether this conduct was a pointer to the fact that the purpose

of filing the Section 9 application was motivated by reasons other than corporate

insolvency.

16. At this stage, it is also pertinent to note that the only claims filed in the

CIRP process was from two entities viz. Assistant Commissioner of GST and

Assistant Commissioner of State Tax, which were authorized to collect statutory

taxes. The recovery of taxes by these two entities was no longer possible because

of moratorium having come into play following the admission of CIRP. The

outstanding tax liability also stands validated by the fact that the Tax

Departments in their claims had submitted substantial amounts as statutory

dues outstanding against the Corporate Debtor for past years. The Adjudicating

Authority has therefore rightly noticed that the initiation of CIRP followed by

moratorium barrier coming into existence under Section 14 coincided with Page 11 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 pending recovery actions by the Tax Departments. Thus, what seems to underpin

the reason for triggering CIRP proceedings was clearly to circumvent the tax

liability. It is clearly evident from the timing of CIRP admission that the

moratorium provision was being put to use by the Appellant to shield themselves

from their tax liabilities and not as a genuine resolution tool.

17. This brings us to the ostensible reasons adduced by the Appellant for not

filing claims. This was attributed by them to their ignorance of the scheme of

IBC and CIRP procedures due to lack of education. We find that this plea has

been duly considered by Adjudicating Authority in the impugned order. The

Adjudicating Authority has correctly observed that if the Appellant could have

pursued the Section 9 application with all vigour at their command and taken it

forward to its logical culmination, it clearly denotes that the Appellant was fully

aware of the IBC framework and its ramifications. Further, the Appellant by their

own admission has also stated that they had issued a legal notice to the

Corporate Debtor on 11.01.2022 as placed at page 399 of the Appeal Paper Book

wherein they had called upon the Corporate Debtor to make payment of Rs 3.90

Cr. of outstanding operational debt. The issue of legal notice and lodging of

police complaints by the Appellant also shows that the Appellant was

meticulously preparing for the legal battle they had chosen to enter into. Given

this background, the plea taken by the Appellant that they did not file the claims

because of lack of legal awareness is an after-thought which lacks credibility. In

this backdrop, the Adjudicating Authority cannot be said to have taken an

arbitrary stand in not accepting this hollow plea of the Appellant to explain the

non-filing of claims. Such opacity of reasons for invoking Section 9 and yet not Page 12 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 filing claims justifies the finding returned by the Adjudicating Authority that the

CIRP was initiated for fraudulent reasons which tantamount to a clear abuse of

the insolvency framework.

18. The Adjudicating Authority has further noticed that the Appellant was

related to the director of the Corporate Debtor and that this familial relationship

was extremely close a relationship as they were real brothers. It has also been

noticed by the Adjudicating Authority that the Appellant was also a director of

the Corporate Debtor for some period of time. These facts have not been

controverted by the Appellant except that it was pointed out that the Appellant

was a director of the Corporate Debtor only for a very brief period. Be that as it

may, we tend to agree with the Adjudicating Authority that when the family links

are kept in mind alongwith the fact that the Appellant was also an ex-director of

the Corporate Debtor coupled with non-pursuit of their claims arising out of debt

owed by the Corporate Debtor clearly establishes that the purpose was not

resolution of insolvency but to prevent recovery proceedings by CGST and GST

Department.

19. Since Section 65 is designed to deter misuse and protect the integrity of

the insolvency framework, the Adjudicating Authority was not off the mark in

examining the overall conduct of the Appellant in the surrounding

circumstances and in satisfying itself that the threshold elements of malicious

intent was met in the facts of the present case. The Adjudicating Authority had

not committed any error in imposing penal/compensatory amounts on the

Appellant as Section 65 clearly provides for penal costs as a punitive measure in

Page 13 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026 case of abuse of the process of law and to protect the integrity of the insolvency

framework.

20. This brings us to the question of whether the Adjudicating Authority was

correct in holding that the Appellant should bear the fees of the RP and the CIRP

expenses. On the face of it, we quite agree with the Appellant that in terms of

CIRP Regulations, such costs are ordinarily met from the assets of the Corporate

Debtor or through CoC. Be that as it may, we are inclined to agree with the

Adjudicating Authority that the present is however not a case where CIRP

proceedings were taken up in normal circumstances. In the present case, the

CoC consisted of only two tax entities who had filed their claims on the basis of

their tax liabilities recoverable from the Corporate Debtor. The Tax Departments

which were the only constituents of the CoC had not initiated the CIRP

proceedings. The CIRP process also gradually slid into the path of turning non-

viable with the CoC stopping to function altogether after a while. Hence for

reasons of equity, the CoC in the present case could not be made to bear the

financial implications of the CIRP proceedings for reasons of equity. The RP was

thus left with no option but to carry on with his statutory obligations by funding

the CIRP process from own resources. Given the absence of assets and a non-

functional CoC coupled with prima-facie abuse of the CIRP proceedings by the

Appellant for reasons other than seeking insolvency resolution of the Corporate

Debtor having been established, the Adjudicating Authority in the present

factual matrix, cannot be said to have faulted in exercising its residuary

jurisdiction to hold that fees/expenses of RP shall be borne by the Appellant

being the original Operational Creditor.

Page 14 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026

21. In result, we find no merit in the appeal and find no cogent reasons to

interfere with the impugned order in any manner. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 17.03.2026

Abdul

Page 15 of 15 Company Appeal (AT) (Insolvency) No. 222 of 2026