NCLT holds Barracks Retail directors liable for fraudulent trading, orders Rs 16.61 crore

The National Company Law Tribunal's Mumbai bench has held that the business of Barracks Retail (India) Private Limited was carried on with intent to defraud its creditors, and has ordered two of its directors to contribute Rs 1,660.62 lakh, about Rs 16.61 crore, to the company. In an order delivered on 27 October 2026, the tribunal also directed one of the directors to contribute a further Rs 23.15 lakh.

What Happened

Barracks Retail entered the corporate insolvency resolution process on 9 January 2024, on a petition by its financial creditor ASREC (India) Limited. The resolution professional applied under Section 66 of the Insolvency and Bankruptcy Code, which covers fraudulent and wrongful trading, relying on a transaction audit report, and sought Rs 2,660.75 lakh. After a resolution plan was approved on 4 November 2025, ASREC took over the application.

The tribunal noted that the company's loans with Bharat Co-op Bank Ltd were restructured, and additional credit sanctioned, on 17 March 2020. It found that revenue rose about 244% in 2018-19, the year before the restructuring, and that book debts in 2019-20 exceeded that year's revenue. Applying the civil standard of preponderance of probability, the tribunal held it more probable than not that purchase and sale transactions from 2018-19 onwards were not genuine and were entered into to persuade the lender. It held that write-offs of Rs 2,225.16 lakh of receivables and Rs 369.94 lakh of stock in 2023-24 fell under Section 66, reduced by Rs 934.48 lakh of payables written back. The directors had denied all allegations and said the transactions were in the ordinary course of business.

The tribunal rejected the claim over Rs 42.50 lakh paid to Mangal Bullion Pvt Ltd, saying the facts were not clear.

What It Means

The two directors must pay jointly or severally within 30 days; any amount paid late carries interest at 12% a year. The money goes to the company's assets for its creditors. The ruling shows that directors can be ordered to make good losses to creditors from their own pockets when a tribunal finds a business was run to defraud lenders. The order may be appealed to the National Company Law Appellate Tribunal.

Source: NCLT order