AdminEOW cheating case Mumbai—The Mumbai Economic Offences Wing has launched a Rs 90 crore fraud probe into the collapsed Provogue textile firm following a contentious e‑auction that saw the company sold to Plutus Investments. The case, triggered by a complaint from former Provogue managing director Nikhil Chaturvedi, alleges that key executives deliberately undervalued assets, eluded debt recovery, and manipulated the insolvency liquidation. The allegations raise fresh concerns over digital liquidation oversight and the integrity of e‑auction processes in India’s growing online asset market.
Background and Context
Provogue, a Mumbai‑based garment manufacturer, suffered a catastrophic fire at its Daman factory in 2014, turning its Union Bank of India loan into a non‑performing asset. The bank commenced an Insolvency and Bankruptcy Code (IBC) proceeding and appointed Resolution Professional Amit Gupta to steer the sale. After multiple failed auction attempts, the company was finally sold via a National Company Law Tribunal (NCLT)‑backed e‑auction to Plutus Holding in March 2023 on a no‑liability basis.
However, the subsequent liquidation revealed glaring gaps. Export receivables amounting to Rs 32.71 cr from overseas transactions between 2018‑2023 remained unrecovered. More alarmingly, the valuation of the subsidiary, Elite Hong Kong—recorded at Rs 54.72 cr in the 2017‑18 financials and holding two Hong Kong immovable properties—was allegedly suppressed, diverting funds to sale proceeds. These findings suggest a systematic shortfall in due diligence during the digital auction, a scenario all too common in India’s fast‑growing online asset sale ecosystem.
Key Developments
In the FIR filed by Nikhil Chaturvedi on 20 November 2025, the following points are highlighted:
- Undervaluation and Asset Misrepresentation – The accused were accused of inflating the company’s liabilities and deflating its assets by manipulating valuation reports submitted to the court.
- Manipulated Liquidation Timeline – The liquidation was allegedly stalled for almost two years, allowing Plutus to secure assets at a heavily discounted price.
- Inadequate Valuer Disclosure – Three independent valuers were denied full balance sheets and essential documents, undermining the impartiality of the asset assessment.
- Beneficiaries – Arpit Khandelwal, director of Plutus Investments, and former employees, including Rakesh Rawat and Sameer Khandelwal, are named as accused.
- Export Receivables Loss – The missing Rs 32.71 cr export receivables were identified as a significant loss component for the company’s stakeholders.
Vivek Toshniwal, CEO of Plutus, stated, “The allegations arise from misinterpretations. None of the individuals mentioned had direct ties to our company when we acquired Provogue. The FIR is filed with malafide intent after the NCLT’s due process.” He further emphasized that the e‑auction operated under the jurisdiction of the Tribunal and complied with all statutory mandates.
Impact Analysis
This case underscores the vulnerabilities of e‑auctions in the digital insolvency landscape. For investors, the primary risk is the potential undervaluation of assets, which can lead to significant financial losses. For employees and former staff of distressed companies, the ramifications are twofold: accusations may tarnish reputations and lead to prolonged legal battles. Importantly, foreign students and international residents who invest in Indian insolvency assets—often through offshore subsidiaries—might face hidden liabilities if dispute mechanisms are not transparent.
In a region where the startup ecosystem is booming and the Insolvency and Bankruptcy Code is being leveraged to unlock dormant assets, the Provogue case highlights the necessity for robust governance and transparent reporting. Policymakers may need to revisit the oversight frameworks around e‑auctions to mitigate fraudulent practices and protect all stakeholders.
Expert Insights and Practical Guidance
Financial analysts advise due diligence before committing to any e‑auction:
- Verify Asset Valuation – Obtain certified valuations from independent experts and cross‑check them with court submissions.
- Document Transparency – Ensure all relevant financial statements and export receivables are fully disclosed and accessible.
- Legal Liaison – Engage counsel experienced in IBC proceedings to scrutinise the auction process and identify any discrepancies.
- Risk Assessment for Students – International students contemplating internships or working in distressed companies should assess the company’s financial health and understand the potential impact of ongoing litigation.
- Monitoring Court Filings – Follow NCLT filings and Mumbai Police FIRs to stay updated on developments that may affect ownership or financial exposure.
Academics suggest the integration of blockchain-based audit trails for future e‑auctions to enhance traceability and minimise manipulation. Meanwhile, industry bodies are calling for stricter guidelines on the disclosure of prized assets such as immovable properties held offshore.
Looking Ahead
Lawmakers are expected to initiate amendments to the IBC Guidelines to strengthen the oversight of digital auctions and to enforce stricter penalties for misreporting. Meanwhile, the National Company Law Tribunal may consider mandating third-party verification of valuations before approvals. For stakeholders involved in the Provogue case, a series of judicial reviews is likely, potentially leading to a reversal of the liquidation award or restitution orders.
As India’s asset‑sale market continues to expand, investors, employees, and international students must remain vigilant. Clear, transparent procedures and robust legal safeguards will be key to preventing similar controversies in the future.
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