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TMI Blog2022 (8) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... pended Director of the Corporate Debtor and 2nd Appellant is the wife of the 1st Appellant. The Respondent / Liquidator filed an Application before the Learned Adjudicating Authority under Sections 35(1)(n), 43, 44, 45, 46, 48, 49, 60(5) and 66 of I&B Code, 2016 seeking reliefs as prayed therein to hold that certain transactions are preferential transactions and prayed the Authority to declare the said transactions as preferential transactions and sought directions to restore the position as it existed before such transaction. 3. The Learned Counsel submitted that the 1st Appellant filed reply to the said I.A. The Respondent/Liquidator has not produced any documents which the Liquidator relied upon nor served the said documents on the Appellants or their Counsel on record. The documents being "Transaction Audit Report" and "Forensic Audit Report" were not provided to the Appellants. It is submitted that the impugned transactions do not fall within the ambit of Sections 43, 45 or 66 of the Code, under which the findings are given. 4. The Learned Counsel further submitted that the Adjudicating Authority erred in entertaining the application filed by the Respondent under multiple pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in writing to the Liquidator clearly demonstrated that there was no enrichment by way of cash or bank transfer in favour of any person, but yet the same had not been considered both by the Liquidator by the Learned Adjudicating Authority. 9. The purported transaction of value Rs.6,28,000/- with the 2nd Appellant was again labelled as a preferential transaction without taking into account the explanation provided or the facts and circumstances and the above all the fact that it did not fall within the ambit of Section 43 of the Code. 10. The transaction to be at undervalue for the purpose of Section 45 has to satisfy sub-section (2) and should not have taken place in the ordinary course of business. In the instant case, the impugned transaction did not meet the said requirement. Further, no proofs have been adduced to show that the said transactions are undervalued within the meaning of the said section. 11. In view of the reasons as stated above, the Learned Counsel prayed this Bench to allow the Appeal by setting aside the impugned order. Respondent's Submissions: 12. The Liquidator filed a detailed reply and submitted that the Hon'ble Adjudicating Authority in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of fair procedure and natural justice. 14. On the point of provisions of law is concerned, the Respondent was empowered under Section 35(1)(n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the Corporate Debtor. Section 60(5) being a non-obstante clause empowers the Adjudicating Authority to have jurisdiction either to entertain or dispose of any application or proceeding by or against the Corporate Debtor or corporate person, any claim made by or against the Corporate Debtor or corporate person. 15. The Respondent had categorized each and every transaction separately showing their inherent nature and distinctiveness from each provision of law. The Hon'ble Adjudicating Authority assessed each transaction for its amount, nature of transaction, particulars and reason along with the remarks given by the Respondent. The Hon'ble Adjudicating Authority confirmed only two transactions from a list of such questionable transactions submitted by the Respondent. The list of such transactions was served to the Appellants as well. 16. It is submitted that the judgment of the Hon'ble Supreme Court in Anuj Jain IRP for J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 others as Respondents to the said application praying the Adjudicating Authority to hold that the loan of Rs.42,50,397/- repaid to the Director during the Financial Year 2017-18 is in preference to trade payables, statutory dues and salary to staff, during that year. Further, it is prayed that to hold that Rs.6,28,000/- paid to Mrs. Revathy Radhakrishnan w/o Suspended Managing Director on 01.07.2018 as loan to be repaid to the Corporate Debtor with interest and cost thereof. Apart from the above reliefs, the liquidator also sought various other reliefs as prayed in the application. (Page 124, Volume-1) 22. The Appellants have filed the detailed reply to the above application. After elaborate discussion, the Adjudicating Authority passed the following order: "43. In view of the fact that after conducting a Transaction Audit and Forensic Audit by Mr. Vibin Vincent, Chartered Accountant, he has reported that based on his analysis of Audited Financial Statements, various bank statements, and other explanations he has found preferential transaction of an amount of Rs.1,38,78,397/- during the relevant period. Out of which Mr. Reji Sivankutty (Suspended Managing Director) has transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the Financial Year 2017-18 and requested him to provide the following: a) Name of the Director from whom the loan is received. b) Agreement and terms for the loan. c) Mode of receipt of loan by the Company d) Date wise receipt details if not made in one payment e) Mode of repayment of loan f) Why preference was given to Director when other external creditors including statutory dues and salaries were outstanding? g) The bank account through which the above amount was collected with dates h) The bank account through which the above amount was repaid with the dates. However, no reply given by the Appellants to the above letter. 27. In the same letter at para 6 the Liquidator sought details with regard to Rs.6,28,000/- paid to Mrs. Revathy Radhakrishnan the 2nd Appellant herein, the amount paid on 01.07.2018 as a loan repaid. The clarification as sought by the Respondent in the above letter is as follows: (a) why opening balance was not found in the books for the loan taken. (b) copy of the board resolution for related party transaction under taken during 2015-16 to 2018-19. Further the Respondent requested them to provide details of the said payments st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading or wrongful trading. The auditor has given the report on all the above observations. However, the Adjudicating Authority confined to only preferential transactions of an amount of Rs.1,38,78,397/-. 31. At para 4.1, the auditor comes to a conclusion based on their analysis of audited financial statements, various bank statements and other explanations provided to them. It is observed that an amount of Rs.1,38,78,397/- is a preferential transaction during the relevant period (financial year) observing as under: "i) A loan of Rs.42,50,397/- has been repaid to the Director during the FY 2017-18, in preference to trade payables, statutory dues and salary to staff, which were increased by Rs.3,46,43,987.44 during FY 2017-18. ii) A preferential loan of Rs.6,28,000/- paid to Mrs. Revathy Radhakrishnan W/o suspended Managing Director on 01.07.2018. iii) Inventory Balance/SMS, Server Maintenance of worth Rs.90,00,000/- was transferred to M/s Sabkaa Payments Ltd. from August, 2018 which is still pending to be received from the subsidiary company. 32. The Auditor also gave his observations and conclusions on avoidance of undervalue transactions, defrauding creditors and fraudule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in Section 44. Sub-section (2): A corporate debtor shall be deemed to have given a preference, if - (a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and (b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53. Sub-section (4): A preference shall be deemed to be given at a relevant time, if - (a) it is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or (b) a preference is given to a person other than a related party during the period of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears expedient to observe that the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different. Specific material facts are required to be pleaded it a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relevant time, is entirely different. Hence, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority. 29.2 In the present case, it is noticed that NCLT in its detailed and considered order essentially dealt with the features of the transaction in question being preferential at a relevant time but recorded combined findings on all these three aspects that the impugned transactions were preferential, undervalued and fraudulent. Appropriate it would have been to deal with all these aspects separately and distinctively." This Tribunal bound by the judgment of the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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