Fraudulent Lease Transaction Srutinised

The National Company Law Appellate Tribunal (NCLAT) examined whether a lease financing arrangement, allegedly resulting in disappearance of assets and diversion of corporate debtor funds, constituted fraudulent trading under Section 66 of the Insolvency and Bankruptcy Code, 2016. 

The Appellate Tribunal held that proceedings under Section 66(1) are not confined only to directors or promoters and may extend to any person who was knowingly a party to carrying on the business of the corporate debtor with an intent to defraud creditors. 

Finding inconsistencies and contradictions in the NCLT’s order, the NCLAT clarified the scope of fraudulent trading provisions and the liability of parties involved in suspect transactions.