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2021 (9) TMI 1207 - Tri - Insolvency and BankruptcyPreferential transaction or not - transfer of amount by Corporate Debtor - Section 43 (1) and 44 of Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Applicant has failed to provide substantial proof to term the transaction as the preferential transaction. Moreover, the amount paid to Respondent No. 1 was a mere refund of amount that was advanced to M/s Mind Estates Private Limited for booking of office premises for the Corporate Debtor Company even before the initiation of CIRP proceedings. Respondent No. 1 had ordinarily been providing loans and getting repaid which proves that the Corporate Debtor Company and the Respondent No. 1 were into business transactions on regular basis - the Resolution Professional has himself not made out his case and the transaction in question fails to be that of a Preferential Transaction, having been made in Ordinary course of business. There was no intent to deceive the company through this transaction nor the Corporate debtor Company had any other ulterior motive other than merely re-paying the Respondent her advanced amount for booking of office premise with M/s Mind Estates Private Limited - Moreover, the Applicant has failed to conduct Forensic Audit which he was supposed to do, to bring out the relevant facts for moving this Application forward. Application allowed.
Issues Involved: Preferential Transaction, Ordinary Course of Business, Refund of Unsecured Loan, Compliance with CIRP Regulations, Forensic Audit.
Detailed Analysis: 1. Preferential Transaction: The primary issue revolves around whether the transfer of INR 47,26,000/- by the Corporate Debtor to Respondent No. 1 constitutes a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code (IBC), 2016. The Applicant, the Resolution Professional, argued that this payment was preferential as it put Respondent No. 1 in a beneficial position over other creditors. The Applicant highlighted that the payment was made within the look-back period and was not in the ordinary course of business, thus meeting the criteria under Section 43(2)(b) of the IBC. 2. Ordinary Course of Business: The Respondents countered that the payment was a refund of an amount advanced for booking office premises, which was part of the regular business transactions. The Respondent No. 1 had been providing unsecured loans to the Corporate Debtor since 2013, and the transactions were consistent with the ordinary course of business. The Tribunal noted that Respondent No. 1 had been regularly providing loans and receiving repayments, indicating ongoing business transactions. 3. Refund of Unsecured Loan: The Respondents provided evidence that the amount in question was a refund of an advance given to M/s Mind Estates Private Limited for office premises booking, which was later canceled. The Corporate Debtor received the refund from M/s Mind Estates and subsequently returned INR 47,26,000/- to Respondent No. 1. The Tribunal accepted this explanation, noting that the transaction was a mere refund and not preferential. 4. Compliance with CIRP Regulations: The Applicant claimed compliance with Regulation 35A of the CIRP Regulations, stating that the determination of the preferential transaction was made within the stipulated time frame. However, the Tribunal found that the Applicant failed to provide substantial proof to support the claim of a preferential transaction. The Tribunal also noted that the Applicant did not conduct a forensic audit, which could have provided relevant facts. 5. Forensic Audit: The Tribunal criticized the Applicant for not conducting a forensic audit, which is essential for substantiating claims of preferential transactions. The lack of a forensic audit weakened the Applicant's case, as it failed to provide concrete evidence of any ulterior motive or intent to deceive. Findings: The Tribunal concluded that the Applicant failed to prove that the transaction was preferential. The payment was deemed a bona fide transaction in the ordinary course of business, and there was no intent to deceive or defraud other creditors. The Tribunal emphasized that the transaction was a refund of an advance and part of regular business dealings. Consequently, the Tribunal dismissed the application, stating that the Resolution Professional did not make a convincing case for a preferential transaction. Order: The application bearing IA No. 1396 of 2020 in C.P (IB) No. 3540 /MB/C-II/2018 was dismissed with no costs. The file was ordered to be consigned to records. Date of Judgment: 23rd September 2021.
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