Case Overview

This appeal arose from Order dated 02.09.2025 passed by NCLT, New Delhi in IA No. 2902/2022 in CP (IB) No. 946/ND/2019. The Liquidator of M/s Wave Global Educational Services Private Limited (Corporate Debtor) had sought directions against Corsalite Education Services Private Limited (purchaser company) and its directors for payment of Rs. 3,00,00,000/- under Business Purchase Agreement (BPA) dated 14.07.2017.

The BPA involved acquisition of Corporate Debtor's business by Corsalite for aggregate consideration of Rs. 3 crore, comprising Rs. 2.35 crore towards specified liabilities, Rs. 65 lakh towards directors' bonus, and Rs. 1 lakh for promoter shareholding acquisition. The appellants (directors of Corsalite and ex-directors of Corporate Debtor) contended they were not signatories to BPA and could not be held personally liable.

Key issues included: (i) NCLT's jurisdiction under Section 60(5) of IBC to entertain contractual recovery applications; (ii) Whether BPA consideration constituted recoverable asset in liquidation; and (iii) Personal liability of directors for corporate obligations.

The Tribunal examined extensive evidence showing appellants assumed complete control of Corporate Debtor post-BPA execution - appointing themselves as directors, transferring shareholding from Corsalite to themselves (5,000 shares to Subbarao Siddabattula, 2,500 each to Ilangovel Thulasimani and Charu Noheria), raising Rs. 4 crore through fresh equity issuance, establishing new coaching centers, and acquiring 70% stake in Axis Tutorials Pvt Ltd for Rs. 1,08,31,300/- from Corporate Debtor's funds.

Analysis and Findings

The Tribunal held:

1. Jurisdiction: NCLT rightly exercised jurisdiction under Section 60(5) read with Section 35(1)(d) of IBC and Regulation 39 of Liquidation Regulations. Recovery of liquidation estate assets falls within NCLT's domain, even if originating from contract.

2. BPA Enforceability: Clause 2(d) of BPA (payment from generated income) couldn't extinguish purchaser's primary obligation. Appellants, having enjoyed business benefits and control, couldn't avoid payment citing revenue shortfalls during their management tenure.

3. Director Liability: Though not BPA signatories, appellants were real beneficiaries who exercised complete control over Corporate Debtor. Corsalite was merely a vehicle; corporate veil piercing justified given appellants: (a) assumed management immediately post-BPA; (b) transferred Corporate Debtor shares to themselves; (c) controlled finances and operations; (d) resigned simultaneously in August 2018 after exploiting business opportunities.

Final Outcome

The appeal was partially allowed. The NCLAT modified the NCLT order to clarify that liability for Rs. 3 crore payment (with interest) rests specifically with:

  • Respondent No. 2 (Corsalite Education Services Private Limited)
  • Appellant Nos. 1-3 (Subbarao Siddabattula, Ilangovel Thulasimani, Charu Noheria)

Payment must be made to Liquidator within four weeks for deposit into Corporate Debtor's liquidation estate. Other directions regarding document disclosure and cooperation with Liquidator remain unchanged.

Topics: Corporate Veil Piercing, Liquidation Recovery, Director Liability