Ex-director held liable for fraudulent transactions under Insolvency and Bankruptcy Code

The Tribunal, in a case concerning fraudulent and preferential transactions under the Insolvency and Bankruptcy Code, 2016, found the ex-director of the corporate debtor liable for non-disclosure and questionable transactions with related parties. The ex-director's lack of cooperation and transparency led to suspicions of fraudulent intent, triggering legal actions under relevant sections of the Code. The Bench directed the ex-director to return the transferred funds within a specified timeframe to rectify the irregularities, emphasizing the importance of compliance and transparency in the corporate insolvency resolution process.

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Issues:
1. Application under Section 43 and 66 of the Insolvency and Bankruptcy Code, 2016 seeking directions related to fraudulent and preferential transactions.
2. Non-cooperation of suspended Board of Directors in Corporate Insolvency Resolution Process (CIRP).
3. Examination of transactions made to Respondent No. 2, 3, and 4 by ex-director of the corporate debtor.
4. Allegations of fraudulent and preferential transactions against ex-director.
5. Failure to disclose details regarding the purchase of assets belonging to the corporate debtor.
6. Application of Section 46 of the Insolvency and Bankruptcy Code, 2016 to the transactions in question.

Analysis:
1. The application was filed under Section 43 and 66 of the Insolvency and Bankruptcy Code, 2016, seeking directions regarding fraudulent and preferential transactions. The Resolution Professional (RP) sought responses from Respondents regarding transactions made to them, highlighting non-cooperation from the suspended Board of Directors, leading to further legal actions.

2. The RP examined transactions made to Respondent No. 2, 3, and 4 by the ex-director of the corporate debtor. The ex-director admitted certain payments, justifying them as payments for supplies. However, discrepancies were noted in the transactions, indicating potential fraudulent and preferential dealings, especially with Respondent No. 3, which could impact asset distribution under Section 53 of the Code.

3. Allegations of fraudulent and preferential transactions were raised against the ex-director, who transferred significant amounts to entities related to him and his wife. The ex-director's lack of response to certain transactions further raised suspicions of fraudulent intent, warranting legal action under Section 66 of the Code.

4. The ex-director failed to disclose crucial details regarding the purchase of assets from the corporate debtor, indicating potential non-compliance and lack of transparency in financial dealings, further complicating the resolution process.

5. Section 46 of the Insolvency and Bankruptcy Code, 2016 was applied to the transactions under scrutiny, establishing that the transactions fell within the relevant period for avoidable transactions involving related parties. Consequently, the Bench directed the ex-director to return the transferred funds to the corporate debtor within a specified timeframe to rectify the irregularities.

This detailed analysis of the judgment provides a comprehensive overview of the issues addressed and the decisions made by the Tribunal regarding the fraudulent and preferential transactions in the context of the corporate insolvency resolution process.

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