Authority: National Company Law Tribunal Mumbai Bench-I

Order Date: 15 July 2026

Case Overview

This application (IA 771/2021) was filed on 18 March 2021 by Mr. Anish Niranjan Nanavaty, the Resolution Professional of Reliance Communications Infrastructure Limited (Corporate Debtor), under Section 66 of the Insolvency and Bankruptcy Code, 2016. The application was part of the Corporate Insolvency Resolution Process (CIRP) initiated against the Corporate Debtor based on a petition filed by State Bank of India under Section 7 of the Code, which was admitted on 25 September 2019.

The applicant sought declaration that two transactions constituted fraudulent transactions under Section 66 of the Code: (i) the loss booked by the Corporate Debtor with respect to receivables from Netizen Engineering Private Limited (NEPL) and Macronet Mercantile Private Limited (MMPL) to the extent of ₹4.60 crores, and (ii) the assignment of receivables of ₹560 crores from NEPL and MMPL to Worldtel Tamil Nadu Private Limited (WTPL) for ₹100 crores.

The application was based on an addendum report dated 18 February 2021 submitted by auditors M/s Batliboi and Purohit, Chartered Accountants, who identified these transactions as potentially fraudulent. The auditors noted significant doubt on the recoverability of amounts, WTPL's non-operational status at the time of assignment, lack of explanation for the valuation, and absence of specific mention of these transactions in board minutes despite management claims of board approval.

The respondents included WTPL (Respondent No. 1), MMPL (Respondent No. 2), NEPL (Respondent No. 3), and six suspended board members of the corporate debtor added later as Respondents 4-9.

The tribunal examined the transaction where receivables from NEPL (₹430 crores in FY 2015-16) and MMPL (₹130 crores in FY 2016-17) aggregating to ₹560 crores were assigned to WTPL for ₹100 crores in FY 2016-17, booking a loss of ₹460 crores. The consideration was shown as an interest-free loan to WTPL.

The tribunal noted that WTPL is a 100% subsidiary of the Corporate Debtor, which in turn is a 100% subsidiary of RCOM (also in CIRP). The CoC in both CIRPs was substantially controlled by the same set of creditors. The respondents argued that the assignment to a wholly-owned subsidiary did not ultimately affect the consolidated value available to creditors, as any benefit to the subsidiary would reflect in the value of shares held by the holding company.

Final Outcome

The tribunal dismissed the application, holding that the impugned transactions did not meet the ingredients of Section 66 of the IBC. The key reasoning was that the transfer of assets to a wholly-owned subsidiary, even at undervalued consideration, does not alter the value of the holding company available to its creditors at a consolidated level. The benefit passed to the subsidiary would be reflected in the value of shares held by the corporate debtor, and thus no ultimate loss was caused to the creditors' interests. The tribunal cited the precedent of Renuka Devi Rangaswamy vs Mr. Madhusudan Khemka, which holds that intent to defraud must be judged by its effect on the object of conduct, and found no detrimental effect on creditors in this case.

Topics: Insolvency Proceedings, Fraudulent Transaction, Related Party Transactions