NCLT New Delhi Bench overturns CIRP initiation due to findings of fraudulent transactions aimed to bypass judicial determinations.
In a significant decision, the New Delhi Bench of the National Company Law Tribunal (NCLT) has recalled the Corporate Insolvency Resolution Process (CIRP) initiated against V4 Infrastructure Private Limited, citing fraudulent and collusive transactions intended to undermine judicial determinations. The judgment, delivered on 27th November 2025, highlighted the abuse of process in triggering insolvency proceedings to evade an arbitral award.
The case, Jindal Biochems & Developers Private Limited v. Kamal Renu Credit & Invest Pvt. Ltd, revolved around allegations that Kamal Renu Credit & Invest Pvt. Ltd, a registered Non-Banking Financial Company (NBFC), colluded with the Corporate Debtor to create a sham financial debt and initiate CIRP. The tribunal found that the loan of Rs. 1 crore, which met the minimum threshold for triggering insolvency under Section 4 of the Insolvency and Bankruptcy Code (IBC), was strategically engineered to bypass a binding judicial order for recovery of Rs. 10.29 crore.
The tribunal, comprising Member (Judicial) Manni Sankariah Shanmuga Sundaram and Member (Technical) Shri Atul Chaturvedi, determined that the initiation of CIRP was malicious and fraudulent, aimed at defeating legitimate claims stemming from an arbitral award upheld by the Delhi High Court. It noted the absence of operational business, the timing of the loan, and the subsequent default, which pointed to a deliberate attempt to misuse the insolvency framework.
The NCLT invoked its inherent powers under Rule 11 of the NCLT Rules, 2016, in conjunction with Section 65 of the IBC, to recall the admission order dated 20th July 2022, terminating the CIRP and imposing penalties on the financial creditor for abuse of process. The tribunal directed Kamal Renu Credit & Invest Pvt. Ltd to pay all CIRP costs and imposed a penalty of Rs. 5 lakh for malicious proceedings, to be deposited in the Prime Minister's National Relief Fund.
The order marks a significant step in safeguarding the integrity of insolvency proceedings, emphasizing the tribunal's role in ensuring the IBC is not misused to override judicial determinations. The tribunal's decision underscores the necessity for genuine financial distress as a prerequisite for invoking insolvency proceedings, reinforcing the code's objective to facilitate resolution of genuine insolvency rather than circumventing legal obligations.
Bottom Line:
Insolvency and Bankruptcy Code - Admission of Corporate Insolvency Resolution Process (CIRP) based on a fraudulent and collusive transaction can be recalled under Rule 11 of the NCLT Rules, 2016, read with Section 65 of IBC, 2016, if the initiation is found to be malicious and intended to defeat legitimate claims or judicial determinations.
Statutory provision(s): Sections 7, 65, 238 of the Insolvency and Bankruptcy Code, 2016; Rule 11 of NCLT Rules, 2016.
