2019 (5) TMI 1801 - AT - Insolvency and Bankruptcy

Transfer of a sum by the Promoter in favour of Yajur International Pvt. Ltd. (Operational Creditor) - allegation that the transfer is in violation of Section 14 of the Insolvency and Bankruptcy Code, 2016 (I B Code) - HELD THAT - In the present case, the question relating to supply of materials during the Corporate Insolvency Resolution Process is not required to be determined as the transfer of ₹ 1,50,70,000/- were made by Promoter in favour of M/s Yajur International Pvt. Ltd. with respect to the supplies, which were made prior to 13th June, 2018, i.e., date of order of moratorium. Admittedly, the aforesaid amount was transferred after the order of moratorium was passed on 13th June, 2018 and just before the joining of Resolution Professional, who joined on 22nd June, 2018 at 11 54 AM. The Promoter hurriedly released the payment in favour of M/s. Yajur International Pvt. Ltd. the moment the order of moratorium passed and before the joining of the Resolution Professional - the impugned order having passed by the Adjudicating Authority, no interference is called for. Appeal dismissed - decided against appellant.

Summary

Issues: Violation of Section 14 of the Insolvency and Bankruptcy Code, 2016

In the present case, the Appellate Tribunal considered two appeals filed by the Promoter of a Corporate Debtor and Yajur International Pvt. Ltd. against a common order passed by the Adjudicating Authority. The order held that a transfer of funds by the Promoter to Yajur International Pvt. Ltd. was in violation of Section 14 of the Insolvency and Bankruptcy Code, 2016 (I&B Code).

Analysis:

1. The Appellate Tribunal noted the arguments presented by the Promoter's counsel, stating that the application filed by the Resolution Professional regarding the transfer in question was not maintainable under various sections as it did not involve related party transactions or preferential transfers. However, the Tribunal found that the Adjudicating Authority correctly determined that the transfer violated Section 14 of the I&B Code, making the application maintainable under Section 74 of the I&B Code.

2. It was established that the application under Section 7 was filed by a Financial Creditor against the Corporate Debtor, and an order of moratorium was passed on the same date. The payment in question to Yajur International Pvt. Ltd. was for supplies made prior to the date of admission into Corporate Insolvency Resolution Process, not during the process itself.

3. The counsel for Yajur International Pvt. Ltd. argued that other suppliers who supplied materials before the moratorium date were also paid by the Resolution Professional, which was disputed by the Resolution Applicant's counsel. The Operational Creditor claimed to still be supplying materials during the resolution process and receiving payments, but this was denied by the Resolution Professional's counsel.

4. The Tribunal emphasized that the transfer of funds to Yajur International Pvt. Ltd. by the Promoter was done after the moratorium order was passed and just before the Resolution Professional took charge. The Tribunal observed that the Promoter hastily made the payment to Yajur International Pvt. Ltd. at that time, leading to the conclusion that the Adjudicating Authority's order did not require interference.

5. Ultimately, the Appellate Tribunal found no merit in the appeals and dismissed them. However, considering the circumstances, no order was given regarding costs. The decision was based on the violation of Section 14 of the I&B Code due to the transfer of funds by the Promoter to Yajur International Pvt. Ltd. before the Resolution Professional's involvement, despite the moratorium being in place.