NCLT Orders Opulent Infradevelopers' Directors To Repay Rs 10.46 Crore For Fraudulent Transactions

The National Company Law Tribunal (NCLT) at New Delhi has ordered suspended directors of insolvent Opulent Infradevelopers to personally contribute Rs 10.46 crore back to the company after finding that they ran the business “with intent to defraud creditors” by making unauthorised donations, advancing interest-free loans, falsifying accounts and booking fictitious expenses.

The order was passed by Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi on an application filed by Resolution Professional Devendra Umrao under Section 66 of the Insolvency and Bankruptcy Code seeking directions against suspended directors Amit Kumar Dubey and Surendra Singh Pilkhwal.

Opulent Infradevelopers entered insolvency on July 12, 2022 on a plea by financial creditor Genesis Comtrade Pvt Ltd. After taking charge, the RP appointed a transaction auditor to scrutinise the company's books for the two years preceding CIRP.

The audit flagged four sets of suspect transactions: Rs 3.10 crore in donations made between January and June 2021, Rs 1.33 crore in uncollected interest on advances to related parties, Rs 1.06 crore in unauthorised adjustment entries, and Rs 4.96 crore in false or non-business expenses.

The donations went to The Catholic Health Association of India, Ambience Education Society, and Master Nihal Singh Memorial Education Society, at a time when the company had defaulted on creditor payments and was in severe financial distress.

The directors claimed the donations were bona fide, supported by board approvals and receipts, and that the Rs 12.34 crore interest-free advances to third parties did not legally require charging interest. The tribunal rejected these explanations, holding that the timing and magnitude of the donations showed they were intended to siphon funds away from the company and its creditors. It noted that “directors of an insolvent company are required to act in the interest of creditors once financial distress sets in.”

On the interest-free advances, the bench found that extending such loans during a liquidity crunch, without showing that they were part of ordinary business or approved by creditors, “reflects gross negligence and mala fide intent” and deprived the company of legitimate income.

Holding the directors responsible for fraudulent trading and wrongful trading, the tribunal directed them to contribute Rs 10.46 crore to the assets of the corporate debtor within 15 days from November 4 (date of order) and asked the RP to take steps for recovery.

The application was allowed.

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