ED Makes Historic Arrest of Resolution Professional in NCLT Fraud Probe
The Enforcement Directorate (ED) has intensified its crackdown on fraudulent corporate resolutions and money laundering activities within insolvency proceedings at the National Company Law Tribunal (NCLT). In a landmark move on Thursday, the agency arrested Arvind Kumar, a former resolution professional (RP) for Richa Industries Ltd, marking the first-ever arrest of an RP by an enforcement agency in India.
Charges of Collusion and Financial Misconduct
Kumar, who served as the company's RP from 2018 to 2025, faces serious allegations of colluding with the promoters of the bankrupt company. The charges include siphoning off assets during the insolvency process and laundering the proceeds of crime. A court has subsequently remanded him to eight days of ED custody for further interrogation.
This arrest follows the earlier detention in January of the company's former promoter, Sandeep Gupta. The ED had accused Gupta of not only defrauding banks of hundreds of crores but also laundering valuable company assets by diverting them to shell entities controlled by him and his associates after the company entered insolvency.
Context of Wider NCLT Fraud Investigations
Kumar's arrest occurred just two days after the NCLT's Delhi bench revoked its insolvency resolution award for Alchemist Ltd. This decision came after the ED presented evidence of fraud in the corporate resolution process. The fraud involved a sister concern of the insolvent company being improperly included in the committee of creditors (CoC) with a 97% voting share, allegedly to fraudulently acquire assets.
In the Richa Industries case, the corporate insolvency resolution process, initiated in 2018, ultimately failed to produce an approved resolution plan. This impasse led the NCLT to order liquidation on June 11 last year. Following the appointment of a liquidator, the sale of Richa Industries' assets yielded only Rs 40 crore for Indian Overseas Bank and Union Bank. This amount represents a mere fraction of their admitted claims of Rs 696 crore, resulting in an approximate 94% haircut, as reported by the ED.
Evidence of Unexplained Financial Transactions
The ED's investigation uncovered substantial evidence of suspicious financial activities linked to Kumar. Bank records revealed unexplained cash deposits exceeding Rs 80 lakh in his personal accounts during his tenure as RP. Additionally, credits of over Rs 1 crore were received from related parties who had previously benefited from payments made by the company.
According to the ED's investigation report, "the arrested RP was a beneficiary of the proceeds of crime generated from the original bank fraud, projecting illicit funds as legitimate receipts under the guise of CIRP-related operations."
Alleged Modus Operandi in Multiple Cases
The agency alleges that Kumar employed a specific modus operandi, which it claims is prevalent in numerous other NCLT resolution cases. This strategy involves manipulating the constitution of the CoC by admitting sham and inflated claims from unsecured financial creditors. Many of these creditors are believed to be dummy or proxy entities controlled by ex-promoters who orchestrated the original bank fraud.
This manipulation effectively grants decisive voting power to the suspended promoters, thereby marginalizing genuine public sector bank creditors. The ED's ongoing operations aim to dismantle these fraudulent networks and restore integrity to the insolvency resolution framework.
