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2023 (4) TMI 1137 - AT - Insolvency and BankruptcyPreferential Transactions - appellant are related party to the Corporate Debtor or not - repayment to related parties and repayment to the non-related parties - HELD THAT - There is no dispute between the parties that repayment to related parties and repayment to the non-related parties were within the lookout period. The avoidance transaction in Insolvency Proceedings has been dealt with in the legislative schemes under several enactments relating to subject. We may have a look over the legislative scheme with regard to avoidance transaction prior to enforcement of IBC to appreciate the changes in the legislative scheme which has been brought by the IBC - Anuj Jain 2020 (2) TMI 1259 - SUPREME COURT was a case where the Hon ble Supreme Court was considering a case where IRP filed an Application for avoidance of certain transactions as preferential transactions where the Corporate Debtor had created security interest by way of mortgage in favour of lenders of third party that is JAL on the unencumbered land of the Corporate Debtor which transaction were sought to be avoided by RP by filing an application. The Adjudicating Authority has declared the said transaction as preferential transaction. Taking financial assistance from related and non-related parties which transactions are subject of enquiry in the present Appeal can not be held to be ordinary course of business of the Corporate Debtor. The expression ordinary course of business or financial affairs of the Corporate Debtor has to be read ejusdem generis . The expression financial affairs of the Corporate Debtor cannot be given an extended meaning as contended by Learned Counsel for the Appellants that all financial transactions done by the Corporate Debtor is covered within expression financial affairs hence the loan taken by the corporate debtor from different related and non-related parties is part of the financial affairs cannot be accepted - Undistinguished common flow of the business of the Corporate Debtor does not contemplate any such or particular situation where the Corporate Debtor s claim that its financial position became unstable due to market condition and had started arranging money from their relatives and other parties. Money arranged from relative and other parties by the Corporate Debtor thus cannot be held to be part of ordinary course of business or part of financial affairs. When the law mandates that any transfer made in pursuance of order of Court can not preclude such transfer to be deemed to be giving a preference there is no occasion for not accepting any transaction made in pursuance to a notice or demand issued by the Lender or by threat extended by lender for initiating any legal proceeding as preferential transaction. The legislative scheme which is clarified by the above proviso clearly leads to the conclusion that any transaction under any notice, demand or threat shall not lose its character of preferential transaction merely on the above reason. The submissions of the Appellant on the ground that the transaction was entered into by the Corporate Debtor due to pressure put on it has no relevance and shall not change the nature of transaction from preferential transaction. Whether the composite application under Section 43, 44, 45, 46, 66, 67 and 60(5) of the Code could not have been filed by the RP? - HELD THAT - The ingredients of Section 43, 45 and 66 are different and Resolution Professional is expected to keep such requirement in view while making motion to the Adjudicating Authority - When we look into the Application which has been filed in the present case the Resolution Professional has in the avoidance application in his application has dealt with preferential transaction undertaken by the Corporate Debtor and undervalued transaction undertaken by the Corporate Debtor as well as fraudulent transaction in different heads - thus allegations and averments were separately made and filing of composite application does not lead to any infirmity in the Application. We are not persuaded to accept the submission of the Appellant that since the composite Application was filed it ought to have been rejected. The Adjudicating Authority has rightly allowed the Application filed by the Resolution Professional and declared the preferential transactions undertaken in favour of the Appellants and directed the Appellants to refund the amount within three months - Appeal dismissed.
Issues Involved:
1. Whether the transactions in question were preferential transactions under Section 43 of the Insolvency and Bankruptcy Code, 2016. 2. Whether the transactions were made in the ordinary course of business or financial affairs of the Corporate Debtor. 3. Whether the composite application filed by the Resolution Professional under multiple sections of the Code was maintainable. 4. Whether the transactions made under pressure or threat could be considered as preferential transactions. Summary: Issue 1: Preferential Transactions The National Company Law Tribunal (NCLT) held that the transactions by the Corporate Debtor in favor of the Appellants were preferential transactions under Section 43 of the Insolvency and Bankruptcy Code, 2016. The transactions involved repayments of unsecured loans to both related and non-related parties within the look-back period specified under the Code. The Appellants were directed to refund the respective amounts. Issue 2: Ordinary Course of Business The Appellants argued that the transactions were in the ordinary course of business and financial affairs of the Corporate Debtor. However, the Tribunal, relying on the Supreme Court's judgment in "Anuj Jain, IRP for Jaypee Infratech Limited Vs. Axis Bank Ltd. & Ors.," held that the transactions did not fall within the ordinary course of business or financial affairs. The Tribunal emphasized that the transactions must be part of the undistinguished common flow of business, which was not the case here. Issue 3: Composite Application The Appellants contended that a composite application under Sections 43, 44, 45, 46, 66, 67, and 60(5) of the Code was not maintainable. The Tribunal referred to the Supreme Court's observation in "Anuj Jain" that the parameters and requisite inquiries for different sections are distinct. However, since the Resolution Professional had separately dealt with different heads of allegations in the application, the composite application was deemed maintainable. Issue 4: Transactions Under Pressure The Appellants argued that the transactions were made under pressure from lenders, including threats of legal action, and thus should not be considered preferential. The Tribunal rejected this argument, stating that the intent or pressure behind the transactions is irrelevant under Section 43. The proviso to Section 43(3) clarifies that even transfers made pursuant to court orders can be deemed preferential. Conclusion: The Tribunal upheld the NCLT's decision, confirming that the transactions were preferential and directing the Appellants to refund the amounts within three months. The appeals were dismissed, and the Tribunal granted an additional three months for compliance.
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