Insolvency Plea Can’t Be Dismissed On Fraud Claims Without Proof: NCLT Ahmedabad

Gandhinagar, Dec 10 (KNN) The National Company Law Tribunal (NCLT), Ahmedabad, has held that an insolvency application cannot be dismissed merely on allegations of fraud or malicious intent unless supported by clear and cogent evidence.

Section 65 Requires Proof of Mala Fides

While admitting insolvency proceedings against Turnrest Resources, the NCLT held that Section 65 of the Insolvency and Bankruptcy Code (IBC) applies only when fraud or mala fides are proven with evidence, not mere allegations.

Case Background

The proceedings arose from a petition filed by HDFC Bank Ltd on July 11, 2025, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Turnrest Resources for a default of Rs 30.5 crore. 

The bank submitted sanction letters, supplemental agreements, an acknowledgment of debt dated October 1, 2023, and a demand notice issued on December 12, 2024.

Tribunal Rejects Allegations

Turnrest had sought dismissal of the plea under Section 65, alleging that HDFC acted maliciously by pursuing parallel proceedings and releasing certain guarantors without disclosure. 

However, the tribunal held that the bank had clearly established the existence of debt and default, and that no evidence of collusion or malice was produced by the corporate debtor.

CIRP Admitted

The tribunal noted that the release of guarantors under a separate commercial agreement did not affect the bank’s right to initiate CIRP.

Concluding that Section 65 allegations were unsupported, the NCLT admitted Turnrest Resources into CIRP, imposed a moratorium, appointed Rajendra Devidas Puranik as Interim Resolution Professional, and directed HDFC Bank to deposit Rs 5 lakh towards initial insolvency costs.

(KNN Bureau)