NCLT Ahmedabad Rejects Plea On Preferential, Fraudulent Transactions Due To Failure Of Service

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 12 June held that applications under Sections 43 and 66 of the Insolvency and Bankruptcy Code, 2016 cannot be adjudicated in the absence of valid service on respondents, as such adjudication would violate principles of natural justice.

Judicial Member Shammi Khan and Technical Member Sanjeev Sharma dismissed an application filed by Omkarchand R. Maloo, Liquidator of Intelligent Textile Engineers Pvt. Ltd., seeking directions on alleged preferential and fraudulent transactions, due to failure to effect service on Respondent Nos. 1 to 3. The Bench held:

“Since service upon Respondent Nos. 1 to 3 has not been effected in accordance with law despite repeated opportunities and despite specific directions for substituted service, the application cannot be adjudicated on merits. As adjudication of the allegations under Sections 43 and 66 of the Code in the absence of service upon the Respondents would be contrary to the principles of natural justice.”

The proceedings arose from the Corporate Insolvency Resolution Process (CIRP) of Intelligent Textile Engineers Pvt. Ltd., which commenced on 2 August 2021. Following the liquidation order dated 19 January 2024, Omkarchand R. Maloo was substituted as Liquidator.

Acting on a Transaction Audit Report dated 11 May 2022, the Liquidator sought recovery of Rs 51.79 lakh towards alleged preferential transactions and Rs 1.99 crore towards alleged fraudulent transactions. The application was filed under Sections 43 and 66 of the Insolvency and Bankruptcy Code, 2016, along with consequential reliefs under Sections 44, 67, 73 and 74.

Despite repeated attempts, service of notice upon the respondents remained unfulfilled. Initial notices through ordinary process failed. On 23 June 2025, the Bench noted the absence of proof of service and de-reserved the matter.

Fresh notices were issued on 1 July 2025, but verification of service remained inconclusive. On 30 March 2026, the Tribunal directed substituted service through publication in one English newspaper of national circulation and one vernacular newspaper of the locality of the respondents' residence. It also permitted the Liquidator to place publication expenses before the Stakeholders' Consultation Committee (SCC).

On 22 April 2026, the Liquidator informed the Bench that the CGST representative required approval from the competent authority for incurring publication expenses, but no final SCC decision was placed on record.

The Tribunal recorded that substituted service had not been effectively carried out despite its order and noted on 9 June 2026 that the matter was being reserved for orders.

Accordingly, the NCLT held that since substituted service was not completed, the respondents could not be proceeded against, and dismissed the application. It also directed that a copy of the order be forwarded to the Insolvency and Bankruptcy Board of India (IBBI).