Insolvency proceedings are built around a simple objective: protect the interests of creditors, preserve value and provide a structured process for resolving a company's financial distress.
But the process depends heavily on the integrity and independence of the professionals managing it.
When claims are questioned, creditors are admitted or rejected, and resolution plans are evaluated, every decision can have significant financial consequences.
A recent Enforcement Directorate investigation connected with the Best Foods case has brought these issues into focus.
According to an ED press release dated August 12, 2026, the agency arrested Jitesh Gupta, an insolvency professional who had acted as Interim Resolution Professional/Resolution Professional (IRP/RP) in the Corporate Insolvency Resolution Process (CIRP) of Homestead Infrastructure Development Pvt. Ltd. and Golden Peacock Residence Pvt. Ltd. He was arrested under Section 19 of the Prevention of Money Laundering Act, 2002, and subsequently remanded to ED custody for further investigation.
The case raises an important question for businesses, creditors and insolvency professionals:
What happens when the integrity of the resolution process itself becomes part of a financial investigation?
How the Best Foods Investigation Began
The ED stated that its investigation originated from an FIR registered by the Central Bureau of Investigation (CBI) against Best Foods Ltd. under various provisions of the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988.
According to the investigation, Dinesh Gupta, while in control of Best Foods Ltd. and related entities, allegedly diverted loan funds through dummy and shell entities and laundered the resulting proceeds of crime.
The investigation subsequently examined the conduct of Jitesh Gupta in his role as IRP/RP.
This is where the insolvency process itself became central to the allegations.
Why the IRP/RP's Role Matters
An insolvency professional occupies an important position within the CIRP.
The professional is involved in managing key aspects of the resolution process, including dealing with creditor claims and facilitating the resolution framework.
According to the ED, Jitesh Gupta allegedly re-admitted claims that he had previously rejected as spurious and fraudulent. The agency stated that this altered the composition of the Committee of Creditors (CoC).
The ED further alleged that he facilitated a resolution plan that was submitted as a front for Dinesh Gupta and funded through an entity controlled by him. The agency also stated that he recommended a person connected with Dinesh Gupta as a prospective resolution applicant.
These allegations demonstrate why decisions made during insolvency proceedings require a high level of independence and documentation.
A change in the composition of creditors can potentially influence the direction of the resolution process.
A resolution applicant's connection with an existing stakeholder can also raise questions that require careful examination.
The NCLT Had Earlier Recorded Adverse Findings
The ED's press release also refers to proceedings before the National Company Law Tribunal (NCLT).
According to the agency, the NCLT, through an order dated September 9, 2025, recorded adverse findings against Jitesh Gupta.
The tribunal held that he had acted beyond his authority by relying on fabricated and improperly submitted documents and directed his replacement as Resolution Professional.
This part of the matter is particularly relevant from a governance perspective.
It shows how concerns about the conduct of an insolvency professional can arise through the insolvency framework itself before becoming part of a broader enforcement investigation.
For professionals working in insolvency, the message is straightforward:
Every major decision needs to be defensible, properly documented and within the authority granted by the applicable legal framework.
Financial Transactions Became Another Part of the Investigation
The ED also stated that its investigation identified a banking trail involving unexplained financial transactions received by Jitesh Gupta from several persons connected with Dinesh Gupta, Best Foods Ltd. and its group entities.
According to the agency, no legitimate consideration for those transactions had been found on record.
This is an important Financial compliance lesson.
A bank transfer by itself does not necessarily establish wrongdoing.
However, when a professional involved in a sensitive financial process receives money from individuals connected with parties whose interests are being considered within that process, the transaction may require careful examination.
The obvious questions become:
- Who made the payment?
- Why was it made?
- What service or consideration supported it?
- Was it properly disclosed?
- Was there an agreement?
- Was it recorded in the relevant financial records?
- Did the transaction create an actual or perceived conflict of interest?
A transparent answer to these questions can be critical.
Independence Is More Than a Formal Requirement
In an insolvency process, independence cannot simply be a declaration on paper.
It has to be reflected in conduct.
An insolvency professional may have to make decisions affecting creditors, applicants, stakeholders and the value of the distressed company.
That means decisions should be based on the facts and applicable rules rather than personal relationships or undisclosed financial interests.
The Best Foods investigation, based on the allegations outlined by the ED, demonstrates why this principle matters.
If a professional is accused of facilitating a resolution plan connected to a particular individual while also receiving unexplained financial transactions from connected persons, questions about independence naturally become significant.
This does not mean every transaction with a connected person is automatically improper.
It means that transactions capable of creating a conflict need to be identified, documented and appropriately addressed.
What Businesses and Creditors Can Learn
The case is specific to the Best Foods investigation, but its broader lessons apply to companies participating in insolvency proceedings.
1. Keep Documentation Complete
Major decisions, claims, rejections, approvals and recommendations should have proper supporting records.
2. Review Claims Carefully
Creditor claims should be supported by appropriate documentation and independently assessed.
If a previously rejected claim is reconsidered, the reason and supporting basis should be clearly documented.
3. Identify Conflicts Early
Relationships between resolution applicants, creditors, promoters, professionals and other stakeholders should be reviewed carefully.
4. Maintain Transparent Financial Records
Payments involving professionals or stakeholders should have a clear business or professional basis.
5. Preserve the Decision Trail
It should be possible to understand why a particular decision was taken and what information was considered at the time.
6. Take Red Flags Seriously
Unusual payments, unexplained relationships, questionable documents or sudden changes in creditor positions deserve closer review.
Why Financial Due Diligence Matters in Insolvency
Insolvency proceedings are already financially complex.
A distressed company may have:
- Multiple creditors
- Outstanding loans
- Related-party transactions
- Complicated ownership structures
- Disputed claims
- Multiple legal proceedings
- Assets with uncertain valuations
- Potentially incomplete financial records
In such an environment, financial due diligence becomes extremely important.
The objective is not simply to identify how much money a company owes.
It is also to understand how the company's financial position was created and whether the records accurately reflect the underlying transactions.
Where there are concerns about shell entities, diverted funds or unexplained payments, the financial trail becomes even more important.
The Importance of Professional Accountability
The insolvency framework relies on professionals performing their responsibilities with care and independence.
When that trust is questioned, the consequences can extend beyond one individual.
Creditors may become uncertain.
Resolution processes can face additional scrutiny.
Potential investors may become more cautious.
And the overall objective of resolving distressed businesses efficiently can become more difficult.
That is why professional accountability is not merely a regulatory concept.
It is an important part of protecting the credibility of the insolvency ecosystem.
What Should Companies Do When They Identify a Compliance Concern?
If a company, creditor or professional discovers unexplained transactions or questionable documentation during an insolvency process, ignoring the issue is rarely the best approach.
A structured review should consider:
What exactly happened?
Who was involved?
What documents support the transaction?
Was the transaction properly recorded?
Was there a potential conflict of interest?
Were the required approvals obtained?
Does the financial record match the underlying transaction?
Getting these questions answered early can help organisations understand the nature and seriousness of a potential problem.
Shunyatax Global Insight
Facing Financial Irregularities or Insolvency-Related Compliance Concerns?
At Shunyatax Global, we believe financial compliance becomes most valuable when it helps identify risks before they develop into larger regulatory or financial problems.
For businesses involved in insolvency, restructuring or complex financial transactions, maintaining accurate records and understanding the movement of funds can be critical.
If your organisation is dealing with unexplained transactions, financial irregularities, accounting concerns, audit issues or complex compliance requirements, Shunyatax Global can help review the financial records, identify potential gaps and establish a clearer financial trail.
Our approach is focused on understanding the numbers behind the transaction—not simply recording them after the fact.
If you are facing a financial or compliance concern, speak with Shunyatax Global before the issue becomes more complicated.