Rakshit Dhirajlal Doshi & Anr. & Ors vs Mr. Chirag Shah-Liquidator Of Doshion ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 1855 of 2025 [Arising out of the Impugned Order dated 06.10.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench in I.A. No. 278/2023 in C.P. (IB) No. 83/NCLT/AHM/2020] In the matter of: Mr. Rakshit Dhirajlal Doshi Suspended Director M/s Doshion Water Umbrella (Cuddalore) Private Limited 27, Ramila Baug, Basant Bahar- III, Opp. Homeopathic Medical College, Bopal - Ghuma Road, Ahmedabad - 380058 .... Appellant No.1 MR. ASHIT DOSHI Suspended Director of M/s. Doshion Water Umbrella (Cuddalore) Private Limited 27, Ramila Baug, Basant Bahar - III, Opp. Homeopathic Medical College, Bopal - Ghuma Road, Ahmedabad - 380058 .... Appellant No.2 Versus MR. CHIRAG SHAH Liquidator of M/s. Doshion Water Umbrella (Cuddalore) Pvt Ltd. Having office at: 208, Ratnaraj Spring, Opp. HDFC Bank House, Beside Navnirman Co-Op Bank, Navrangpura, Ahmedabad - 380009 .... Respondent Present:

For Appellant : Ms. Vaishnavi Vishwanathan, Advocate.

For Respondent : Ms. Anjali Sharma, Mr. Mandeep Singh Vainaik, Ms. Thanguin Kim and Mr. Gaikhuanlung, Advocates. 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 06.10.2025 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-

I) in I.A. No. 278/2023 in C.P. (IB) No. 83 of 2020. By the impugned order,

the Adjudicating Authority has allowed I.A. No. 278 of 2023 filed by the

Liquidator of the Corporate Debtor-M/s Doshion Water Umbrella Pvt. Ltd.

holding certain transactions conducted by the Appellants No.1 and 2 as

transactions falling within the ambit of Section 66 of IBC and directing refund

of the amount withdrawn to the account of the Corporate Debtor. Aggrieved

by the impugned order, the present appeal has been jointly preferred by the

Appellants.

2. Coming to the factual matrix of the case, on the initiation of CIRP of the

Corporate Debtor- Doshion Water Umbrella Pvt. Ltd. on 01.07.2022, the

Resolution Professional ('RP' in short) appointed M/s Pipara & Company as

the Transaction Auditor which submitted the Transaction Audit Report ('TAR'

in short) on 01.12.2022. The RP sought clarifications from the suspended

management on 26.12.2022 on the observations of fraudulent

trading/wrongful transactions as reported by the Transaction Auditor in the

TAR with respect to two sets of transactions, one relating to managerial

remuneration paid to Directors amounting Rs. 23.64 lakhs and the other of

Rs. 2.78 lakhs. The suspended management submitted their reply and on Page 2 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 consideration of the said reply, the RP filed a Section 66 application vide IA

No. 287 of 2023 impugning the two transactions carried out by the suspended

management of the Corporate Debtor. The RP was thereafter substituted by

the present Respondent-Liquidator on account of the Corporate Debtor being

ordered into liquidation on 13.09.2023. The Appellants-Suspended

Management of the Corporate Debtor in their reply to the IA No. 287 of 2023

before the Adjudicating Authority contended that the managerial

remuneration drawn by the Directors has been wrongly classified as

fraudulent transaction/wrongful trading and asserted that there was no

intent to defraud the creditors as required by Section 66 of the IBC. The

Adjudicating Authority in the impugned order however allowed IA No. 287 of

2023 and held that the withdrawal made by the Appellants under the guise

of managerial remuneration satisfied the conditions stipulated under Section

66 of the IBC and directed refund of Rs 26.42 lakhs to the CIRP bank account

of the Corporate Debtor. Aggrieved by the impugned order, the present appeal

has been preferred by the Appellants.

3. Making submissions on behalf of the Appellants, Ms. Vaishnavi

Vishwanathan submitted that the suspended management had not been

drawing salary from April 2019. When the claims made for remuneration of

managerial services for the period commencing April 2020 to June 2022 had

been admitted by the RP, there is no rationale for characterising the

withdrawal of remuneration for managerial services claimed by the same

Directors for the preceding period in 2019-2020 as fraudulent particularly

when it is clear from records that the suspended management had not been

Page 3 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 drawing salary since April 2019. When the claims made by the Appellants

towards their remuneration was admitted by the RP for FY 2020-2021 it does

not stand to reason as to how the payment of remuneration for FY 2019-2020

could be denied to the Appellants. It was also emphatically asserted that in

the case of the first transaction, the remuneration was drawn by the

suspended management to the tune of Rs. 21.64 lakhs on 31.03.2021 and

Rs.2 lakhs on 30.06.2022 which were dates prior to the commencement of

CIRP as the Corporate Debtor had been admitted into CIRP on 01.07.2022.

Moreover, the payment of the remuneration amount towards managerial

services rendered by the Appellants was clearly recorded in the books of

accounts of the Corporate Debtor. Further, there were no other employees

working in the company who were to receive remuneration and there were no

other admitted remuneration dues in respect of similarly placed employees,

workmen or like operational creditors. Hence payment of remuneration to the

Appellants cannot be said to have been given to them in preference over

payments which were required to be made to other similarly placed creditors.

Thus, the payment of their dues could not be viewed to have been done with

the intent of defrauding other creditors. Submission was also pressed that

payment of managerial remuneration was made to keep the Corporate Debtor

run as a going concern and hence it was very much within the scope of

ordinary course of business. Reliance was also placed on the judgment of the

Hon'ble Apex Court in Anuj Jain vs. Axis Bank Ltd. & Ors. (2020) 8 SCC

401 to claim that specific material fact is required to be pleaded in a Section

66 application. In the present case, the Respondent failed to prove that the

Page 4 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 transaction fell under Section 66 of IBC. It was further submitted that the

Transaction Auditor in his report failed to furnish any specific and effective

finding to show these transactions to be fraudulent at a time when Section

66 of IBC clearly stipulates that intention to defraud has to be explicitly and

expressly demonstrable in such cases. As regards the other set of transaction

involving a sum of Rs.2.78 lakhs, during the oral submissions, the Appellants

mentioned that they have already dropped this claim.

4. Refuting the contentions of the Appellants, Ms. Anjali Sharma, Ld.

Counsel for the Respondent submitted that the suspended management

withdrew amounts under the head of remuneration in a wrongful manner

which clearly attracted Section 66 of the IBC and hence the Adjudicating

Authority had rightly directed the restitution of the amount wrongfully drawn

by the suspended management. It was further contended that the managerial

remuneration was not only paid over other liabilities but the said amount was

drawn immediately on the receipt of funds from the sister concern of the

Corporate Debtor-M/s Penta Aqua Pvt. Ltd. which shows the malafide intent

to defraud the other creditors. Moreover, an amount of Rs. 2.78 lakh was

appropriated on 02.07.2022 which appropriation was clearly after the CIRP

initiation date thus rendering the action of withdrawal inadmissible due to

moratorium provisions having come into play. It was emphatically asserted

that the managerial remuneration amount withdrawn was in the nature of

self-payments made by the suspended management at a time when they were

clearly aware that the Corporate Debtor was facing financial stress and many

of its dues including dues of statutory nature still remained unpaid. Thus, at

Page 5 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 a time when the Corporate Debtor was financially oppressed, these selective

payments cannot be regarded as payments made in ordinary course of

business, hence, both in terms of the timing of the withdrawal and the source

of receipts, the transactions were wrongful transactions. It was also

canvassed that the admission of a claim by the RP for managerial

remuneration for a later period of FY 2020-2021 cannot justify the legality of

self-payments made by the suspended management towards managerial

remuneration for the earlier period of FY 2019-2020. It was also contended

that for purposes of establishing Section 66, it is not required to substantiate

direct admission of fraud and the same can be easily established by the

circumstantial grounds. The present was also a case where the payment was

made in priority to the insiders at the expense of the other creditors including

statutory dues. Being insiders, such self-payments warranted strict

justification and compliance to accounting discipline in the context of

statutory dues since insolvency was ongoing. These transactions were thus

wrongful transactions not made in the ordinary course of business with intent

to defraud writ large which has been rightly noted by the Adjudicating

Authority by way of a well-reasoned order.

5. We have duly considered the arguments advanced by the Learned

Counsel for the parties and perused the records carefully.

6. The short point for our consideration is whether the payment drawn by

the suspended management towards their managerial remuneration for FY

2019-2020 can be construed as a wrongful trading/fraudulent transaction

under Section 66 of IBC and, if so, whether the said amount requires to be

Page 6 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 returned to the Corporate Debtor by the suspended management-Appellants.

However, both these issues being closely inter-dependent, we would deal with

them conjointly.

7. It is the case of the Appellants that the managerial remuneration

claimed for the period April 2020 to June 2022 had been admitted by the RP

as a legitimate claim. By admission of these claims, the RP had therefore

admitted that the Appellants had rendered professional services and were

entitled to receive payment on this count. Having admitted the Appellant's

right to be paid for the period April 2020 to June 2022, it was contended that

the Respondent is estopped from challenging the legality of the payments

made for the same purpose during FY 2019-2020. Application of Section 66

selectively to managerial service remuneration for FY 2019-2020 while

holding similar transactions for a subsequent period to be legal displays

manifest arbitrariness on the part of the Respondent. Professionally, the

Appellants were water-treatment technology experts and the remuneration

claimed by them was for rendering of their technical services made in the

ordinary course of business and could not have been treated as preferential

transaction either as there were no other workmen or like operational

creditors whose dues were outstanding.

8. Per contra, it is the contention of the Respondent that the managerial

remuneration amount was in the nature of self-payment made by the

suspended management after sourcing the same from a sister concern of the

Corporate Debtor at a time when the Appellants were clearly aware that the

Corporate Debtor was facing financial stress and many of its dues including

Page 7 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 dues of statutory nature still remained unpaid. The present was a case where

the payment was made in priority to the insiders at the expense of the other

creditors. These selective payments therefore could not be looked upon as

payments made in ordinary course of business. Being insiders, such self-

payments warranted strict justification and compliance to accounting

discipline in the context of statutory dues since insolvency was ongoing.

Moreover, merely on account of admission of remuneration claims of the

suspended management by the RP for some later period cannot justify the

legality of self-payments made for an earlier period since these transactions

have to be weighed differently and were not strictly comparable. It was

vehemently contended that the manner in which the suspended management

had withdrawn the remuneration amount in question immediately on receipt

from its sister concern was sufficient to show that the intent of the Appellant

was to defraud the other creditors thereby attracting Section 66 of IBC.

9. Coming to our analysis and findings, it is well settled that to establish

a case under Section 66 of the IBC for fraudulent or wrongful trading, a high

burden of proof is required. The degree of proof and evidence required should

be of unimpeachable nature and beyond reasonable doubt. Mere suspicion or

presumption of fraud would not suffice to attract the provisions of Section 66.

Having outlined the above test, we now proceed to examine whether the

Respondent had furnished adequate, cogent and robust material proof of

malafide intent on the part of the Appellants to defraud the creditors which

travelled beyond the realm and spectre of suspected wrongdoing.

Page 8 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025

10. When we look at the material on record, we find that the IBBI Claims

Portal of the Corporate Debtor reflected the total claims received from the

Appellants as admitted by the RP towards their remuneration claim of Rs.

54.36 lakhs which is placed at page 312 of the Appeal Paper Book ("APB" in

short). This table does not show admission of any other employee-related

claims. Even the TAR placed at page 131 of APB shows that the remuneration

claim received from the two Appellants as Rs. 27.18 lakhs each aggregating

to Rs. 54.36 lakhs. The same amount is also reflected in the claim forms filed

by the two Appellants at pages 313 and 325 of the APB. It is therefore clear

from multiple documentations that managerial services had been performed

by the Appellants and their claims on this count stood admitted by the RP for

the period FY 2020-2021. Further when we look at the supporting ledger

entries placed at pages 315-317 and 327-329 of the APB, it clearly shows that

salaries were due to the Appellants and payments were made accordingly for

the period FY 2019-2020. The underlying ledger entries unequivocally

demonstrates the actual amount withdrawn towards managerial

remuneration. It is equally pertinent to note that the Respondent has nowhere

denied that the Appellants had not rendered managerial services since April

2019. There is no allegation made by the Respondent of falsification of records

with regard to these liabilities towards managerial services remuneration for

FY 2019-2020. In such circumstances, in the absence of any cogent grounds

to show that the managerial services remunerations dues had not arisen,

recovery of such remunerations for the period of FY 2019-2020 appears

unjustified. The withdrawal of remuneration for the period 2019-2020 cannot

Page 9 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 be considered to be fraudulent or wrongful trading under the provisions of

Section 66 of the IBC at a time when similar remuneration has been admitted

by the RP for a subsequent period of FY 2020-2021. When the managerial

services were rendered in the ordinary course of business by the suspended

management during FY 2019-2020 as in FY 2020-2021, Section 66 cannot

be said to visit the managerial remuneration transactions during FY 2019-

2020 in the absence of strict proof to demonstrate intent to defraud. Mere

possibility or presumption of fraud without conclusive evidence of intent to

defraud cannot attract Section 66 of the IBC as this provision cannot be

invoked except on clear and cogent evidence of intent to defraud creditors.

11. Another reason attributed by the Respondent to hold that the

transactions were fraudulent in nature was the proximity of the date of

withdrawal of the managerial remuneration cheques to the insolvency

commencement date. The RP had held that the amounts were withdrawn on

30.06.2022 while the CIRP admission orders was issued on 01.07.2022.

When we look at the actual bank statements placed at pages 315-317 and

327-329 of the APB, it shows that the amounts were actually withdrawn on

31.03.2021 which withdrawals had therefore effectively occurred more than

15 months prior to the admission of Section 7 petition. Furthermore, when

the technical services were rendered legitimately by the erstwhile

management to keep the Corporate Debtor running as a going concern, the

tenability of the same transaction cannot be doubted or viewed suspiciously.

Moreover, these services were rendered two years before the commencement

of CIRP. Hence the claim of the RP of these transactions being preferential

Page 10 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 and wrongful keeping in mind the proximity of the cheque withdrawal date to

the insolvency commencement date is entirely misplaced and factually

incorrect. The inference of purported last-minute siphoning away of funds at

the expense of other creditors is wholly unsupported by facts on records.

12. Thus, when payments were made to the Appellants for legitimate

services rendered by them in the ordinary course of business with full

disclosure of accounts of the Corporate Debtor, the same cannot be said to

fall within the purview of Section 66 of IBC as the essential element to attract

Section 66 is to establish by way of cogent evidence the intent to defraud

which remains unfulfilled. Merely because the account of the Corporate

Debtor had been classified as NPA, this does not suspend or extinguish the

responsibility of management to continue its effort to run the business as a

going concern so as to maximize the value of the assets. The scrupulous and

meticulous maintenance of accounts by the Corporate Debtor with respect to

managerial remuneration which corresponded with the underlying ledger

entries unequivocally demonstrates the integrity of the amount claimed. The

impugned transaction was in effect a disbursement of long-standing dues in

respect of managerial services discharged in the ordinary course of business

thereby negating any suggestion of fraudulent conduct. Thus, the basis on

which the transaction has been characterised as fraudulent does not have

legs to stand on. In the absence of specific and cogent evidence linking the

withdrawal of managerial services remuneration amount with an intent to

defraud the creditors, we are of the considered view that Section 66 cannot

be said to visit the transactions amounting Rs 21.64 lakhs of 31.03.2021. Be

Page 11 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 that as it may, in respect of withdrawal of Rs 2 lakhs made by the suspended

management for their remuneration for the period FY 2019-2020 for which

cheque was drawn on 30.06.2022 which cheque was admittedly cleared after

CIRP admission order, we cannot rule out the factum that the Appellant was

having knowledge that insolvency of the Corporate Debtor was imminent or

was inevitable. We are therefore not amenable to allowing the withdrawal of

the said cheque amount of Rs. 2 lakhs and are of the considered view that

this sum deserves to be refunded to the account of the Corporate Debtor.

13. On the allegation that the suspended management had utilised a

receipt from the sister concern of a Corporate Debtor to make the withdrawals

and therefore the transactions should be treated as fraudulent trading also

lacks substance. Routing of revenue generation of professional services

through a sister concern of the Corporate Debtor is standard business

practice. This in itself cannot be viewed as an attempt to siphon off funds

from the sister concern and for any such transaction to be stamped with

fraudulent intent must be accompanied with specific pleading and proof.

Insofar as the project related advisory services for which Rs. 2.78 lakh was

recovered by the Appellants after the CIRP initiation date, the Appellant have

themselves admitted that this amount was not admissible in view of

moratorium and hence we need not dwell on this aspect any further.

14. Coming to another argument raised by the Respondent that since the

Appellant did not deposit statutory dues such as TDS at the time when the

account of the Corporate Debtor has been classified as NPA, hence the

payments for managerial services were preferential in nature is found to be

Page 12 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 equally misconceived. The inability of the Corporate Debtor company to meet

its tax obligations during a period of financial distress when placed in

juxtaposition to the payment of remuneration for managerial services form

two separate buckets or categories of payments. Hence not meeting tax

obligations cannot form a ground to demonstrate any dishonest design on the

part of the suspended management to defraud creditors or to carry on

business with an intent to deceive. Any such conclusion would be premised

on presumption and assumption which is not permissible in coming to a

conclusion for any transaction to be held as fraudulent transaction. The

threshold for determining fraudulent trading under Section 66 is much more

rigorous and requires proof of deliberate intent to cause wrongful loss to

creditors which aspect has not been established. There is lack of sufficient

material to indicate intent to defraud other like creditors or malafide conduct

on the part of the Appellant.

15. We also find that the Adjudicating Authority at para 8.12 of the

impugned order has held that the withdrawal of the managerial services

remuneration also had the character of preferential transaction. What has

been missed out is that the scope of inquiry differs from preferential

transactions to fraudulent transactions since the consequences in relation to

these two distinct sets of transactions vary from each other. Specific material

facts are required to be pleaded if a transaction is sought to be brought under

the mischief sought to be remedied by Section 43 which deals with

preferential transactions and Section 66 which centres around intent to

defraud by way of fraudulent trading or wrongful trading. The rather casual

Page 13 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025 manner in which the term preferential transaction and fraudulent transaction

has been interchangeably used does not meet our countenance as in the

scheme of IBC both these terms have been coined with distinct connotation

and needs to established separately.

16. For the reasons discussed above, we set aside the impugned order

holding the impugned withdrawals by the Appellants as vitiated by fraud in

terms of Section 66 of IBC. However, we direct that out of total of Rs. 26.42

lakhs withdrawal made by the Appellants, Rs. 2 lakhs which was withdrawn

by the Appellant on 30.06.2022 may be restored to the account of the

Corporate Debtor besides Rs. 2.78 lakhs which the Appellants have on their

volition agreed to restore. The Appeal is disposed of with the above directions.

No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 03.03.2026

Harleen/Abdul

Page 14 of 14 Company Appeal (AT) (Insolvency) No. 1855 of 2025