IN THE NATIONAL COMPANY LAW TRIBUNAL,

MUMBAI BENCH, COURT II

IA/2717/2021
In
CP(IB)4106/MB/2018

Application filed under section 66 r/w section 25(j) of

Insolvency and Bankruptcy Code, 2016.

Mr. Anuj Bajpai, RP of Tollways (Ujjain) Private

Limited.
…Applicant/Resolution Professional

V/s
Surendra Lodha, Suspended Director of Corporate Debtor
126-128, Shriram Tower, Kingsway Sadar, Nagpur-
440001, Maharashtra.
… Respondent

In the matter of
Bank of Baroda
…Financial Creditor

V/s

Topworth Tollways (Ujjain) Private Limited

…Corporate Debtor

Order Pronounced on :- 11.08.2023

1 of 10
CORAM:
SHRI SHYAM BABU GAUTAM SHRI KULDIP KUMAR KAREER
HON’BLE MEMBER (T) HON’BLE MEMBER (J)

Appearances (through video conferencing)

For the Applicant/RP : Adv. Mitali Bhatt
For the Respondent : Adv. Eshna Kumar

ORDER
Per- Coram

1. It is an application filed by Anuj Bajpai, RP of Topworth

Tollways (Ujjain) Private Limited under section 66 read with
section 25(j) of the Insolvency and Bankruptcy Code, 2016
against Surendra Lodha, Suspended Director of Corporate
Debtor for seeking following reliefs:
i.) Direct the Respondent to make such contributions to the
account of the Corporate debtor aggregating to sum of Rs.
4.15 Crores as stated in this Application with regard to
the financial benefit fraudulently derived by the
Respondent which falls within the ambit of provisions of
section 66 of the Code;
ii.) Pass appropriate directions/orders in terms of Section 67,
of the code including for recovery/restoration of legitimate
amounts due to the Corporate Debtor;
iii.) Issue orders that recovery, if any, made pursuant to this
Application, shall form part of the liquidation estate as per

2 of 10
 section 36 of the Code and shall be exclusive right of the
CoC/stakeholders of the Corporate Debtor.
iv.) Impose such fine under section 71, 72 and 73 of the Code
upon the Respondent No 2 as this Hon’ble Tribunal may
deem fit.

Facts of the IA
2. On perusal of the Application, it reveals that during the
course of CIRP, transaction auditor viz. BDO India LLP was
appointed to undertake the transaction audit of the books of the
Corporate debtor for the period from 10.10.2018 to 09.10.2020.
The Transaction Auditors filed their Forensic Audit Report in
July 2021. Considering the findings of the Transaction Audit
Report, the Applicant submits that the transactions so
identified are covered under the provisions of section 66 of the
Code. The Applicant submits that there are certain transactions
which have been entered into with a clear intent to defraud the
creditors and to siphon off the money from the Corporate
Debtor.
The Applicant submits that Mr. Surendra C Lodha
(respondent and suspended Director) has blatantly misused his
fiduciary position as a “director” and pocketed an amount of Rs.
2.57 Crores for his personal financial gains. The Corporate
Debtor was under tremendous financial stress but the
Respondent callously and without keeping in mind the interest
of the Corporate Debtor and its stakeholders conveniently

3 of 10
increased his monthly remuneration by 100% i.e from Rs.
5,00,000/- to Rs. 10,00,000/-. The Applicant submits that the
financial situation of the Corporate Debtor was bleak and it was
not a case where any major project or supernormal profits were
earned by the Corporate Debtor and hence such 100% increase
in his own salary is a clear example of fraudulent transaction
with an intent to defraud the creditors and siphon off the money
for his own personal gains.
In addition to this, the Applicant came across a copy of
the ledger of Mr. Surendra Lodha as per the records of Rajmal
Gorecha & Sons (sub-contractor of the Corporate Debtor). The
said ledger shows transactions made during the period from
01.04.2019 to 30.09.2020 (a month prior to insolvency
commencement date i.e. 09.10.2020) which clears that the
Respondent has also siphoned off an amount of Rs. 1.58 Crores
in his personal capacity. In fact, the said ledger has also been
signed off by the Respondent. The Applicant submits that the
conduct and fraudulent intent of Respondent is evident from
the face of the document itself wherein without any valid
business reason the Respondent for his own personal financial
gain started withdrawing a substantial sum under the guise of
“monthly remuneration” which is squarely covered under the
provisions of section 66(2) of the Code and has led to a
substantial financial loss to the Corporate Debtor to the tune of
Rs. 4.15 crores (Rs. 2.57 crores and Rs. 1.58 crores) which
ought to be recovered from the Respondent. Under such

4 of 10
 circumstances, the Applicant has filed the present application
for seeking appropriate orders against the respondent.

Reply filed by the Respondent

3. In response to this, the Respondent has filed a detail reply

and submitted that the application is based on the forensic
audit submitted in July 2021, which has not taken the material
facts into consideration and overlooked certain crucial details
before arriving at the erroneous conclusion that the Respondent
have siphoned off money from the Corporate Debtor.
The Respondent, who is a suspended director, has
submitted that out of Rs. 2.57 crores, Rs. 97,82,752/- was paid
as a part director’s remuneration which was duly authorized in
the Extra Ordinary General Meeting (“EGM”) of the Corporate
Debtor held on 01.11.2019. The increase in the salary of the
Respondent was duly authorized by the members. The
Respondent has been instrumental in the sustenance of the
Corporate Debtor that justified the increase in remuneration.
The Respondent has further submitted that he reduced the
traffic leakages which led to increase in toll collection revenues
for the Corporate Debtor. He also successfully liaised with
Madhya Pradesh Development Corporate Limited (“MPRDC”)
and guided the Corporate Debtor through a very difficult
financial time when the lenders were not supporting after the
account of the company was declared as NPA. His success can
be gauged from the fact that the toll road was successfully

5 of 10
 operational otherwise the project would have been terminated
by MPRDC.
The Respondent has further submitted that out of the
total payment to Respondent, Rs. 86,419/- was paid as
reimbursements for travelling expenses against the bills
submitted to Corporate Debtor and Rs. 1,58,48,000/- was paid
as reimbursement for the payments made by the Respondent to
Rajmal Gorecha & Sons on behalf of the Corporate Debtor
against the work issued by the Corporate Debtor to Rajmal
Gorecha & Sons. The payment was made due to non-availability
of requisite funds with the Corporate Debtor required for
maintenance and operation issues of toll road. Rajmal Gorecha
& Sons was awarded the contract for maintenance of the toll
road by the Company vide Work Order No. TTUPL/18-19/005
dated 27.03.2019. Before awarding work order to Rajmal
Gorecha & Sons, their quotation was sought and meetings were
held with them. Basis the work order and the revision of rates,
the total work order value Res. 14.69 Crore (excluding GST).
Their work was continuing with regular supervision of MPRDC.

Findings:

4. The present application has been filed under section 66 of

the IB Code, 2016, which reads as follows:
“66 Fraudulent trading or wrongful trading: (1) If during the
corporate insolvency resolution process or a liquidation process, it is
found that any business of the corporate debtor has been carried on
with intent to defraud creditors of the corporate debtor or for any

6 of 10
 fraudulent purpose, the Adjudicating Authority may on the application
of the resolution professional pass an order that any persons who were
knowingly parties to the carrying on of the business in such manner
shall be liable to make such contributions to the assets of the corporate
debtor as it may deem fit.
(2) On an application made by a resolution professional during the
corporate insolvency resolution process, the Adjudicating Authority
may by an order direct that a director or partner of the corporate debtor,
as the case may be, shall be liable to make such contribution to the
assets of the corporate debtor as it may deem fit, if-
(a) before the insolvency commencement date, such director or partner
knew or ought to have known that the there was no reasonable
prospect of avoiding the commencement of a corporate insolvency
resolution process in respect of such corporate debtor; and
(b) such director or partner did not exercise due diligence in minimising
the potential loss to the creditors of the corporate debtor.
(3) Notwithstanding anything contained in this section, no application
shall be filed by a resolution professional under sub-section (2), in
respect of such default against which initiation of corporate insolvency
resolution process is suspended as per section 10A.
Explanation. – For the purposes of this section a director or partner of
the corporate debtor, as the case may be, shall be deemed to have
exercised due diligence if such diligence was reasonably expected of a
person carrying out the same functions as are carried out by such
director or partner, as the case may be, in relation to the corporate
debtor.
From a bare perusal of the aforementioned Section 66 of
the Code it is clear that in order to attract the aforementioned
Section, the following ingredients are to be fulfilled:

a.) That the business of the company undergoing insolvency has

been carried on with the intent to defraud the creditors of the
company or for any other fraudulent purpose;

7 of 10
 b.) That the defendant sought to be made liable participated in
the carrying on of the business of the company in that manner;
and
c.) That it did so knowingly i.e. with knowledge that the
transactions it was participating in were intended to defraud
the creditors of the company or were in some other way
fraudulent.

5. We have heard the counsel for the parties and gone

through the record. Keeping in view the requirements of the
provision of section 66 of the Code, we are of the considered
view that the applicant has not able to satisfy the requirements
of the provision of Section 66. The applicant/resolution
professional has wholly relied upon the forensic report to
substantiate the allegations of fraud. So far as the allegation
with regard to enhancement of salary by the Respondent from
Rs. 5 Lakhs to 10 Lakhs per month with effect from 01.11.2019,
the same cannot be treated to be a fraudulent at on the part of
the Respondent, especially, when the enhancement of the
remuneration was duly approved by the shareholders in the
EoGM held on 01.11.2019.
The second part of the allegations are with regard to the
reimbursement of travel expense of Rs. 86,419 which can also
not be termed as fraudulent by any stretch of imagination. In
the forensic audit report relied upon by payment, the applicant
has alleged that the Respondent had diverted funds of the

8 of 10
Corporate Debtor. It is mentioned in the audit report that the
payment of INR 2.57 crores was made to Surender Lodha
against Director’s remuneration of INR 1.56 crores and payment
made by Surender Lodha to Vendor (Rajmal Gorecha and Sons)
on behalf of Topworth Tollways.
In the conclusion part of the report, it has been
mentioned that the payments were made by the Respondent on
behalf of the company and the same were reimbursed to the
Respondent later on. It is further concluded in the report that
such payment appears to questionable in nature. However, in
the report no clear-cut finding have been recorded. In the
disclaimer part, it has been mentioned that the finding and the
report should not be interpreted as documentary evidence, nor
the report should be considered a definite pronouncement on
any individual or the company. Therefore, whatever has been
stated in the audit report, the only inference that can be drawn
is that report is tentative in nature and cannot be relied upon
to hold that the questioned transactions are fraudulent in
nature. It is settled proposition of law that to prove the
transaction to be fraudulent in nature, the degree of proof and
evidence required should be of unimpeachable nature and a
transaction cannot be dubbed as fraudulent, on the basis of
inadequate and tentative findings, as recorded in the forensic
audit report relied upon by the applicant. Therefore, we are of
the considered view that the applicant has not able to establish
the transactions questioned in the application are fraudulent in

9 of 10
 nature. In the light of the same, the IA No. 2717/2021 is
dismissed being without any merits.

Sd/- Sd/-

SHYAM BABU GAUTAM KULDIP KUMAR KAREER

(MEMBER TECHNICAL) (MEMBER JUDICIAL)

Arpan, LRA

11.08.2023

10 of 10