Tribunal holds repayment of unsecured loan and selective vendor payment were outside ordinary course of business; beneficiaries and ex-management directed to restore money to assignee of NRRA.
The National Company Law Tribunal (NCLT), Principal Bench, New Delhi, has held that two payments made by M/s Pellet Energy Systems Private Limited before insolvency were preferential transactions under the Insolvency and Bankruptcy Code, 2016, and ordered their reversal.
A bench comprising Justice Anupinder Singh Grewal, President, and Ravindra Chaturvedi, Member (Technical), allowed an application filed under Section 43 read with Section 44 of the IBC in relation to payments aggregating Rs 13.50 lakh. The application was originally filed by the erstwhile liquidator, Ms. Reshma Mittal, and later pursued by C.A. Manjit Anjna, who was substituted as the assignee of the company’s Not Readily Realizable Assets (NRRA) under Regulation 37A of the Liquidation Process Regulations.
The tribunal examined two transactions identified in a transaction audit report: repayment of Rs 2 lakh to Manish Kumar Tripathi, an unsecured creditor, and payment of Rs 11.50 lakh to Adarsh Enterprises, an old vendor. Both recipients were treated as unrelated parties, and the payments were made within the one-year look-back period prescribed under Section 43(4)(b) of the IBC.
The NCLT held that the payments satisfied the ingredients of Section 43(2) because they amounted to transfers of the corporate debtor’s property for the benefit of creditors on account of antecedent debts, and placed the recipients in a better position than they would have occupied in liquidation under Section 53. The bench also rejected the argument that the transactions were made in the ordinary course of business, noting that the respondents had produced no documentary material to support that claim.
The tribunal further observed that proving fraudulent intent is not necessary for a finding of preferential transaction under Section 43, since the provision operates through a deeming fiction. Citing earlier decisions, including Rajesh Toshniwal v. Kamal Nayan Jain and GVR Consulting Services Pvt. Ltd. v. Pooja Bahry, the bench reiterated that unsupported pleas of ordinary course of business cannot defeat an avoidance application.
Significantly, the corporate debtor had already been dissolved after liquidation. However, the tribunal held that the avoidance proceedings could still continue because the NRRA, including the present application, had been assigned to the successful purchaser under the liquidation regulations. The amounts recovered are to be dealt with in terms of the assignment deed, including remittance of 50% of the realisation to Punjab National Bank, the secured financial creditor.
In its final order, the NCLT declared the Rs 2 lakh payment to Manish Kumar Tripathi and the Rs 11.50 lakh payment to Adarsh Enterprises as preferential transactions. It directed Respondent No. 3, along with Respondent Nos. 1 and 2, and Respondent No. 4, along with Respondent Nos. 1 and 2, to jointly and severally pay the respective amounts to C.A. Manjit Anjna, assignee of the NRRA.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Section 43 - Repayment of unsecured loan and selective payment to old vendor within look-back period to non-related parties, when not shown to be in ordinary course of business, amount to preferential transactions - Beneficiaries along with persons in management can be directed jointly and severally to restore amounts to assignee of Not Readily Realizable Assets even after dissolution of corporate debtor.
Statutory provision(s): Section 43, Section 44, Section 53 of the Insolvency and Bankruptcy Code, 2016, Regulation 37A, Regulation 44A of the IBBI (Liquidation Process) Regulations, 2016
