# In the matter of HBN foods Ltd. (IB)-1359(ND)2019

> NCLT judgment dated 2021-12-13. Citation: TCN-2021-NCLT-00186. The case involves an application filed by the Resolution Professional under Sections 66, 68,…

- **Court:** NCLT
- **Order date:** 13 Dec 2021
- **Citation:** TCN-2021-NCLT-00186
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/hbn-foods-ltd-ib-1359nd2019-a07f11d2

## Summary

### Background

The case involves an application filed by the Resolution Professional under Sections 66, 68, 69, and 70 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 11 of the National Company Law Tribunal Rules, 2016. The application seeks to declare certain transactions entered into by the Corporate Debtor, HBN Foods Limited, with various Non-Applicants/Respondents as sham and fraudulent, and to direct these parties to contribute to the assets of the Corporate Debtor. The Resolution Professional initiated a transaction audit after observing suspicious transactions during the financial years 2013-14 to 2018-19, indicating an intent to defraud creditors and siphon off funds. The audit revealed that substantial amounts were transferred to related parties, and

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## Facts

HBN Foods Limited, the Corporate Debtor, underwent Corporate Insolvency Resolution Process (CIRP) initiated on October 21, 2019. The Resolution Professional observed suspicious transactions between FY 2013-14 and 2018-19, leading to the appointment of M/s. Gaurav J & Co. for a transaction audit. The audit revealed that Rs. 1527.82 Lakhs were transferred to related parties during FY 2013-14 to 2018-19. Respondent Nos. 1 to 20 were identified as related parties, including associate/subsidiary companies of the HBN group, ex-directors, and family members. The Corporate Debtor collected Rs. 36.73 Crores from the public through a collective investment scheme dated August 1, 2013, deviating from its main objective of manufacturing food products and beverages. Out of this

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## Issues and analysis

### Issue 1: Whether the transactions entered by/with the Corporate Debtor with the Non-Applicants/Respondents …

**Ratio:** Section 66 of the IBC allows the Adjudicating Authority to order individuals knowingly

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**Reasoning:** The respondents failed to file a reply, leading the Adjudicating Authority to infer

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**Interpretation:** Section 66 of the IBC provides a mechanism to address fraudulent trading or

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**Application:** Given the findings of the transaction audit report and the respondents' failure

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## Parties

- **Judges:** ABNI RANJAN KUMAR…; L. N. G…
- **Appellants:** Ashok Singh L.…
- **Respondents:** HBN FOODS L…; HBN Dairies and…

## Timeline

- **2013-03-01 — Incorporation of HBN…**: HBN Foods Limited was originally…
- **2013-07-24 — Conversion to Public…**: The Company was subsequently…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 66 — Fraudulent trading or wrongful trading](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-66)

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