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NCLAT upheld the NCLT's finding that the impugned memorandum of understanding between the erstwhile directors of the corporate debtor and a counterparty was a fraudulent transaction under s.66 of the IBC. The Tribunal held that the payment structure (98.997% consideration paid, with the balance enabling forfeiture) was intentionally designed to siphon funds from the corporate debtor and defraud creditors. It reiterated that no statutory "look back" period applies to fraudulent transactions and that once fraud is established on a preponderance of probabilities supported by substantial evidence, the transaction is void ab initio and non est without requiring civil court cancellation. Finding no procedural or jurisdictional error by NCLT, NCLAT affirmed the direction to the former directors to contribute Rs. 36,53,00,000 to the assets of the corporate debtor and dismissed the appeal.
NCLAT upheld the NCLT's finding that the impugned memorandum of understanding between the erstwhile directors of the corporate debtor and a counterparty was a fraudulent transaction under s.66 of the IBC. The Tribunal held that the payment structure (98.997% consideration paid, with the balance enabling forfeiture) was intentionally designed to siphon funds from the corporate debtor and defraud creditors. It reiterated that no statutory "look back" period applies to fraudulent transactions and that once fraud is established on a preponderance of probabilities supported by substantial evidence, the transaction is void ab initio and non est without requiring civil court cancellation. Finding no procedural or jurisdictional error by NCLT, NCLAT affirmed the direction to the former directors to contribute Rs. 36,53,00,000 to the assets of the corporate debtor and dismissed the appeal.
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