Ruling that a change of management through insolvency does not wipe out the alleged diversion of company funds, the NCLT has held the Centre’s SFIO recovery plea against former Bhushan Power and Steel promoters maintainable.
New Delhi: The National Company Law Tribunal (NCLT), Principal Bench, has dismissed eight applications by former promoters of Bhushan Power and Steel Limited (BPSL), their associated companies and other individuals challenging the maintainability of the Central Government’s petition seeking recovery of funds allegedly diverted from the company. The petition, filed through the Serious Fraud Investigation Office (SFIO), concerns an alleged fraud of approximately Rs 5,431 crore [Union of India Through SFIO v. Bhushan Airways Services Private Limited and Others].
The order was pronounced on October 30, 2026 by a Bench of President Justice Anupinder Singh Grewal and Member (Technical) Ravindra Chaturvedi in C.P. No. 105 of 2023.
The case
The Union of India, through the SFIO, filed the company petition under Sections 241(2), 242 and 246 read with Section 339 of the Companies Act, 2013, against 76 respondents. Relying on the SFIO’s investigation report, it seeks to hold the respondents personally liable for funds allegedly siphoned off from BPSL, along with attachment and realisation of their assets.
The applications challenging maintainability were filed by, among others, former promoters Sanjay Singal and Aarti Singal (Respondent Nos. 36 and 37), Priyanka Miglani (Respondent No. 44), DPS Bhatia, Raj Kumar Kedia, Hardev Chand Verma, and companies including Décor Investments and Finance, Silver Star Commercial Company and Prudent Transport Company. BPSL, now under new management after its corporate insolvency resolution, filed intervention petitions, which were allowed.
The applicants argued, among other things, that Section 241(2), which deals with affairs “being conducted” in a manner prejudicial to public interest, could not reach historical transactions after the old management had been replaced.
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What the Tribunal said
The Tribunal rejected that reading. It held that a change in management does not undo the alleged diversion:
“The replacement of the erstwhile management may have brought its control over the company to an end, but it does not, by itself, undo the alleged diversion or remove the prejudice that may have been caused to the company and the public interest.”
It added that the retention of diverted assets continues to affect the company:
“The affairs of a company include the custody, ownership and recovery of its assets; the non-restoration of assets diverted from the company therefore continues to affect the company, its creditors and the public interest, notwithstanding that the persons now managing it are different.”
On Section 32A of the Insolvency and Bankruptcy Code (IBC), which protects a corporate debtor after a resolution plan is approved, the Bench drew a distinction between the company and those who allegedly took its money:
“The present Petition, however, seeks no relief against BPSL or its property; it is brought for the benefit of the company and its stakeholders against those who allegedly diverted its assets.”
The conclusions
Summing up, the Tribunal held that territorial jurisdiction under Section 241(2) is decided by the registered office of the company whose affairs are complained of; that the petition was validly instituted by the Central Government; that Section 339 applies to a Section 241 petition through Section 246; that disgorgement can be pleaded as a civil and equitable relief; that the remedy under Section 212(14A) is additional, not exclusive; and that pending writ petitions challenging the investigation, in which no stay has been granted, do not bar the petition.
It also held that a petition filed within three years of the SFIO report is not, on its face, time-barred, and that proceedings by the resolution professional under Section 66 of the IBC do not bar the Centre’s petition, since the two remedies differ in applicant, purpose, reach and relief.
No finding on merits
The Bench made clear that the order is confined to maintainability and that the burden remains on the Centre:
“The burden of proving the allegations of fraud, and the knowing participation of each Respondent, remains on the Petitioner. Fraud must be pleaded with particulars and proved. The Respondents retain every defense on the merits, together with the liberty reserved under the several issues.”
The allegations in the SFIO report are yet to be adjudicated. The Tribunal has recorded no finding on the merits.
The directions
The Tribunal directed the Centre to file, within four weeks, a consolidated statement identifying for each respondent the role alleged against it, the transactions involved and the relevant portions of the BPSL investigation report. The respondents may file replies on merits within four weeks, with a rejoinder within three weeks after that.
To prevent double recovery, both sides must file affidavits within two weeks disclosing the status of the IBC proceedings concerning BPSL’s transactions, and credit will be given for any amount recovered or recoverable on the same transaction “so that no person is made to pay twice”. The Ministry of Corporate Affairs must also file an affidavit within four weeks ratifying the institution of the petition. Earlier interim directions will continue, and the matter is listed on November 26, 2026.
Why the order matters
The resolution of a stressed company under the IBC often leaves an open question: can the State still go after the former promoters for money allegedly taken out before the insolvency? The NCLT’s answer is that it can. The clean slate under Section 32A protects the company and its new owner, not those said to be holding diverted assets, and the continued retention of those assets keeps the prejudice to public interest alive.
At the same time, the order builds in safeguards. The Centre must specify each respondent’s alleged role, fraud must be proved with particulars, and recoveries in the parallel IBC proceedings will be credited. The case now moves from the threshold to the merits.
Case Title: Union of India Through SFIO v. Bhushan Airways Services Private Limited and Others [C.P. No. 105 of 2023, with Intervention Petition Nos. 60 to 67 of 2026 and connected applications]
Bench: Justice Anupinder Singh Grewal (President) and Ravindra Chaturvedi (Member, Technical), NCLT Principal Bench, New Delhi
Date of Order: October 30, 2026
For BPSL (Intervenor): Gyanendra Kumar, Senior Advocate, with Kamalika Bhattacharjee, Saurabh Bhargavan, Spandan Biswal, Sugandh Virmani, Salonee Sirohi, Nikhil and Shivendra Pandey, Advocates
For Sanjay Singal and another: K. Avinash, Advocate
For Union of India Through SFIO: Aditya Sikka, with Onshi Jakhar and Yuganshi Singh, Advocates