Pranav B Prem

The National Company Law Tribunal (NCLT), Mumbai Bench – Court III, comprising Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer, has refused to direct an investigation under Section 213 of the Companies Act, 2013 into the affairs of the former management of Smaaash Entertainment Private Limited, a company known for its virtual reality-based gaming and entertainment centres.

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However, the Bench directed that a copy of its order be forwarded to the Ministry of Corporate Affairs, the Regional Director (Western Region), the Registrar of Companies, and the Income Tax Department, for them to take appropriate action as may be permitted under law against those in charge of the company at the relevant time.

Background

The order came in an application filed by Mr. Bhrugesh Amin, the Resolution Professional (RP) of Smaaash Entertainment Private Limited, under Sections 19(1) and 19(2) of the Insolvency and Bankruptcy Code, 2016, seeking directions against the company’s suspended directors and senior officials for non-cooperation and failure to furnish statutory records during the Corporate Insolvency Resolution Process (CIRP). The respondents included Shripal Morakhia, Kalpana Morakhia, Amit Ram Krishnan, Mayur Shah, Anand Krishnan, Vishakha Sangoi, and the erstwhile statutory auditor, M/s L.J. Kothari.

The RP alleged that the former management failed to provide vital information such as board meeting minutes, registers of contracts and related-party transactions, internal and tax audit reports, transfer pricing reports, and other statutory documents for several financial years, making it difficult to complete due diligence and transaction audits. He contended that this deliberate non-cooperation obstructed the insolvency process and concealed material information about the company’s affairs, subsidiaries, and asset transfers.

Proceedings Before The Tribunal

Earlier, by order dated 31.07.2024, the Tribunal had issued notices under Section 213(b) of the Companies Act to certain respondents, observing that their replies indicated concealment of material records and possible contraventions of statutory provisions.In the latest order dated 04.11.2025, the Bench took note that, despite repeated directions, several statutory records had not been maintained or furnished by the erstwhile directors. These included the minutes of board meetings, registers of contracts, internal audit reports, transfer pricing reports, and tax audit reports for the period between 2019 and 2022.

The Tribunal noted that by their own admission, the respondents had either failed to prepare or were concealing documents required under the Companies Act, 2013, and Income Tax Act, 1961. It further held that Respondents 1 and 2, as directors, were responsible for non-compliance with Sections 118 and 189 of the Companies Act concerning maintenance of statutory records, while Respondent 4, who was the Deputy General Manager (Finance & Accounts), was liable for defaults under the same provisions.

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Submissions Of The Parties

The former directors (Respondents 1 & 2) submitted that they had provided all available records to the RP and that certain documents were unavailable due to the COVID-19 pandemic, during which the company’s Company Secretary was laid off. They argued that the RP could have independently accessed the information through public filings or from the financial creditor and that the earlier notice issued under Section 213 was vague and procedurally defective.

Respondent 4, the former DGM – Finance & Accounts, contended that he had duly responded to emails and provided all available information between August 2022 and February 2023, and therefore could not be held responsible for non-compliance.

The RP, however, countered that the missing records pertained to years prior to the pandemic, and the respondents’ justifications were inconsistent. He alleged that their selective disclosure suggested deliberate concealment and pointed out that the assignment of the “Smaaash” brand and related asset transfers had already been declared fraudulent by the Tribunal in earlier orders.

Tribunal’s Observations

The Bench referred to its previous findings in related applications, including IA/2115/2022 and IA/4888/2023, where transactions such as the assignment of the “Smaaash” brand to Fun Gateway Arena Pvt. Ltd. and certain fund transfers amounting to ₹8.42 crore were held to be fraudulent transactions under Section 66 of the IBC. It also noted that the suspended directors had “done all that they could possibly do to create hurdles in the smooth insolvency resolution process.”

While acknowledging that the respondents’ actions amounted to serious non-compliance with statutory obligations and involved fraudulent conduct, the Bench held that an investigation at this stage would serve no practical purpose, since the company had already been revived. The Bench observed:“On a comprehensive view of the case, it can be seen that the violations under the various provisions of the Companies Act, 2013 and the fraudulent transactions executed by the Respondents may warrant investigation to unearth the true nature of the business operations of the Corporate Debtor prior to the insolvency commencement date. We are of the considered view that no useful purpose would be served by ordering investigation of the Corporate Debtor under Section 213 of the Companies Act, 2013 since the business and operations of the Corporate Debtor is now vested with the new management and the Corporate Debtor will also get the benefit of Section 32A of the Code.”

Direction To Government Authorities

Considering the findings, the Tribunal directed that a copy of the order be forwarded to the Ministry of Corporate Affairs, the Regional Director (Western Region), the Registrar of Companies, and the Income Tax Department, to take appropriate steps as may be permitted under law against those in charge at the relevant time for statutory non-compliances.

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Since Smaaash Entertainment Pvt. Ltd. had already been revived under a resolution plan approved on May 7, 2025, submitted by Nazara Technologies Pvt. Ltd., the Tribunal held that an investigation into the previous management would be infructuous. Accordingly, the application filed by the Resolution Professional was disposed of, with directions to the authorities to act upon the findings of the Tribunal.

Appearance

For Applicant: Advocate Shyam Kapadia along with Advocates Kunal Kaul, Virgil Braganza instructed by JSA

For Respondents: Advocate Akshata Shah instructed by Advocate Sujit Lahoti & Associates

Cause Title: Bhrugesh Amin v Shripal Sevantilal Morakhia and Ors

Case No: IA/742/2023 IN C.P.(IB)/935(MB)/C-III-2020

Coram: Judicial Member Lakshmi Gurung, Technical Member Hariharan Neelakanta Iyer