NCLAT Delhi Upholds Order Directing Satra Properties’ Suspended Directors To Refund ₹91 Lakh Cleared During Moratorium
Pranav B Prem
The National Company Law Appellate Tribunal at Delhi has upheld the direction issued by the National Company Law Tribunal, Mumbai Bench, mandating the suspended directors of Satra Properties (India) Ltd. to jointly and severally refund ₹91 lakh with 12% interest for allowing two cheques to be cleared after the commencement of the moratorium period in violation of Section 14 of the Insolvency and Bankruptcy Code. The appeal filed by the suspended directors challenging the NCLT’s order under Section 66(2) was dismissed.
A bench comprising Judicial Member Justice N. Seshasayee and Technical Member Arun Baroka observed that the directors were well aware that insolvency admission was imminent, as the Section 7 petition had been reserved for orders on February 19, 2020, yet they issued two cheques dated July 31, 2020 to Darshan Developers despite the company accounts carrying negligible balances. Fresh credits of ₹50 lakh and ₹41 lakh were received only on August 4, 2020—after CIRP commencement on August 3—and these exact amounts were used to clear the cheques on August 6. The Tribunal held that the encashment during moratorium “clearly falls foul of Section 14” and cannot be treated as an ordinary commercial transaction.
The Appellate Tribunal rejected the directors’ contention that the payments were bona fide under a December 2019 Memorandum of Understanding with joint venture partner Shreeniwas Developers pursuant to a slum rehabilitation project. It noted that the MOU did not justify transferring funds to Darshan Developers, which was not a party to the arrangement. The Tribunal also recorded that the beneficiary of the cheques admitted during the hearing that the cheques were handed over on July 31, 2020, undermining the defence that they were issued earlier.
In examining the scope of Section 66(2), the Tribunal reiterated that the provision applies where directors knew or ought to have known that there was no reasonable prospect of avoiding insolvency and nevertheless failed to exercise due diligence to minimise loss to creditors. It found that the cheques were issued only two days before admission of CIRP while the directors were aware of the corporate debtor’s distressed financial status, nothing in the MOU required immediate payment, and the funds used originated post-moratorium, demonstrating a conscious dissipation of assets. The bench held that the conduct satisfied the ingredients of Section 66(2) and rejected the argument that both sub-sections (1) and (2) of Section 66 must be read cumulatively.
Addressing the plea that proceedings were barred due to an interim moratorium under Section 96 triggered by a personal insolvency application against one director, the Tribunal held that Section 96 applies only to “debt” in relation to the individual concerned and does not curtail the power of the Adjudicating Authority to pass orders under Section 66 during corporate insolvency resolution. It stated that “Section 96(1)(b) IBC does not bar the Adjudicating Authority to pass appropriate orders in the pending proceedings against the suspended directors and related parties”
The Tribunal also turned down the contention that Section 66 does not empower award of interest, holding that the power to direct contribution to the assets of the corporate debtor includes compensating for the time value of dissipated assets. The objection that the issue had already been adjudicated in earlier proceedings was also rejected, the Tribunal noting that the prior order had granted liberty to seek contribution under Section 66, and the present application was filed in accordance with that liberty.
Having found no infirmity in the NCLT’s findings, the National Company Law Appellate Tribunal concluded that the suspended directors failed to exercise the due diligence expected once insolvency was unavoidable and permitted dissipation of assets through cheque clearance using post-CIRP credits. Accordingly, the Appellate Tribunal dismissed the appeal and affirmed the direction requiring the directors to refund ₹91 lakh with 12% interest to the corporate debtor.
Appearance
For Appellant : Mr. Malak Bhatt, Ms. Neeha Nagpal and Ms. Somya Saxena, Advocates
For Respondent : Mr. Divyanshu Rai, Ms. Taruna, Mr. Shubh Gautam, Mr. Vishal Sharma, A. Gulati and Ms. Vaishali Patrikar for R-1.
Cause Title: Praful Satra and Ors. Versus Ms. Vaishali Patrikar
Case No: Company Appeal (AT) (Insolvency) No. 348 of 2025
Coram: Judicial Member Justice N. Seshasayee, Technical Member Arun Baroka
