Authority: National Company Law Tribunal, Jaipur Bench (Ms. Reeta Kohli, Judicial Member and Ms. Kavita Bhatnagar, Technical Member)

Order Date: 12.10.2026

Case Overview

The Interlocutory Application (IA(IBC) No. 403/JPR/2021) was filed by Mr. Sourabh Malpani, the Liquidator of Khetan Apparel Private Limited (Corporate Debtor), under Section 45 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) on 12.02.2020 and subsequently ordered for liquidation on 02.03.2021. The Application sought directions against respondents (ex-directors Deepak Khetan and Arun Kumar Khetan) to repay ₹12.85 lakh, representing the alleged reduction in tangible assets of the Corporate Debtor between FY 2018-19 (₹18.52 lakh) and FY 2019-20 (₹5.67 lakh).

The Liquidator appointed G. Chaudhary & Co., Chartered Accountants as forensic auditors who reported transactions potentially falling under avoidance provisions (Sections 43, 45, 49, and 66 of IBC). The Liquidator alleged that the reduction in tangible assets constituted undervalued transactions under Section 45, claiming assets were transferred to franchise holders against security deposits or disposed of for cash to local parties outside the ordinary course of business.

The Respondents contested the application, arguing that the forensic audit failed to understand business operational dynamics and made assumptions without cogent evidence. They explained that the asset reduction resulted from a strategic shift from in-house production to outsourcing in FY 2018-19 to reduce fixed costs and adapt to changed sales channels. In FY 2019-20, assets comprised store fixtures returned by franchise owners upon store closures, with non-reusable materials yielding no recovery and reusable fittings sold at fair prices.

The Tribunal examined the statutory requirements of Section 45, which requires identification of specific transactions where assets were transferred for consideration significantly less than their value, outside the ordinary course of business. The Hon'ble Tribunal referenced the Supreme Court's judgment in Anuj Jain v. Axis Bank Limited (2020) which emphasized distinct ingredients for different avoidance transactions.

Final Outcome

The Tribunal dismissed the Application, finding that the Liquidator failed to provide sufficient evidence to establish the statutory requirements of an undervalued transaction under Section 45. The reduction in book value of tangible assets (₹12.85 lakh difference) alone, without transaction-specific details—such as identification of specific assets, dates of transfer, parties involved, consideration received, or contemporaneous valuation—was insufficient to prove undervaluation. The Tribunal clarified that commercial explanations by Respondents didn't need to be affirmatively proved when the Applicant failed to meet the evidentiary burden. No relief was granted regarding other transactions mentioned (increased discounts or trademark "Mr. Button" transfer) as the substantive prayer was confined to tangible assets.

Topics: Insolvency Avoidance Transactions, Forensic Audit Evidence, NCLT Procedure