The National Company Law Tribunal (NCLT) has given the green light for the commencement of the corporate insolvency resolution process (CIRP) against Rahul Yadav’s Broker Network (4B Networks Private Limited). The decision follows a petition filed by Krishkan Investment Private Limited, a Kolkata and Mumbai-based non-banking financial company (NBFC), regarding an unresolved debt of INR 1.2 Cr.
Insolvency Order and Financial Background
The NCLT’s Mumbai bench admitted Krishkan Investment’s petition under section 7 of the Insolvency and Bankruptcy Code, 2016. The financial creditor, Krishkan Investment, filed the petition after Broker Network failed to clear an outstanding amount of INR 1.2 Cr, originating from a corporate loan taken from Ace Housing and Construction Private Limited.
As per the petition, 4B Networks borrowed INR 3 Cr from Ace Housing in the form of an Inter Corporate Deposit or corporate loan facility with a simple interest of 24% per annum in January 2023. Despite repaying INR 2 Cr in May 2023, an outstanding amount of INR 1.09 Cr remained, escalating to INR 1.20 Cr by August 2023, leading to the insolvency petition.
Legal Tangle and Related Party Transactions
Ace Housing, the original lender, later transferred the corporate loan to Krishkan Investments, tasking the NBFC with recovering the outstanding amount. The legal proceedings are expected to disrupt existing lawsuits and proceedings against Broker Network. The NCLT’s order prohibits the institution or continuation of suits against the corporate debtor, including the execution of any judgments.
The insolvency order also bars Broker Network from transferring or disposing of any assets and restricts actions seeking to foreclose or recover any interest pending. This move could have significant implications for the ongoing legal challenges faced by Rahul Yadav and Broker Network.
Ongoing Investigations and FIRs
Rahul Yadav, CEO and co-founder of Broker Network, along with several employees, has been named in multiple FIRs (First Information Reports) related to non-payment of dues and allegations of fraud. The legal troubles include an FIR filed by Vikas Nowal for an alleged INR 10 Cr fraud and a second complaint by Info Edge, Broker Network’s chief backer, alleging a fraud of INR 288 Cr.
Impact on Investigations and Future Developments
It remains to be seen whether the NCLT’s initiation of the insolvency process will impact the ongoing investigations and legal proceedings against Broker Network. Inc42 has reached out to the involved parties for comments on the potential implications of the insolvency order, and updates will be provided as responses are received.
