NCLAT Dismisses Appeal of Suspended Directors: Upholds ₹2.65 Cr Recovery Order of NCLT [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has dismissed an appeal filed by Praful Satra and other suspended directors of Satra Properties (India) Ltd., challenging an order directing them to refund ₹2.65 crore to the company along with interest.

The appeal arose from an April 2024 order of the NCLT Mumbai Bench, which allowed an application filed by the Resolution Professional (RP), Ms. Vaishali Patrikar, under Section 66 of the Insolvencyand Bankruptcy Code, 2016, alleging that the amount was wrongfully written off and had caused loss to creditors.

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The disputed amount was related to an advance of ₹2.65 crore made in 2006 for the proposed purchase of a property in Bandra. However, the transaction never materialized and the amount was later written off by the company. The RP alleged that no adequate documentation was provided by the suspended board regarding the nature of the transaction, the identity of the property, or efforts to recover the money. In its order, the NCLT had observed that the transaction appeared fraudulent, particularly since no agreement to sell was executed, and no recovery steps were taken, despite the passage of several years.

Challenging the order, counsel for the appellants argued that the amount had been given as an adequate deposit to Sanvruta Properties Pvt. Ltd., and the promoters of that company later shifted abroad, making recovery difficult. It was also submitted that the write-off occurred in 2020, not 2010 as found by the Tribunal.

However, during the hearing, the appellants admitted that they had no agreement to show for the transaction, nor any Memorandum of Understanding. They also conceded that no legal action was taken for recovery. Details about the property were vague, limited only to it being located “in Bandra.”

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Taking note of these admissions, the NCLAT held that there was no error in the NCLT’s order. The appellate tribunal noted that the absence of key documents, failure to pursue legal remedies, and lack of clarity regarding the transaction supported the RP’s case under Section 66.

The bench consisting of The NCLAT, consisting of Justice Ashok Bhushan (Chairperson), Braun Mitra (Technical Member) and Arun Baroka (Technical Member) held that the appellants failed to substantiate any genuine effort to recover the amount or justify the write-off. The NCLAT dismissed the appeal as he found no merit in it, and directed the suspended directors to contribute ₹2.65 crore with 15% annual interest back to the corporate debtor’s account.

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