Fraudulent trading under insolvency law can arise from repeated non-remittance of employee deductions, even without personal gain.

Repeated deduction of employee contributions from salaries and failure to remit them to the Society supported liability under Section 66 of the Insolvency and Bankruptcy Code, 2016. The unexplained claim that the sums were used as working capital was rejected because it was not backed by reliable material. Applying the standard of fraudulent conduct, and drawing on the breadth of fraud under Section 447 of the Companies Act, 2013, the tribunal held that wrongful gain or personal enrichment is not essential. The sustained withholding of amounts held for a specific statutory purpose was sufficient to establish fraudulent trading, and the challenge failed.

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Issues: Whether the appellants were liable under Section 66 of the Insolvency and Bankruptcy Code, 2016 for deducting employee contributions from salaries over several months and failing to deposit the same with the Society, and whether absence of personal gain or proof of diversion defeated a finding of fraudulent conduct.

Analysis: The admitted position was that deductions were made from employees' salaries for a prolonged period and were not remitted to the Society. The explanation that the amounts were used as working capital was not supported by reliable material. The governing standard under Section 66 requires proof that the business was carried on with intent to defraud creditors or for a fraudulent purpose, and the decision also drew upon the breadth of fraud under Section 447 of the Companies Act, 2013, where wrongful gain or wrongful loss is not essential. The repeated withholding of sums held for deposit, coupled with the failure to substantiate their alleged business use, supported the inference of fraudulent conduct. The absence of personal enrichment did not neutralise liability.

Conclusion: The appellants were correctly held liable under Section 66, and the challenge to the contribution order failed.

Ratio Decidendi: Repeated deduction and non-remittance of amounts held for a specific statutory or fiduciary purpose can constitute fraudulent trading under Section 66 when the explanation of business use is unsubstantiated, and personal gain is not a necessary ingredient of fraud.

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