NCLT Orders ₹486 Crore Recovery in Butta Infrastructure Fraud Case
Authority: National Company Law Tribunal Hyderabad Bench-1
Order Date: 18 June 2026
Case Overview
The application was filed by Mr. Gonugunta Murali, Liquidator of Butta Infrastructure Private Limited (Corporate Debtor), under Section 66 of the Insolvency and Bankruptcy Code, 2016 read with Section 213 of Companies Act, 2013 and Rule 11 of NCLT Rules, 2016. The matter arose from CP(IB) No. 325/7/HDB/2020 initiated by LIC Housing Finance Ltd against Butta Infrastructure Pvt Ltd, which was admitted on 01 March 2021 and ordered into liquidation on 24 February 2022.
The Liquidator alleged that Respondent Nos. 1-3 (Siva Neelakanta Butta, Butta Naga Raju, and Butta Renuka), being directors/promoters, along with related entities (Respondent Nos. 5-12) and Meridian Educational Society (Respondent No. 4), carried out fraudulent transactions that defrauded creditors and contributed to the corporate debtor's insolvency.
Principal allegations included: (1) fraudulent waiver of lease rentals amounting to ₹281.67 crore payable by Meridian Educational Society; (2) advancement of ₹99.66 crore in loans to related party entities and ₹177.68 crore to directors/relatives without interest and in violation of Sections 185-186 of Companies Act; (3) withdrawal of ₹1.20 crore from corporate debtor's bank account after commencement of CIRP on 03 March 2021.
The Tribunal examined extensive documentary evidence including audited financial statements (FY 2016-17 to 2020-21), loan sanction documents from LIC Housing Finance (₹310 crore rental securitization facility), lease deeds, tripartite agreements, and bank statements. The bench found that the corporate debtor was used as a financial conduit to repay liabilities of promoter-controlled entities while depriving itself of legitimate revenue streams.
Key Findings on Fraudulent Transactions:
Lease Rental Waiver: The Tribunal found that Respondent No. 4 (Meridian Educational Society) was a related party that occupied two prime properties (Banjara Hills: 7,321.12 sq yards and Madhapur: 22,795 sq yards) under lease deeds dated 15 February 2017 but paid no rentals from February 2017 onwards. Annual rentals of ₹36 crore (2017-18), ₹39.69 crore (2018-19), and ₹41.67 crore (2019-20) were fraudulently waived despite the LIC Housing loan being sanctioned specifically on rental securitization basis. The waiver directly contributed to insolvency as rentals formed the primary repayment source.
Loans to Related Parties: The corporate debtor advanced ₹99.66 crore to related entities (Butta Automotives: ₹8.08 cr, Butta Convention: ₹9.11 cr, Butta Hospitalities: ₹37.77 cr, Meridian Edutech: ₹15.53 cr, Tejaswi Jewellers: ₹6.31 cr, Tejaswi Motors: ₹22.86 cr) and ₹175.77 crore to directors/relatives (Siva Butta: ₹154.31 cr, Butta Renuka: ₹20.68 cr, Butta Tejaswi: ₹0.13 cr, Pratul Butta: ₹0.65 cr) without interest and in violation of company law provisions. These were not mere book entries but actual diversions of funds.
Post-CIRP Withdrawal: ₹1.20 crore was withdrawn from corporate debtor's account on 03 March 2021 after CIRP commencement on 01 March 2021, violating moratorium under Section 14 of IBC.
The Tribunal rejected respondents' defenses including limitation arguments, absence of forensic audit, and claims of being mere accounting adjustments. The bench found clear pattern of using corporate debtor as vehicle for routing funds to benefit promoters and related entities at creditors' expense.
Final Outcome
The Tribunal allowed the application and issued the following directions:
1. Respondent No. 4 (Meridian Educational Society) to contribute ₹209,85,20,000 towards fraudulently waived lease rentals (February 2017-March 2021) with 18% interest from due dates till realization within 30 days.
2. Respondents No. 1, 3, 11, 12 to repay outstanding loans with 18% interest within 30 days:
- Siva Neelakanta Butta: ₹154.31 crore
- Butta Renuka: ₹20.68 crore
- Butta Tejaswi: ₹0.13 crore
- Pratul Butta: ₹0.65 crore
Total: ₹175.77 crore
3. Respondents No. 5-10 to repay loans with 18% interest within 30 days:
- Butta Automotives: ₹8.08 crore
- Butta Convention: ₹9.11 crore
- Butta Hospitalities: ₹37.77 crore
- Meridian Edutech: ₹15.53 crore
- Tejaswi Jewellers: ₹6.31 crore
- Tejaswi Motors: ₹22.86 crore
Total: ₹99.66 crore
4. Respondents No. 1-3 jointly and severally to pay ₹1.20 crore with 18% interest from 03 March 2021 within 30 days.
5. Central Government directed to appoint inspectors under Section 213 of Companies Act, 2013 to investigate affairs of corporate debtor and related party transactions.
The total recovery directed amounts to approximately ₹486 crore including principal amounts specified.
Topics: Corporate Fraud, Insolvency Proceedings, Related Party Transactions