Recalling Insolvency Order: A Rare Move to Uphold Integrity
In a landmark decision, the National Company Law Tribunal (NCLT) has taken the rare step of recalling and setting aside its own order that initiated insolvency proceedings against real estate firm Logix Infrastructure. The tribunal found that the insolvency plea was filed with “fraudulent and mala fide intentions” and identified collusion between the financial creditor, Experts Realty Professionals, and Logix Infrastructure. …………………Recalling Insolvency Order
Background of the Case
The insolvency proceedings against Logix Infrastructure were initially triggered on July 14, 2023, when the NCLT admitted a petition filed by Experts Realty Professionals, claiming that Logix Infrastructure had defaulted on debt repayments. However, upon further investigation, the NCLT discovered significant irregularities and a clear nexus between the financial creditor and the corporate debtor.
Evidence of Collusion and Fraud …………………Recalling Insolvency Order
The tribunal noted that Hemant Sharma, who served as an Additional Director at Experts Realty Professionals from May to September 2020, was appointed as a director at Logix Infrastructure shortly thereafter. This overlap raised serious concerns about the authenticity of the transactions and the intentions behind the insolvency petition. Additionally, the tribunal found that key documents, including a Memorandum of Understanding (MoU) dated October 20, 2020, and minutes of a meeting dated December 15, 2021, were not accompanied by the required stamp paper, further casting doubt on their genuineness.
NCLT’s Decision and Actions …………………Recalling Insolvency Order
In light of these findings, the NCLT has taken several corrective measures:
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Recalling the Insolvency Order: The tribunal has annulled its previous order initiating the Corporate Insolvency Resolution Process (CIRP) against Logix Infrastructure.
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Restoring Management: The Resolution Professional has been directed to hand over the management of Logix Infrastructure to its former board of directors.
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Refunding Bidders: If any resolution plans had been submitted by prospective bidders, the tribunal ordered the refund of earnest money deposits and performance bank guarantees within one week.
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Imposing Penalties: A penalty of Rs 5 lakh has been imposed on Experts Realty Professionals, with the amount to be deposited in the Prime Minister’s National Relief Fund (PMNRF) within ten days.
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Calling for Investigation: The NCLT has requested a thorough probe by the Serious Fraud Investigation Office (SFIO) to comprehensively examine the alleged fraudulent and collusive actions. …………………Recalling Insolvency Order
Implications and Significance …………………Recalling Insolvency Order
This decision by the NCLT underscores the tribunal’s commitment to upholding the integrity of the insolvency process and ensuring that the Insolvency and Bankruptcy Code (IBC) is not misused for purposes contrary to its intended objectives. The tribunal’s actions send a strong message that fraudulent and collusive practices will not be tolerated, thereby reinforcing the credibility of the insolvency resolution framework. …………………Recalling Insolvency Order
Conclusion
The NCLT’s rare move to recall its own insolvency order against Logix Infrastructure highlights the importance of vigilance and due diligence in corporate governance and insolvency proceedings. As the SFIO conducts its investigation, the case will likely set a precedent for future cases involving similar fraudulent activities. …………………Recalling Insolvency Order
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