NCLAT upholds NCLT order in Smaaash insolvency case

The National Company Law Appellate Tribunal (NCLAT) has upheld a ruling by the National Company Law Tribunal (NCLT) in November 2023, which invalidated the transfer of the Smaaash brand by founder Shripal Morakhia. The NCLT found the transfer to be fraudulent, ordering the return of the brand to the bankrupt Smaaash Entertainment Pvt Ltd (SEPL). This decision followed a petition by the resolution professional, Bhrugesh Amin, who argued that Morakhia's actions had unjustly stripped SEPL of critical assets, significantly impacting its value and potential resolution plans.

The NCLT's order highlighted collusion between Morakhia and associated firms to siphon off valuable assets, including the Smaaash brand, through a back-dated agreement in 2022. The ruling directed Fun Gateway, the recipient of the brand, to return all benefits gained from its use and prohibited further utilization. Fun Gateway initially contested the ruling but later withdrew its appeal, resulting in the NCLAT dismissing the case, thereby affirming the original decision.