# In the matter of Sovereign Industries Limited

> NCLT judgment dated 2025-01-01. Citation: TCN-2025-NCLT-00691. The case pertains to an application filed by the Resolution Professional (RP) of Sovereign…

- **Court:** NCLT
- **Order date:** 1 Jan 2025
- **Citation:** TCN-2025-NCLT-00691
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/sovereign-industries-limited-1830e50c

## Summary

### Background

The case pertains to an application filed by the Resolution Professional (RP) of Sovereign Industries Limited, the Corporate Debtor (CD), under Section 66 of the Insolvency and Bankruptcy Code (IBC), 2016, against several respondents. The RP alleges that the respondents engaged in fraudulent transactions amounting to Rs. 29,48,05,000.00 during the period from 2021 to 2023. The CD was incorporated on 05.01.2009 for manufacturing sugar. The CIRP was initiated following an application under Section 7 of the IBC filed by Triveni Education Society. The RP's application seeks a declaration that the transactions are fraudulent, a direction for the respondents to transfer the amount to the CD's account, and an award for costs.

## Facts

Sovereign Industries Limited (Corporate Debtor) was incorporated on 05.01.2009 to manufacture sugar. Triveni Education Society filed an application under Section 7 of the IBC, leading to the initiation of CIRP. The RP, Ritesh R. Mahajan, filed an application under Section 66 of the IBC alleging fraudulent transactions. The RP discovered that Rs. 29,48,05,000.00 was transferred to SLV Cements Ltd. and Lokapur Cements Ltd. shortly before the CIRP commencement date. These funds originated from the sale of a license to Ugar Sugar Works Ltd. The RP issued recovery notices to SLV Cements Ltd. and Lokapur Cements Ltd. The suspended directors failed to provide explanations or documents regarding these transactions, citing flood damage. The Transaction Auditor highlighted the

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## Issues and analysis

### Issue 1: Whether the transactions entered into by the Respondents during the years 2021 to 2023, amounting …

**Ratio:** Section 66 of the IBC, 2016, allows the Adjudicating Authority to pass an order requiring

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**Reasoning:** The court reasoned that the transactions were carried out shortly before the commencement

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**Interpretation:** Section 66 is interpreted to prevent fraudulent activities that deplete the

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**Application:** The court applied Section 66 to the facts, finding that the transactions met

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## Parties

- **Judges:** K. Bi…; Manoj Kumar…
- **Appellants:** Ritesh R. M…
- **Respondents:** Sovereign…; Shivkumar M…

## Timeline

- **2009-01-05 — Incorporation of…**: Sovereign Industries Limited was…
- **2022-11-07 — Application under…**: Triveni Education Society filed an…

## 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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