ED Arrests Resolution Professional in Unique Case
The Enforcement Directorate (ED) has arrested Arvind Kumar, a former resolution professional for Richa Industries Ltd., marking the first instance of an RP being taken into custody for alleged collusion with the promoters of a bankrupt company. The arrest took place on Thursday, as part of ongoing investigations into fraudulent corporate resolutions and money laundering activities linked to insolvency proceedings at the National Company Law Tribunal (NCLT).
Kumar served as the resolution professional for Richa Industries from 2018 to 2025 and is accused of working with the company’s former promoter, Sandeep Gupta, to siphon off company assets while laundering the proceeds of the scheme. A court has since remanded him to ED custody for eight days.
Background on the Richa Industries Case
The corporate insolvency resolution process for Richa Industries began in 2018. However, the process stalled due to a lack of an approved resolution plan, leading the NCLT to order liquidation on June 11 of last year. As a result of the liquidation, the sale of Richa Industries yielded ₹40 crore for Indian Overseas Bank and Union Bank, a stark contrast to their combined claims of ₹696 crore, representing a significant loss of approximately 94%.
Details of the Allegations
Fraudulent Financial Practices
According to the ED’s investigation, Kumar allegedly collaborated with Gupta to cheat banks of hundreds of crores by diverting the company’s valuable assets to shell companies controlled by himself and his associates. Earlier this year, the ED had also arrested Gupta, asserting he had laundered valuable assets amid the insolvency proceedings.
The agency reported that bank records associated with Kumar revealed unexplained cash deposits that exceeded ₹80 lakh in his personal accounts during his tenure as RP. Additionally, Kumar received over ₹1 crore from related parties who had previously benefitted from payments by Richa Industries.
Modus Operandi of Collusion
The ED stated that Kumar’s actions reflect a broader scheme utilized in many corporate insolvency cases at the NCLT. This involved manipulating the composition of the Committee of Creditors (CoC) by admitting inflated or sham claims from unsecured financial creditors. Many of these creditors were allegedly proxies controlled by former promoters, which allowed suspended promoters to retain crucial voting power at the expense of legitimate creditors, primarily from the public sector.
The ED noted that through this system, the promoters orchestrated a facade that concealed the illegitimate operations as part of the corporate insolvency resolution process.
Reactions from Authorities
In light of this unprecedented arrest, a senior ED official stated, “This case highlights significant vulnerabilities in the insolvency resolution process and underscores the need for closer scrutiny of financial practices within corporate frameworks. The illicit collaborations between RPs and promoters can undermine the entire mechanism and harm genuine creditors, leading to extensive financial losses.”
Legal experts emphasize the importance of heightened regulatory oversight to mitigate such frauds. They argue that this incident may prompt the NCLT and other regulatory agencies to establish stricter measures to ensure that the integrity of the insolvency process is maintained.
Further Investigations and Implications
The arrest raises questions about the potential for more arrests and the extent of fraudulent activities within the insolvency framework. The ED is expected to deepen its investigation into Richa Industries and examine other similar cases to uncover widespread malpractices.
The implications of these fraudulent activities are significant, as they damage the credibility of the insolvency process, which is supposed to provide a safety net for distressed companies and their creditors. Without trust in the process, genuine investors and financial institutions may become wary of entering into future insolvency proceedings.
Next Steps for the Enforcement Directorate
The ED announced that it will continue to probe the financial transactions linked to both Kumar and Gupta, as well as other individuals connected to Richa Industries. The agency stressed that their investigation aims to recover lost assets and bring those responsible to justice.
Officials have indicated that they will also be reviewing the policies governing the oversight of resolution professionals, potentially leading to revisions designed to fortify the existing frameworks against such fraudulent activities.
Conclusion
This arrest serves as a significant milestone in ensuring accountability within the insolvency proceedings in India. With the ED’s commitment to tackling corporate fraud head-on, the landscape of financial governance may evolve, enabling a more secure environment for both creditors and companies undergoing distress.
Regulatory agencies may emerge from this case with greater authority and tools to investigate and curb corporate fraud, steering the financial system toward increased transparency and decreased corruption.