NCLAT Upholds ₹437.02 Lakh Contribution for Fraudulent Round-Tripping

Fraudulent Round-Tripping Attracts Director Liability Under IBC

The National Company Law Appellate Tribunal (NCLAT), Delhi, upheld a ₹437.02 lakh contribution order against suspended directors of a corporate debtor, finding them accountable for round-tripping of funds and fraudulent property transactions. The ruling arises in an IBC proceeding where financial misconduct was central to the insolvency.

The tribunal found that funds were routed through shell entities to create fictitious asset records, thereby defrauding creditors. Citing Section 27A of the IBC and relevant provisions on avoidance transactions, the bench held that directors who orchestrated such schemes remain personally liable despite insolvency proceedings. The contribution was imposed to ensure equitable distribution among creditors.

For insolvency practitioners, this decision strengthens the use of director accountability mechanisms under IBC. It signals that NCLAT will scrutinize financial engineering and uphold financial contributions where fraud is established.