Mr. Lalit Modi vs Mr. Ashish Singh Resolution ...

[Arising out of the Impugned Order dated 23.09.2025 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench-IV in I.A. No. 1220 of 2023 & I.A. No. 1630 of 2023 in C.P. (IB) No. 983 (ND)/2020] In the matter of: Mr. Lalit Modi R/o House No. E-20, Lajpat Nagar - III, South Delhi - 110024 .... Appellant Versus 1. Mr. Ashish Singh Resolution professional of Vibrant Buildwell Private Limited, R/o Flat No. 901, Tower-A, Cleo County, Sector-121, Noida, Uttar Pradesh-201301

2. Bishwanath Traders and Investment Ltd. Through Mr. Kumal Jee Mishra R/o Ground Floor, 3796, Chawri Bazaar, Delhi-110006

3. Committee of Creditors of Vibrant Buildwell Private Limited, At 22, Siri Fort Road, New Delhi-110049 .... Respondents

Present: For Appellant : Mr. Anirban Bhattacharya, Rajeev Choudhary, Priyanka Bhatt, Advocate. For Respondent : Mr. K. Datta, Sr. Adv. with Saurabh Kalia, Ateendra Saumya Singh, Alina M. Mathew, Advocates for SRA.

Mr. Sumant Batra, Abhishek Parmar, Sarthak Bhandari, Riya Kaur Arora, Advocates for R1. 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

23.09.2025 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-IV)

in I.A. No. 1220 of 2023 & I.A. No. 1630 of 2023 in C.P. No. (IB) 983 (ND)/2020.

By the impugned order, the Adjudicating Authority has dismissed I.A No. 1220

of 2023 filed by the Appellant-Lalit Modi and rejected the claims of the Appellant

in the CIRP of the Corporate Debtor and has allowed I.A No. 1630 of 2023 filed

by the RP against the Appellant under Section 66 of IBC. Aggrieved by the

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

2. The Corporate Debtor-Vibrant Buildwell Pvt. Ltd. was admitted into CIRP

on 22.02.2022 following which the Resolution Professional ("RP" in short)

invited claims from the creditors of the Corporate Debtor by way of public

announcement made on 24.02.2022. The Appellant submitted a claim of Rs

15,46,56,889/- on 30.05.2022 which claim of the Appellant was rejected by the

RP-Respondent No.1 on 06.06.2022. Following the rejection of their claim, the

Appellant filed IA No. 2769 of 2022 before the Adjudicating Authority seeking

directions for admission of their claim. While the IA No. 2769 of 2022 was

pending adjudication, in the meantime, the RP on 29.10.2022 had filed IA No.

5458 of 2022 for approval of the resolution plan. Even while IA No. 5458 of 2022

was pending before the Adjudicating Authority, the RP rejected the claim of the Page 2 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 Appellant on 06.02.2023 which led to filing of I.A. No. 1220 of 2023 challenging

the rejection of the claim by the RP. The Appellant also filed IA No. 4173 of 2023

before the Adjudicating Authority seeking rejection of the Resolution Plan on

04.08.2023. The RP also filed IA No. 1630 of 2023 against the Appellant under

Section 66 of IBC on the ground that the Appellant under the Loan Agreement

of 02.04.2007 had entered into fraudulent transaction with deliberate intent to

defraud the creditors of the Corporate Debtor. On 24.01.2024, the Adjudicating

Authority allowed IA No. 4173 of 2022 of the Appellant and dismissed the plan

approval application of the RP vide IA No. 5458 of 2022. The order rejecting the

plan was challenged before this Tribunal. On 25.10.2024, this Tribunal turned

down the above order of the Adjudicating Authority and approved the resolution

plan of the Corporate Debtor and directed the Adjudicating Authority to issue

consequential orders. This order of this Tribunal was challenged before the

Hon'ble Supreme Court on 25.11.2024. On 20.12.2024, the Hon'ble Supreme

Court of India inter alia directed that IA No. 1220 of 2023 be decided by the

Adjudicating Authority in accordance with law. The Adjudicating Authority

dismissed IA No. 1220 of 2023 on 23.09.2025 and subsequently passed the

consequential order approving the resolution plan on 04.11.2025. The

Adjudicating Authority has also allowed IA No. 1630 of 2023 filed by RP and held

the transactions undertaken by the Appellant under the LA of 02.04.2007 to be

fraudulent transaction within the meaning of Section 66 of the IBC. Aggrieved

by the impugned order dismissing IA No. 1220 of 2023 and admitting IA No.

1630 of 2023, the same has now been challenged by the Appellant.

Page 3 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

3. Making his submissions, Shri Anirban Bhattacharya, Ld. Counsel for the

Appellant contended that the Adjudicating Authority had erroneously rejected

the claim filed by the Appellant with the RP on 27.05.2022 which claim arose

out of the Loan Agreement executed by them with the Corporate Debtor on

02.04.2007. It was asserted that the Adjudicating Authority had failed to

appreciate that an amount of Rs 48,50,000/- clearly figured as outstanding in

the balance sheet of FY 2016-2017 of the Corporate Debtor under the head of

'Other Long-Term Liabilities' and under the head "Advances" which therefore

reinforces the existence of financial debt. Emphasising that the Appellant had a

right to payment under the Loan Agreement which constituted sufficient basis

for filing of claim, the rejection of their claim on the ground that no charge had

been registered and that no secured loan is reflected in the name of the Appellant

was untenable as non-registration of charge did not render the transaction

under the Loan Agreement void or render the debt as unrecoverable.

Submission was further pressed that finding of the Adjudicating Authority that

there was no evidence of deduction of TDS on interest was misplaced. In any

case, it was contended that the component of interest was not a sine qua non for

bringing a debt within the fold of a "financial debt" as held by the Hon'ble

Supreme Court in Orator Marketing Pvt. Ltd. Vs Samtex Desinz Pvt. Ltd.

2021 SCC Online SC 513. Assertion was made that once the amount claimed

was recorded in the balance sheet of the Corporate Debtor and there existed a

Loan Agreement to show the disbursal, there was no reason for the Adjudicating

Authority to reject the claim. It was also submitted that the finding of the

Adjudicating Authority that the claim stood barred in 2010 since the loan was Page 4 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 disbursed in 2007 is in contravention to Clauses 3.6 and 8.3 of the Loan

Agreement as per which the due date for repayment was 31.12.2019. Thus, the

three years limitation period would have therefore expired on 31.12.2022, while

the claim was filed on 30.05.2022 which is before the expiry of the three years.

Submission was also made that the Adjudicating Authority erroneously referred

to the Loan Agreement as concocted document and in holding transactions

stemming out of it as sham and bogus without appreciating that the RP had

never sought cancellation or declaration of the Loan Agreement as void nor ever

challenged the validity of this document before the competent authority.

Further, the Appellant also hotly contested the adjudication on the validity and

enforceability of the Loan Agreement by the Adjudicating Authority as this

required elaborate examination of evidence which was clearly beyond the scope

of the Adjudicating Authority in view of its summary jurisdiction. It was not open

to the Adjudicating Authority to deliberate on the issue of forgery of documents

as decided by this Tribunal in Sandeep Behl Vs Nirmal Trading Company

and Ors. in CA(AT)(Ins) No. 36 of 2024 where it has been held that the

authority of the Adjudicating Authority to investigate into such disputes of

forgery and fabrication of invoices is circumscribed by the summary nature of

jurisdiction vested upon by it. On the admission of Section 66 application vide

IA No 1630 of 2023, it was submitted that the Adjudicating Authority had gravely

erred in holding that the Appellant had carried out a fraudulent transaction

under Section 66 of the IBC without any examination and discussion on the

facts, merits and averments made by the Respondent RP in the application filed

under Section 66 of the IBC. When the RP has admitted infusion of funds by the Page 5 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 Appellant from his own account into that of the Corporate Debtor, the RP has

failed to demonstrate how the alleged underlying transaction amounts to

fraudulent trading under Section 66 (1) of the IBC. Furthermore, submission

was pressed that the provisions of the IBC do not empower the Adjudicating

Authority to declare any transaction as null and void and that any such

declaration could only be done by a civil court.

4. Refuting the contentions made by the Appellant, Shri Sumant Batra, Ld.

Counsel making submissions on behalf of the Respondent No.1-RP, submitted

that the Loan Agreement was made on Stamp Paper which was not obtained

from authorised or verifiable sources making the authenticity of the Loan

Agreement document doubtful. Further, the Loan Agreement was unilaterally

executed by the Appellant with his brother who had no authorisation from the

Corporate Debtor for being a signatory on their behalf. Contending that the

genuineness of the Loan Agreement was itself questionable, the claim filed on

the basis of such an agreement was untenable. It was strenuously asserted that

the claims were also unfounded as the balance sheet of the Corporate Debtor

did not reflect any financial liability or loan obligation. Further the audited

Financial Statements of Corporate Debtor for FY 2016-2017 showed Rs.

48,50,000/- in the head of 'Other Advances' and not as an unsecured loan. There

was no provision of interest in the books of Corporate Debtor nor any document

on record to support their claims including provision of interest in their books

or TDS Certificate/Form 16-A. As per records of the Corporate Debtor, there was

no secured loan, charge or mortgage created in favour of the Appellant. There is

nothing on record that showed the acceptance of debt by the Corporate Debtor Page 6 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 or any other document to substantiate the debt anytime even before three years

preceding from insolvency commencement date. The claim was thus not a

bonafide financial claim and hence the Appellant therefore cannot seek

treatment of the said sum as financial debt under the definition of 5(8)(a) of the

IBC. The Appellant had remained silent with no communication sent to

Corporate Debtor for the repayment and recovery of such default amount or

interest thereon and came up for the first time claiming the sum as debt in Form-

C before the RP only after Corporate Debtor was admitted into CIRP. The

Appellant, moreover, had claimed interest amount at an unusually high rate @

24% interest compounded quarterly totalling Rs 15,46,56,3889/- from 2007 to

2022 which made the entire transaction suspicious. Further the Appellant had

filed claim beyond the last date specified for submission of claim and springing

up of such surprise claims before the SRA is not permissible. Attention was also

adverted to the judgement of the Hon'ble Supreme Court in Ghanshyam Mishra

& Sons Pvt. Ltd. Vs Edelweiss Asset Reconstruction Company Ltd. 2021

SCC Online SC 313 to emphasise the "clean slate principle" enunciated therein.

Emphasis was laid that while the Loan Agreement laid down the purpose of the

alleged secured loan to be for purposes for development of land, the amount was

withdrawn for the purpose of purchasing a car which was a fraudulent act on

part of the Appellant. Submission was also pressed that though the Corporate

Debtor had obtained license from DTCP, Haryana in 2007 to develop its project

in Bahadurgarh, no registered charge was created by Corporate Debtor in favour

of Appellant even though Appellant was the Director of the Corporate Debtor. No

third-party rights are created on the said land. The Appellant had thus created Page 7 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 a forged loan agreement and shown mortgaged secured assets of the Corporate

Debtor with malafide intention to defraud creditors and hence the Adjudicating

Authority had rightly held the transaction under the sham Loan Agreement to

be a fraudulent transaction within the meaning of Section 66 of IBC and allowed

the IA No 1630 of 2023.

5. Echoing similar arguments as canvassed by the RP, Shri Krishnendu

Dutta, Ld. Sr. Counsel for SRA-Respondent No.2 submitted that the Loan

agreement basis which claim has been filed by the Appellant before the

Respondent No.1-RP was a forged and fabricated document and its authenticity

and genuineness are disputed as it was executed without any proper

authorization from Corporate Debtor. It was vehemently contended that the

claim filed by the Appellant was done basis a Loan Agreement which was the

outcome of collusion between the two brothers who are ex-Directors of the

suspended management. It was also contended that perusal of the Loan

Agreement read with the audited balance sheet of the Corporate Debtor also

showed that the aforesaid amount was not in the nature of a secured loan but

was recorded under the head of 'Other Advances' and therefore did not partake

the character of a financial debt. Moreover, while the loan was purportedly

advanced for the limited and specific purpose of facilitating land development

activities and meeting related statutory dues, it was diverted for the purchase of

Audi A6 Car. It was also asserted that the Appellant had claimed a total amount

of Rs. 15,46,56,889/- of which principal amount was only Rs. 48,50,000/- of

which a huge amount of Rs 14,98,06,889/- has been claimed on account of

interest. It was also contended that the Appellant had raised a claim based on Page 8 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 inflated and a disproportionate rate of interest which was commercially

unreasonable and untenable. Further, the Appellant had failed to produce

concrete evidence of interest provision in their books of account or balance sheet

or other supporting documents like TDS deduction. This coupled with the fact

of the Appellant not raising the demand for repayment until the Corporate

Debtor got admitted into rigours of CIRP shows that it was an afterthought.

Casting doubts on the legitimacy and bonafide of the alleged transaction,

attention was also adverted to fact that no objections or claims were raised by

the Appellant to the Letter of Intent ("LOI'') dated 09.08.2017 issued in favour of

the Corporate Debtor by the Directorate of Town and Country Planning ("DTCP''),

Haryana, calling for filing of objections, regarding third party rights over the

project land, which indicate that no such genuine claim existed at the relevant

time and the present assertion of financial debt is an afterthought aimed at

wrongful enrichment. Submission was also pressed that the plan submitted by

them had attained finality and once the resolution plan was approved by the

Adjudicating Authority, the claims stood frozen in terms of the resolution plan

and became binding on all concerned. Further, in terms of the judgment of the

Hon'ble Supreme Court in Ghanshyam Mishra judgment supra, it is well

settled that on the date of approval of the plan by the Adjudicating Authority, all

claims which do not form part of the resolution plan stand extinguished and no

person is entitled to initiate or continue any proceedings in respect of a claim

which is not part of the plan. It was strenuously contended that this conduct of

the Appellant amounted to be a gross abuse of the process of law which are

Page 9 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 aimed at obstructing the timely and efficacious completion of the CIRP of the

Corporate Debtor.

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

for the parties and perused the records carefully.

7. Coming to our analysis and findings, we first come to the submission

made by the Appellant that he had submitted his claims as a Financial Creditor

to the RP alongwith relevant supporting documents which include the Loan

Agreement; the Bank statements showing disbursement; the Audited Financial

Statement of the Corporate Debtor as on 31.03.2017 as well as the interest

calculation and that this was clearly reflected in the Form-C submitted by him

as has been placed at page 230 of the Appeal Paper Book ("APB" in short). On

the observations made by the Adjudicating Authority at para 27 of the impugned

order that there were discrepancies in the Loan Agreement on account of lack of

licenced vendor's stamping; lack of serial number and date of purchase of stamp

paper besides the absence of any Board Resolution authorising the execution of

the Loan Agreement it was contended by the Appellant that the Adjudicating

Authority had wrongly raised doubts on the validity and enforceability of the

Loan Agreement since the Adjudicating Authority did not enjoy the jurisdiction

to decide on the validity and enforceability of contractual agreements being an

evidence-based exercise. Per contra, it is the case of the Respondents that

besides the deficiencies and defects noted in the stamp paper on which the Loan

Agreement had been executed, the absence of formal authorisation by the

Corporate Debtor to execute the Loan Agreement was by itself a cardinal

shortcoming which rendered the Loan Agreement questionable. Page 10 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

8. We agree that disputes involving authenticity and genuineness of

contractual documents cannot be decided by the Adjudicating Authority in the

exercise of summary nature of jurisdiction. However, given the fact that

Regulations 10, 12 and 13 of IBBI (Insolvency Resolution Process for Corporate

Persons) Regulations,2016 enjoins upon the IRP/RP to verify claims submitted

by creditors including calling for evidence/clarification for substantiation of

claims with supporting documents to determine their authenticity and accuracy,

we are of the considered view that there was nothing abnormal or unusual on

the part of the Adjudicating Authority to have undertaken to satisfy itself on the

genuineness of the Loan Agreement. On a bare look at the Loan Agreement as is

placed at page 178 of APB, we find no reasons to disagree with the Adjudicating

Authority that the stamp paper on which the Loan agreement was executed does

not carry the stamp of the licensed vendor, serial number and date of purchase.

No material has been placed on record to show that there was any formal

authorisation from the Corporate Debtor by way of Board Resolution for

execution of the Loan Agreement. Hence, we are inclined to agree with the finding

returned by the Adjudicating Authority that there existed substantial grounds

for doubting the authenticity and bonafide of the Loan Agreement.

9. We next come to the contention of the Appellant that the Adjudicating

Authority has failed to appreciate the fact that the balance sheet of the Corporate

Debtor as on 31.03.2017 clearly reflected an amount of Rs 48,50,000/- under

the head of "Other Long Term Liabilities" which validates the fact that this

outstanding amount qualified to be treated as a financial debt and that the

Appellant was therefore justified in making this claim before the RP. Page 11 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

10. Taking a contrary stand, it has been asserted by both the Respondents

that the Adjudicating Authority had rightly noticed on perusal of the Loan

Agreement alongwith the audited balance sheet of the Corporate Debtor that the

sum of Rs 48,50,000/- given by the Appellant was not in the nature of a financial

debt and could not have been claimed in Form-C when the audited balance sheet

of the Corporate Debtor classified the amount claimed by the Appellant under

the head of 'Other Advances' and not a loan.

11. When we look at the balance sheet of the Corporate Debtor for FY 2016-

17 which appears at page 201 of the APB, it reads to the effect:

Vibrant Buildwell Private Limited Notes Forming Part of Balance Sheet as at 31st March, 2017

Note '3' Long Term Borrowings Particulars As at As at 31st March 2017 31st March 2016 Rs. Rs.

Unsecured Loans From Related Parties Raj Associates 1,734,646.00 1,099,660.00 Dilwara Leasing and Investment 176.241,966.00 154,311,932.00 Limited Total 177,976,612.00 155,411,592.00

Note '4' Other Long Term Liabilities

Particulars As at As at 31st March 2017 31st March 2016 Rs. Rs. Advances Against Registration Charges

Arti Mehta - 291,008.00 Gopal Krishna Gupta - 291,008.00 Page 12 of 19

Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 Other Advances Primex Estate Private Limited 3,095,000.00 3,095,000.00 J. R. Modi Associates Limited 400,000.00 400,000.00 Surender Modi 510,000.00 510,000.00 Lalit Modi 4,850,000.00 4,850,000.00 ERA Constructions Pvt. Ltd. 500,000.00 500,000.00 DSL Properties Private Limited 28,186,053.00 28,186,053.00 Total 37,541,053.00 38,123,069.00

It is also clear from the above extracts of the financial statement of the Corporate

Debtor that Rs 48,50,000/- appearing against the name of Lalit Modi appears in

the head of 'Other Advances' under the category of "Other Long Term Liabilities"

and not as a loan as claimed by the Appellant. It is clear from the above

categorisation that the sum was provided as an advance and was treated as a

liability and not a borrowing in the balance sheet and therefore does not partake

the character of financial debt. We therefore find that the Adjudicating Authority

did not commit any infirmity in holding that the advance purportedly given by

the Appellant not having been classified as a borrowing in the balance sheet,

hence, this amount did not acquire the colour of financial debt.

12. We next notice that the Appellant has filed his claim before the RP by

showing the sum to have been advanced by him as secured loan. This claim of

being a secured financial creditor was however disputed by the RP on the ground

that there was no supporting document provided by the Appellant in support of

his claim as a secured financial creditor. It was also contended by the

Respondents that there was no secured loan in the audited balance sheet of the

Corporate Debtor or in the books of accounts and that even the MCA portal did

Page 13 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 not show any secured loan or mortgage created in favour of the Appellant in the

MCA portal.

13. When we look at the impugned order, we find that it has been noted by

the Adjudicating Authority that though Article 4 of the Loan Agreement under

the heading "Security and Disbursement Guarantee" provided that the loan

stipulated in the agreement was to be secured by certain properties in

Bahadurgarh, no such charge was created by the Corporate Debtor in favour of

the Appellant. It has also not been controverted by the Appellant that when the

Corporate Debtor had mortgaged these properties with Director Town and

Country Planning, Haryana and a Letter of Intent was accordingly published in

the newspapers, the Appellant had not raised the issue of enjoying title/security

over the said properties. Though, we agree that non-assertion of security interest

does not extinguish or wipe out the liability owed by the Corporate Debtor to the

Appellant, nevertheless, it remains unexplained as to then why the Appellant

failed to assert his right when the objections were sought before mortgaging the

land to DTCP, Haryana.

14. We now come to another limb of argument of the Appellant that the

Adjudicating Authority had erroneously held that the Appellant was not entitled

to file claims merely because the records of the Corporate Debtor did not reflect

accrual of interest in any financial year. It was contended that simply because

the Corporate Debtor had not made provision for interest payment in the balance

sheet or had failed to deduct interest, this cannot become a ground for denying

the sum advanced by them to be treated as a financial debt. It was further

contended that in terms of the judgment of the Hon'ble Supreme Court in Orator Page 14 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 judgment supra, even interest free loans are financial debts within the meaning

of IBC.

15. We have no quarrel with the proposition of law laid down in the judgment

of Hon'ble Supreme Court in Orator judgement supra that financial debt also

includes any sum raised under any transaction having the commercial effect of

borrowing even it does not carry an interest component. However, when we

consider the factual matrix of the case at hand, we find that the Appellant has

failed to place on record any step or measure taken by him seeking repayment

of the purported loan or for payment of interest since the sum was advanced in

pursuance of the terms of the Loan Agreement of 2007. While we note that

Clauses 3.6 and 8.3 of the Loan Agreement stipulated that the due date on which

the loan was required to be repaid was 31.12.2019 and as the Appellant filed

their claim on 30.05.2022 it was very much within the three years limitation

period, we find it rather unusual that the Appellant remained indifferent in

demanding repayment of the loan and attendant interest amount for nearly

fifteen years. We therefore tend to agree with the Adjudicating Authority that if

the Loan Agreement was a genuine one, then the ordinary course of action on

the part of the Appellant would have been to seek refund of the loan given by

him including interest thereon. The unusually prolonged delay in raising the

demand by the Appellant until the Corporate Debtor was admitted into rigours

of CIRP therefore creates doubts on the legitimacy and bonafide of the alleged

transaction besides lending credence to the fact that the Loan Agreement was

contrived as an after-thought to file their fictitious claims.

Page 15 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

16. On the allegation of the loan transaction having been labelled as a sham

and bogus transaction simply because the Corporate Debtor had purchased an

Audi-6 Car, it is the case of the Appellant that this was a misplaced contention

as there is nothing on record to show that no funds were available with the

Corporate Debtor at the time of purchase of Audi Car barring the loan amount

given by the Appellant. It is the contention of the Appellant that when the bank

statement of the Corporate Debtor placed at page 192 of the APB clearly shows

that Rs 48,50,000/- had been received in the account of the Corporate Debtor

from the Appellant, this clearly and effectively demonstrated that there was

infusion of funds by the Appellant into the account of the Corporate Debtor.

Hence, the Adjudicating Authority had erroneously questioned the genuineness

of the loan transaction on account of purchase of a car.

17. Per contra, it is the case of the RP that the funds infused into the

Corporate Debtor under the Loan Agreement was not used for the purpose of

raising the loan in terms of the Loan Agreement as stipulated at Clause 2 thereof.

The purpose for which loan was to be used was for the purpose of developing the

land available with the Corporate Debtor and was not to be used for any other

business purpose. However, in the present case, as the loan was used for

purchase of an Audi A6 Car for personal use of the Appellant, the Adjudicating

Authority has correctly held that the Appellant has filed a claim to recover the

sum purportedly advanced by him to the Corporate Debtor which not having

been utilised for the purpose for which the sum was advanced tantamount to

defrauding the creditors of the Corporate Debtor.

Page 16 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

18. When we look at para 17 of the impugned order, we find that the

Adjudicating Authority has taken cognisance of the purpose for which the Loan

Agreement by extracting Clause 2 in the impugned order. From a plain reading

of Clause 2, it is amply clear that the loan was to be used for development of

land and Clause 2.2 made it adequately clear that diversion of the loan for any

other business purpose was not permissible. However, when we look at the bank

statement of the Corporate Debtor as placed at page 314 of the APB it is clear

that the same day i.e. 19.04.2007 when the alleged secured loan was disbursed,

the same day there has been a pay-out of the same amount from the account of

the Corporate Debtor for the purpose of purchasing an Audi A6 Car which use

clearly did not conform to the stipulations of Clause 2.2 of the Loan Agreement.

The Appellant being a Director of the Corporate Debtor at that point of time

cannot disclaim responsibility that the purported loan advanced to the

Corporate Debtor had not been utilised for the beneficial interest of the

Corporate Debtor as contemplated in the Loan Agreement.

19. In such circumstances, the Adjudicating Authority has rightly concluded

that the transactions purportedly undertaken by the Appellant under the Loan

Agreement amounted to be a fraudulent transaction within the meaning of

Section 66 of the IBC. We also find that the Adjudicating Authority has rightly

observed that any transaction which adversely impacts the financial health of a

distressed corporate person must be examined with utmost circumspection by

placing reliance on the judgment of the Hon'ble Supreme Court in the matter of

Anuj Jain, IRP Vs Axis Bank Ltd. in Civil Appeal No. 8512/8527. We also

find that the Adjudicating Authority has recorded with reasons to hold that the Page 17 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025 claim of the Appellant as sham and bogus and the relevant paragraph of the

impugned order which is as reproduced below:

"36. We observe that the RP of the Corporate Debtor rejected the claim of the Ex-director claim for want of relevant documents to supports its claim. The documents relied upon, including the alleged Loan Agreement, were found to be inconsistent and lacking authenticity, thereby rendering the claim as nothing but a series of sham and bogus transactions. We further record that: i. The purported loan agreement in question has no backing of the board resolution.

ii. There is no record to show that the Corporate Debtor was in need of use money (as Loan) involved in the transactions.

iii. No document to stipulate the period of repayment.

iv. That Mr. Lalit Modi (Ex-Director of the Company) who extended alleged loan to the Corporate Debtor and Mr. Surender Modi who entered agreement on behalf of Corporate Debtor, both were directors and promoters of the corporate debtor.

v. The essential ingredients for financial debt disbursement and consideration for the time value of money is missing.

vi. The Ex-Director/Claimant had filed claim before the resolution professional for an amount of INR 15,46,56,889/- (Rupees Fifteen Crores Forty-Six Lakhs Fifty-Six Thousand Eight Hundred and Eighty-Nine Only). which has not been substantiated with any documentary evidence."

20. Given this backdrop, we find that there is sufficient basis in the findings

returned by the Adjudicating Authority that the loan transaction not being

genuine, the claim filed by the Appellant was not found to be genuine and

therefore rejected. Further, the transaction carried out under the Loan

Agreement having found to have defrauded by the creditors of the Corporate

Debtor, the Adjudicating Authority has not committed any infirmity rejected in

declaring the impugned transaction to be null and void.

Page 18 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025

21. In view of the foregoing discussion, we do not find any infirmity in the

impugned order allowing I.A. No. 1630 of 2023 and dismissing IA No. 1220 of

2023. The impugned order does not warrant any interference. The Appeal lacks

substance and accordingly is dismissed. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 20.01.2026

Abdul

Page 19 of 19 Company Appeal (AT) (Insolvency) No. 1850 & 1851 of 2025