Appellant’s appeal dismissed; Tribunal stresses on the need for transparency in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed the appeal filed by Mega Mall Management Services Pvt. Ltd. against the order of the National Company Law Tribunal (NCLT), Kolkata Bench. The order required the company to disclose financial records related to rent and parking income from Avani Riverside Mall, a key asset developed by Avani Projects & Infrastructures Ltd., which is undergoing Corporate Insolvency Resolution Process (CIRP).
The appeal, adjudicated by a bench comprising Mr. Justice N. Seshasayee, Mr. Arun Baroka, and Mr. Indevar Pandey, was filed following NCLT's direction on June 18, 2025. The Tribunal emphasized that the Resolution Professional (RP) is entitled to seek such disclosures under the Insolvency and Bankruptcy Code, 2016, to ensure a fair and transparent CIRP process.
The dispute arose when Mega Mall Management Services resisted the RP's request for detailed revenue information, arguing that it was an independent entity with no financial ties to the Corporate Debtor post a 2018 agreement. However, the NCLAT upheld the NCLT's decision, stating that the separate legal identity of the appellant does not exempt it from cooperating with the RP, especially when the transactions in question may have significant implications for the creditors of the Corporate Debtor.
The bench noted that the RP's request was not an attempt to adjudicate ownership or liability but was essential for investigating and understanding the financial dealings of the Corporate Debtor. The court reiterated that the disclosure order was limited in scope, aiming only to facilitate the CIRP, and did not impinge upon the appellant's substantive rights.
This decision reinforces the RP's authority to require cooperation from associated entities of a Corporate Debtor, ensuring that insolvency proceedings are conducted with complete transparency. The judgment underscores the importance of full disclosure to ascertain the true financial position and to protect the interests of creditors.
The Tribunal's ruling aligns with its mandate under the Insolvency and Bankruptcy Code to preserve the value of the Corporate Debtor's assets for the benefit of all stakeholders. The NCLAT's decision is expected to have significant implications for similar cases where related parties of Corporate Debtors are reluctant to disclose financial information critical to insolvency proceedings.
Bottom line:-
The Resolution Professional has the authority under the Insolvency and Bankruptcy Code, 2016 to seek disclosure of financial and transactional records from entities connected to the Corporate Debtor for effective conduct of the Corporate Insolvency Resolution Process (CIRP).
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 19(2), 45, 49, 66
