# In the matter of Pratibha Industries Limited

> NCLT judgment dated 2024-10-08. Citation: TCN-2024-NCLT-00464. This case involves an application (I.A. 1420/2020) filed by Mr. Anil Mehta, the Resolution…

- **Court:** NCLT
- **Order date:** 8 Oct 2024
- **Citation:** TCN-2024-NCLT-00464
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/pratibha-industries-limited-f4e39245

## Summary

### Background

This case involves an application (I.A. 1420/2020) filed by Mr. Anil Mehta, the Resolution Professional of Pratibha Industries Limited (Corporate Debtor), against Mr. Ajit Bhagwan Kulkarni & others (Respondents). The application seeks to address alleged preferential, undervalued, and fraudulent transactions undertaken by the Corporate Debtor, particularly concerning payments to related parties, sale of assets at lower value, significant reduction in inventory, loans converted into investments, payments made on invocation of Letter of Credit, additions in fixed assets, assignment of advances and receivables, sale and lease-back of assets, and misstatements of encashed bank guarantees. KPMG was appointed as Transaction Auditor to assist the Resolution Professional in

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## Facts

1. Pratibha Industries Limited ('Corporate Debtor') was admitted into Corporate Insolvency Resolution Process ('CIRP') on 01 February 2019.
2. The Resolution Professional ('RP') filed an application (I.A. 1420/2020) against the former directors ('Respondents') seeking to reverse certain transactions deemed preferential, undervalued, or fraudulent.
3. KPMG was appointed as the Transaction Auditor to review transactions under Sections 43, 45, and 66 of the Insolvency and Bankruptcy Code ('Code').
4. The RP identified several transactions, including payments to related parties (INR 533.77 crores), sale of assets at lower value (INR 11.77 crores), significant reduction in inventory (INR 1411.59 crores), loans converted into investments (INR 1253.40 crores), and fraudulent

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## Issues and analysis

### Issue 1: Whether the payments made on invocation of Letter of Credit (Transaction 5) qualify as fraudulent …

**Ratio:** Section 66 of the Code deals with fraudulent or wrongful trading. To establish a case

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**Reasoning:** The NCLT found that the Corporate Debtor had mis-utilised the un-utilised LC facility and

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**Interpretation:** Section 66 requires a demonstration of fraudulent intent or wrongful trading.

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**Application:** The NCLT held that the transactions were undertaken to defraud the creditors of

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## Parties

- **Judges:** Prabhat…; V.G. B…
- **Appellants:** Anil M…
- **Respondents:** Pratibha Industrie…; Ajit B. Ku…

## Timeline

- **2019-02-01 — Admission in…**: Pratibha Industries Limited was admitted into Corporate Insolvency Resolution Process…
- **2019-03-14 — RP Appoin…**: Mr. Anil Mehta was confirmed as the…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 44 — Orders in case of preferential transactions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-44)

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