Tribunal holds all directors jointly liable to deposit Rs. 2.07 lakh as cash-in-hand reflected in company's financials; declines recovery of disputed Rs. 12.61 lakh receivable from third party.
In a significant order dated October 15, 2026, the National Company Law Tribunal (NCLT), Kochi Bench, adjudicated an application filed by Mr. Balakrishnan Baburajan, the Liquidator of Goodwin Packpet Private Limited, under Sections 19(2) and 34(3) of the Insolvency and Bankruptcy Code (IBC), 2016. The liquidator sought directions against the suspended directors of the Corporate Debtor to deposit the cash balance reflected in its financial statements and to pay the outstanding receivable amount due from a proprietary concern of one of the directors.
The financial statements for the financial years 2018-19 and 2019-20 showed a cash-in-hand amount of Rs. 2,07,826.56. The liquidator contended that this sum, being an asset of the company, was under the custody and control of the directors and should be deposited into the liquidation account maintained with CSB Bank, Kochi. The directors, however, disputed the existence of this cash balance, claiming it was a fabricated entry, and argued that some of them were mere investors not involved in the day-to-day management of the company.
The Tribunal rejected the directors' contentions, emphasizing that mere claims of non-involvement in management do not absolve directors of their statutory obligation to cooperate with the liquidator. It held that the entries in the balance sheet, prepared in the ordinary course of business, are binding on the company and its management. Furthermore, the Tribunal ruled that all six respondents, being directors, are jointly and severally liable to account for and deposit the cash-in-hand amount of Rs. 2,07,826/- along with interest at the rate of 12% per annum into the liquidation account within 30 days.
Conversely, the liquidator's prayer seeking recovery of Rs. 12,61,608/- shown as receivables from Goodwin Traders, a proprietary concern of one of the directors, was declined. The Tribunal clarified that such receivables constitute disputed or outstanding amounts from third parties and cannot be summarily recovered in summary liquidation proceedings under Sections 19(2) and 34(3) of the IBC. The liquidator was advised to pursue appropriate legal remedies before competent forums for recovery.
The Tribunal further underscored the statutory obligations imposed by Sections 19(2) and 34(3) of the IBC, which mandate all personnel, promoters, and management personnel of the corporate debtor to provide full assistance and cooperation to the liquidator, including access to assets, books, and records. Failure to comply entitles the liquidator to seek directions from the Adjudicating Authority to ensure smooth liquidation proceedings.
This order reaffirms the principle that directors cannot evade responsibility by distancing themselves from management duties and that entries in the company's financial records are prima facie evidence of assets under their control. The ruling also delineates the limits of the Tribunal's jurisdiction in summary proceedings, distinguishing between tangible assets subject to immediate recovery and disputed receivables requiring separate legal action.
The NCLT's decision brings clarity on directors' liabilities during liquidation and reinforces the liquidator's powers to enforce cooperation, thereby strengthening the insolvency resolution framework.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - In liquidation proceedings, all directors are under a statutory obligation to assist and cooperate with the Liquidator and are jointly and severally responsible to account for assets reflected in the company's books such as cash-in-hand - However, disputed receivables shown in the balance sheet cannot be summarily recovered from a respondent in proceedings under Sections 19(2) and 34(3); the Liquidator must pursue appropriate legal remedies for such recovery.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 19(2), 34(3)
