Former Director Liable To Refund Diverted Rental Income Received During CIRP: NCLT Mumbai

The Mumbai Bench of the National Company Law Tribunal (NCLT) on 29 April held that a former director who diverted rental income from properties of the corporate debtor during the Corporate Insolvency Resolution Process (CIRP) is liable to restore the amounts to the insolvency estate.

Technical Member Prabhat Kumar and Judicial Member Sushil Mahadeorao Kochey allowed an application filed by the Resolution Professional in the CIRP of Barracks Retail India Pvt. Ltd., admitted on a Section 7 petition filed by ASREC (India) Limited, against Puneet Bhatia, Respondent No.1 and other respondents. They held:

“…. Leave & License Agreement dated 04.01.2024 was entered with Respondent No. 3 by Respondent No. 1 in his personal name, thereby establishing that the rentals accruing under said agreements were also received by him. This clearly, establishes that the rentals under the license arrangement with Respondent Nos. 3 and 4 in respect of properties owned by corporate debtor were received by Respondent No. 1 in his personal name or in the account of M/s BNT Connections, which is identified by Respondent No. 4 in its books connected to Mr. Puneet Bhatia.”

The RP alleged that Bhatia, despite being aware of the CIRP, executed leave and licence agreements in his personal capacity in respect of commercial units owned by the Corporate Debtor and diverted rental income to himself and an entity named “M/s BNT Connections”. It further submitted that forged documents were also initially supplied to the RP.

The Tribunal noted that Respondent Nos. 3 and 4 had paid Rs. 9.67 lakh and Rs. 40.68 lakh respectively towards rent, which was received personally by Respondent No.1 instead of being credited to the Corporate Debtor's account.

Referring to the minutes of the Committee of Creditors (CoC) meeting held on 4 August 2025, the Bench observed that the RP had informed the CoC regarding concealment of genuine lease arrangements and submission of forged documents by the suspended management.

The Tribunal held that the director was fully aware of his obligation to disclose all assets and transactions of the Corporate Debtor, but instead suppressed material facts and furnished forged documents, thereby concealing both the nature of the transactions and the rental income accruing from them.

It further observed that the income was required to be credited to the Corporate Debtor's account but was never deposited therein.

The Bench also noted that the Leave & Licence Agreement dated 04.01.2024 with Respondent No.3 was executed by Respondent No.1 in his personal capacity, establishing that the rental amounts under the arrangement were received by him.

It held that the amounts were either received by Respondent No.1 personally or routed through M/s BNT Connections, which was linked to him in the books of Respondent No.4.

Accordingly, the NCLT directed Respondent No.1 to deposit the entire diverted amount, along with any further rental income received, into the Corporate Debtor's account within 30 days with 12% annual interest from the date of receipt till repayment.

Lastly, the Tribunal referred the matter to the Insolvency and Bankruptcy Board of India (IBBI) for appropriate action against Respondent No.1.