NCLAT quashes Ligare Aviation's insolvency; loan from Religare Enterprises round-tripping

The National Company Law Appellate Tribunal (NCLAT) has set aside insolvency proceedings against Ligare Aviation Ltd, holding that the NCLT erred in admitting the plea filed by Religare Enterprises without properly examining the nature of the underlying transactions, which was “only round tripping of money” and not “any genuine financial transaction”.

In a strongly worded order, the appellate tribunal said the material on record “clearly proves” that there was no financial debt disbursed by the financial creditor (Religare Enterprises) to the corporate debtor (Ligare Aviation) for consideration of the time value of money, a key requirement under the Insolvency and Bankruptcy Code (IBC).

Allowing appeals filed by Daiichi Sankyo Company, a Japanese global pharmaceutical company and a shareholder, NCLAT observed that the transactions in question were merely a “round tripping of money/layering of money” undertaken for “some undisclosed fraudulent purposes” and did not create any financial debt capable of triggering insolvency proceedings.

“We have come to the conclusion that the materials on the record clearly proves that there was no financial debt which was disbursed by Financial Creditor (Religare Finvest) to the Corporate Debtor (Ligare Aviation) for time value of money…” said a two-member NCLAT bench.

Moreover, the MoU for loan was a “sham one-pager document created dishonestly to give the colour of genuine transactions to fraudulent transaction,” NCLAT noted its order passed on May 27, 2026.

Religare Enterprises and Ligare Aviation are both group companies and related parties. A host of companies, including these two, were controlled by Malvinder Mohan Singh and Shivinder Mohan Singh, the two brothers who were ex-promoters of Ranbaxy Laboratories and Fortis Healthcare.

In its 69-page-long order, the NCLAT also faulted the New Delhi-based Principal Bench of the National Company Law Tribunal (NCLT) for admitting the insolvency plea filed by Religare Enterprises despite the absence of a genuine financial debt.

“Adjudicating Authority (NCLT) has not even looked into the plea that the amount was immediately transferred and did not remain even for 24 hours with the corporate debtor,” said NCLAT.

The NCLAT noted that Rs 3.6 crore transferred by Religare Arts Investment Management Ltd (RAIML) to Ligare Aviation on March 31, 2009, was remitted to Religare Finvest, a subsidiary company of Religare Enterprises, which was reflected in the bank transfer of the same day.

“The bank transfer of 31.03.2009 further indicates various amounts received from different group companies and transmitted on the same day to other group companies of the group,” said NCLAT.

It was claimed that a Memorandum of Understanding (MoU) was entered between RAIML and Ligare Aviation on March 30, 2009, under which an amount of Rs 5 crore was sanctioned with interest of 13 per cent. Following that MoU, RAIML transferred Rs 3.6 crore on March 31, 2009.

Meanwhile, Daiichi Sankyo received an arbitral award of Rs 3,500 crore on April 29, 2016, in Singapore from Singh Brothers and their various companies, which initiated proceedings for the enforcement of the foreign award before the Delhi High Court.

The high court passed orders attaching properties of the different group companies, including RHC Holdings, which was a debtor to Ligare Aviation. This matter also went before the Supreme Court.

Later, on December 8, 2017, NCLT permitted the amalgamation of RAIML with Religare Enterprises. On March 27, 2019, Religare Finvest filed an FIR naming the Financial Creditor-Religare Enterprises and making an allegation that money advances under the MoU were not intended to be repaid.

FIR made several allegations and alleged that loans were extended on a non-arm’s length basis. The FIR alleged that the MoUs signed were documents created dishonestly to give the colour of genuine transactions to sham transactions, the purpose of which was only to siphon off the money. It was alleged that Religare Enterprises is accountable for the actions taken by the then management.

On this, Religare Enterprises filed an insolvency plea before NCLT on January 18, 2021, for non-payment of Rs 5.87 crore.

Meanwhile, the Supreme Court passed an order staying the insolvency proceedings initiated against 23 companies. The apex court, on September 22, 2022, directed that all proceedings, including FIR and proceedings before the NCLT, be taken to a logical end.

NCLT allowed the insolvency plea filed by Religare Enterprises, observing that none of the MoUs in any of the clauses provide that the payment received by Ligare was for onward transmission to a third party.

The appellate tribunal rejected it, saying this “observation of the NCLT is wholly erroneous”.

It also said FIR lodged by Religare Finvest and the allegations made therein and subsequent proceedings “are not to be relied as any substantive evidence in the proceeding” under Section 7. The FIR has been lodged by a subsidiary of the financial creditor, making allegations against the erstwhile promoter of the corporate debtor and financial creditor, it said.

Setting aside the NCLT order, a NCLAT bench comprising Chairperson Justice Ashok Bhushan and Member Barun Mitra said, “There was no financial debt in existence in the transaction, and its initiation of CIRP by the financial creditor could not have been made on such a transaction. The order of the adjudicating authority (NCLT) admitting the Section 7 application cannot be sustained.”