# In the matter of Sri Vinayaka Paper And Boards Limited

> NCLT judgment dated 2024-05-28. Citation: TCN-2024-NCLT-01280. The case involves M/s Sri Vinayaka Paper and Boards Limited, which underwent Corporate…

- **Court:** NCLT
- **Order date:** 28 May 2024
- **Citation:** TCN-2024-NCLT-01280
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/sri-vinayaka-paper-and-boards-limited-6f0d281d

## Summary

### Background

The case involves M/s Sri Vinayaka Paper and Boards Limited, which underwent Corporate Insolvency Resolution Process (CIRP) and subsequent liquidation. The liquidator filed applications (I.A. Nos. 38/2021, 39/2021, and 40/2021) under Section 66 R/w 60(5)(c) of the Insolvency and Bankruptcy Code (IBC), 2016, seeking directions against the erstwhile management/directors for allegedly making fraudulent transactions, misusing company funds, and engaging in wrongful trading. The applications were based on a forensic audit report that highlighted irregularities in the company's financial dealings, including writing off bad debts, adjusting sundry debtor balances, and diverting funds.

## Facts

M/s Sri Vinayaka Paper and Boards Limited underwent CIRP and liquidation. The liquidator filed applications under Section 66 of IBC, alleging fraudulent transactions by the former management. The allegations included writing off Rs. 42.25 crores as bad debt, adjusting Rs. 46.36 crores of sundry debtor balances, and crediting Rs. 13.37 crores to a non-TRA account. The liquidator claimed that the respondents awarded contracts to Manish Industries Private Limited and Latha Industries without sufficient infrastructure, diverted funds, and falsified books. The respondents denied the allegations, stating that the transactions were legitimate and that the liquidator failed to provide evidence of fraud. They also argued that the applications were filed with a significant delay

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## Issues and analysis

### Issue 1: Whether the corporate debtor has carried on its business with intent to defraud the creditors of …

**Ratio:** The ratio is based on Section 66 of the Insolvency and Bankruptcy Code (IBC), 2016, which

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**Reasoning:** The NCLT reasoned that the liquidator failed to provide sufficient evidence to prove that

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**Interpretation:** The interpretation of Section 66 requires a clear demonstration of fraudulent

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**Application:** In this case, the NCLT found that the liquidator failed to meet the burden of

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## Parties

- **Judges:** Venkata Ramakrishn…; SH. CHARAN…
- **Respondents:** Vinayaka Paper…; Garapati…

## Timeline

- **2010-04-01 — Forensic Audit Period…**: Start date of the period…
- **2015-01-01 — New Paper Plant…**: Operations in the new…

## 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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