NCLAT Sets Aside Ligare Aviation Insolvency Admission, Holds Round-Tripped Funds Cannot Constitute Financial Debt

NCLAT finds Rs 3.6 crore transferred to Ligare Aviation and immediately routed back to a Religare subsidiary the same day was not a genuine financial debt under IBC, setting aside the NCLT's Section 7 admission order.

The National Company Law Appellate Tribunal, Principal Bench, New Delhi, has set aside the admission of a Section 7 insolvency application filed by Religare Enterprises Ltd. against Ligare Aviation Ltd., holding that the underlying transactions were not genuine financial debts but instances of round-tripping and financial layering among related group companies. The judgment, delivered on 27 May 2026 by a bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member, Technical), resolves two appeals filed by shareholders of Ligare Aviation and by Daiichi Sankyo Company Ltd. against the NCLT Principal Bench order dated 18 July 2023. The Tribunal found that the Adjudicating Authority had failed to examine bank records placed before it that showed the disputed amount leaving the corporate debtor's account on the very same day it arrived, and that dismissing this evidence as a “moonshine defence” was an error.

The Dispute Before the Tribunal

Religare Enterprises Ltd. and Ligare Aviation Ltd. (formerly Religare Aviation Ltd.) were both group companies controlled by brothers Malvinder Mohan Singh and Shivinder Mohan Singh. On 18 January 2021, Religare Enterprises filed a Section 7 application before the NCLT claiming a financial debt of Rs 5,87,27,454/- owed by Ligare Aviation. The claimed debt traced back to a one-page Memorandum of Understanding dated 30 March 2009 between Religare Arts Investment Management Ltd. (RAIML) and the corporate debtor, under which Rs 3,60,00,000/- was transferred on 31 March 2009. Seven further MoUs followed over subsequent years, each on similar terms.

RAIML was subsequently amalgamated with Religare Enterprises Ltd. by an NCLT order dated 8 December 2017, which is how Religare Enterprises came to assert the debt. The NCLT admitted the Section 7 application on 18 July 2023, rejecting the corporate debtor's defence that the transactions were sham and constituted mere financial layering.

Two sets of appellants challenged that admission. Company Appeal (AT) (Insolvency) No. 992 of 2023 was filed by Chandra Shekhar Jha (holding one share in Ligare Aviation) and RHC Finance Pvt. Ltd. (holding 70% of the corporate debtor). Company Appeal (AT) (Insolvency) No. 1238 of 2023 was filed by Daiichi Sankyo Company Ltd., which had obtained a Singapore arbitral award of approximately Rs 3,500 crore on 29 April 2016 against the Singh brothers and their group companies, and had secured a garnishee order from the Delhi High Court on 26 February 2018 against Ligare Aviation for Rs 184.04 crore.

Locus of the Appellants Under Section 61

Religare Enterprises contested the maintainability of both appeals. On the shareholder appellants, it relied on a three-member bench judgment of this Tribunal in Park Energy Pvt. Ltd. v. State Bank of India, which had held that shareholders cannot maintain an appeal under Section 61 of the IBC challenging an admission order.

The Tribunal accepted that the Park Energy ruling was binding and that a pure shareholder could not claim locus. However, it held that Appellant No. 2, RHC Finance Pvt. Ltd., was also reflected as a creditor in the corporate debtor's balance sheet as on 31 March 2021, with an acknowledged loan payable of Rs 1090.94 lakh. Since the CIRP had been stayed and claims had not yet been crystallised, RHC Finance was a stakeholder in the process and its appeal was maintainable. The Tribunal further held that where the very existence of a financial debt is disputed and fraud in the initiation of CIRP is alleged, a person raising that plea cannot be turned away on locus alone, drawing support from the Supreme Court's three-judge bench ruling in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors. (Civil Appeal No. 6071 of 2023), which held that the expression “any person aggrieved” in Section 61 must be understood widely.

On Daiichi Sankyo's locus, the Tribunal reiterated its earlier order of 24 November 2023 in the same appeal. Daiichi held a garnishee order from the Delhi High Court against Ligare Aviation for Rs 184.04 crore. The Tribunal held that Daiichi could not be said to have no claim against the corporate debtor, and that when the very proceedings are questioned as tainted, a person in Daiichi's position qualifies as an aggrieved person under Section 61.

The Core Question: Was There a Financial Debt?

The central issue was whether the MoU-based transfers constituted a “financial debt” within the meaning of Section 5(8) of the IBC — that is, a disbursement against consideration for the time value of money.

The corporate debtor's reply to the Section 7 application had placed on record the bank statement of 30–31 March 2009. That statement showed that Rs 3,60,00,000/- was credited to Ligare Aviation's account from RAIML on 31 March 2009 and debited on the very same day to Religare Finvest Ltd., the NBFC arm and a wholly owned subsidiary of Religare Enterprises. The corporate debtor pleaded that the amount did not remain in its account even for 24 hours, that it never had the benefit of the funds, and that the transaction was financial layering for an undisclosed purpose rather than a genuine loan.

The bank statement also showed a series of parallel transactions on 30–31 March 2009 involving multiple Religare group entities — amounts flowing in from one group company and flowing out to another on the same day — which the corporate debtor argued demonstrated a pattern of round-tripping across the group.

The NCLT had rejected this defence in paragraph 10(v) of its order, reasoning that none of the six MoUs contained any clause providing that the payment received was for onward transmission to a third party, and that the defence was therefore contrary to the terms of the MoUs. The NCLT also noted that the corporate debtor had acknowledged the financial debt in its financial statements for the period 2019–2020, and characterised the defence as a “moonshine defence.”

How the Tribunal Reasoned

The Tribunal held that the NCLT's approach was fundamentally flawed. Relying on the Supreme Court's ruling in Phoenix ARC Private Limited v. Spade Financial Services Ltd. & Ors. — (2021) 3 SCC 475 — the Tribunal reiterated that a transaction which is sham or collusive only creates an illusion of disbursement, and that the real nature of the transaction must be unearthed before a financial debt can be found to exist.

The Tribunal found that the NCLT had not even adverted to the bank statements of 31 March 2009 that were part of the record. The observation that the MoUs did not mention onward transmission was, in the Tribunal's view, a refusal to examine the material rather than an analysis of it. The fact that the MoU was silent about onward transmission did not answer the question of what actually happened to the money.

On the balance confirmation relied upon by the NCLT, the Tribunal noted that the corporate debtor's reply had placed on record a letter dated 31 March 2017 in which the current management had categorically denied the balance, signing against the column stating the balance was “not in agreement with my/our records.” The NCLT had not addressed this denial.

The Tribunal also addressed the relevance of FIR No. 50/2019 lodged by Religare Finvest Ltd. — itself a subsidiary of the financial creditor — which alleged that the one-page MoUs were documents created dishonestly to give the colour of genuine transactions to sham transactions. The Tribunal held that the FIR could not be treated as substantive evidence in the Section 7 proceeding, but the fact that the financial creditor's own subsidiary had made such allegations was a relevant circumstance that the NCLT ought to have considered in assessing the nature of the transactions.

On the question of Section 65 of the IBC, the Tribunal noted that the corporate debtor had not specifically pleaded fraudulent and malicious initiation of CIRP within the meaning of that provision, and that the materials on record did not meet the threshold required for a Section 65 finding. The Tribunal distinguished this from the broader question of whether the underlying transaction constituted a financial debt at all.

The Tribunal answered its framed questions as follows: the MoU-based transactions, read with the bank account entries of 31 March 2009, did not reflect a financial transaction entitling Religare Enterprises to initiate proceedings under Section 7; the NCLT was required to examine the pleadings and materials to find the true nature of the transaction and failed to do so; and the FIR was not to be relied upon as substantive evidence but its existence was a relevant background fact.

Outcome

Both appeals were allowed. The impugned order dated 18 July 2023 passed by the NCLT Principal Bench, New Delhi, admitting Section 7 application C.P. (IB) No. 2(PB)/2022 filed by Religare Enterprises Ltd. against Ligare Aviation Ltd., is set aside. The Section 7 application is dismissed. All pending interlocutory applications are disposed of. Parties are directed to bear their own costs.