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TMI Blog2023 (8) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... t able to give due instructions, to prefer the 'Appeal', well 'within 30 days from the date of Impugned Order, on 25.01.2023, passed by the 'Adjudicating Authority' / 'Tribunal', in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021. 4. This 'Tribunal', on being subjectively satisfied, as to the reasons ascribed for, and by on behalf of the 'Petitioners / Appellants', in regard to the 'Condonation of delay of 5 days', in preferring, the instant 'Appeal', by adopting a 'practical', 'liberal', 'purposeful', 'meaningful', a 'pragmatic', and a 'rational' approach, extends its 'Judicial Arm of Generosity', in 'Condoning' the 'delay in question', to prevent an 'Aberration of Justice', and to 'Promote Substantial Cause of Justice', accordingly, allows the 'IA No. 335 of 2023 in Comp. App (AT) (CH) (INS.) No. 96 of 2023', but, without costs. JUDGMENT (Virtual Mode) Justice M. Venugopal, Member (Judicial): Background: Comp. App (AT) (CH) (INS.) No. 96 of 2023: The 'Appellants / Respondent Nos. 1, 3 & 5', have preferred the instant Comp. App (AT) (CH) (INS.) No. 96 of 2023, as an 'Aggrieved Persons', in respect of the 'impugned order', dated 25.01.2023 in IA (IBC) / 206 / KOB / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to the corporate debtor from the person or persons benefited by such void transaction. Further in this application the applicant has not furnished sufficient materials in this regard; hence no order has been passed in this regard and liberty is granted to the applicant to take necessary steps to recover the amount involved in the sale transaction concluded during the moratorium period." and resultantly, directed the 1st Appellant / 1st Respondent, to pay a Sum of Rs.3,96,04,622/-, the 2nd Appellant / 3rd Respondent, was directed to pay a Sum of Rs.30,39,400/- and the 3rd Appellant / 5th Respondent, was directed to pay a Sum of Rs.37,86,943/- and the 6th Respondent therein, was directed to pay a Sum of Rs.47,13,869/- to the Respondent / Resolution Professional / Petitioner, within one month from today, failing which, the said Amounts, are to be paid with 12% Interest Per Annum, from the 'Date of the Order', to till the 'Date of Realisation of Amount', and in respect of 2nd and 4th Respondents therein, the 'Petition / Application', was 'Dismissed', but, without costs. Appellants' Contentions: 3. Assailing the 'Validity', 'Propriety' and 'Legality' of the 'impugned order', date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty of the RP to come to conclusive determination before filing an application with the Adjudicating Authority. Simply by repeating the extracts or observations made in the forensic auditors report, the RP could not make an independent determination about the nature of transactions as required by Regulation 35A (2) of the CIRP Regulations." 8. The Learned Counsel for the Appellants, cites the decision in Kshitiz Chhawchharia v. Madhumalati Merchandise Private Limited & Ors., reported in (2022) ibclaw.in 630 NCLT Kolkata, wherein, at Paragraph Nos. 6.7 to 6.9, it is observed as under: 6.7. "According to regulation 35A(1) of the CIRP Regulations, the Resolution Professional shall form an opinion whether the corporate debtor has been subjected to any transaction covered under sections 43, 45, 50 or 66 on or before the seventy-fifth day of the insolvency commencement date. According to the regulation 35A(2), on or before the one hundred and fifteenth day of the insolvency commencement date, the Resolution Professional is also required to make a determination to that effect. 6.8. Further, Regulation 35A(3) of the CIRP Regulations provides that upon making such determination under r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exclusion of the rest'. We may usefully take note of the meaning, definition and basic ingredients of 'preference' and 'preferential transfer', as defined in Black's Law Dictionary : preference. (15c) 1. The favouring of one person or thing over another. 2. The person or thing so favoured. 3. The quality, state, or condition of treating some persons or things more advantageously than others. 4. Priority of payment given to one or more creditors by a debtor; a creditor's right to receive such priority. 5. Bankruptcy. PREFERENTIAL TRANSFER. * insider preference. (1981) A transfer of property by a bankruptcy debtor to an insider more than 90 days before but within one year after the filing of the bankruptcy petition. * liquidation preference. (1936) A preferred shareholder's right, once the corporation is liquidated, to receive a specified distribution before common shareholders receive anything. * voidable preference. See "preferential transfer" *** *** *** "preferential transfer. (1874) Bankruptcy. A prebankruptcy transfer made by an insolvent debtor to or for the benefit of a creditor, thereby allowing the creditor to receive more than its proportionate share of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to the decision in Down Distributions Co. Pty. Ltd. v Associated Blue Star Pty Ltd. (in liq) (1948) 76 CLR 463, wherein, it is observed as under: "As was pointed out in Burns v. McFarlane 3 the issues in sub-section 2 (b) of Section 95 of the Bankruptcy Act 1924-1933 are (1) good faith; (2) valuable consideration; and (3) ordinary course of business." This last expression it was said "does not require an investigation of the course pursued in any particular trade or vocation and it does not refer to what is normal or usual in the business of the debtor or that of the creditor." It is an additional requirement and is cumulative upon good faith and valuable consideration. It is, therefore, not so much a question of fairness and absence of symptoms of bankruptcy as of the everyday usual or normal character of the transaction. The provision does not require that the transaction shall be in the course of any particular trade, vocation or business. It speaks of the course of business in general. But it does suppose that according to the ordinary and common flow of transactions in affairs of business there is a course, an ordinary course. It means that the transaction must fall into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance of 'Substantial Cause of Justice'. Preferential Transaction: 17. Section 43 of the I & B Code, 2016, defines 'Preferential Transaction', referring to the opinion of a 'Resolution Professional', which implies that the 'Opinion', was reached at during a 'Resolution Stage', during the 'pendency of Resolution Process', the ingredients of Section 43 of the 'Code', can be pressed into service. Onus: 18. When a 'Transaction', is purported to be a 'Preferential', the 'burden', falls on the intended 'Beneficiary', to 'repudiate the presumption' that, on the 'balance of probabilities', the alleged 'preferer', was acting solely, by 'reference to proper commercial consideration', as per decision in Oxford Pharmaceuticals Ltd., Re (2009) 2 BCLC 485. Preference : 19. A preference, shall be deemed to be given at a relevant time, if 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 a 'Preference', is given to a 'Person', other than the 'Related Party', during the period of one year, preceding the 'Insolvency Commencement Date'. Presumption of Preference : 20. To be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.12.2019 and 25.02.2022, which clearly falls within the four corners of Section 43 of the I & B Code, 2016. As a matter of fact, these 'Transactions', the 'Corporate Debtor', had carried out, during the 'Look Back Period', are 'Preferential in Character', whereby, the 'Loss', was caused to the 'Corporate Debtor', to an extent of Rs.6,35,61,367/-. 26. A mere glance of the IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the Respondent / Resolution Professional / Petitioner), indicates that the 1st Appellant / 1st Respondent, had withdrew a Sum of Rs.3,66,54,622/- (amount withdrawn from 'Bank' - Preferential Payments and in respect of the 1st Appellant / 1st Respondent), the Journal Adjustment, providing 'Credit' to 'Steel House Pvt. Ltd.', resulting in a Bank Transfer from Steel House to the 1st Appellant / 1st Respondent, amounted to Rs.262,000/-. Likewise, the Cash Payment from Steel House Pvt. Ltd., to the 1st Appellant / 1st Respondent, amounted to Rs.24,88,000/-. 27. Apart from the above, the 1st Appellant / 1st Respondent withdrew a Sum of Rs.50,00,000/- from 'Bank', to transfer it to George Kurian. Also that, Rs.2,76,752/- was the Journal Adjustment, in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the 'Code', and hence, directed to be awarded. 34. According to the 'Resolution Professional / Petitioner', the conduct of the 'Suspended Directors', is / was 'detrimental', to all the 'Creditors' interest, and therefore, they were to be directed to refund the said Sum, which could be utilised, to settle the 'Creditors Dues'. In short, to restore the Loss, caused to the 'Corporate Debtor', the Resolution Professional / Petitioner, had filed IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Before the 'Adjudicating Authority' / 'Tribunal'), for seeking necessary 'Orders' / 'Directions'. 35. The Appellants / Respondent Nos. 1 to 5 (in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021), were the 'Directors' of the 'Corporate Debtor', and that the 'Paptrade India Pvt. Ltd. / Company', being a 'Related Party', advanced some 'Loans', to the 'Corporate Debtor', and therefore, they were 'Unsecured Creditors' of the 'Corporate Debtor', 36. It is brought to the fore, that the 'Corporate Debtor', had transferred Sums, from its 'Bank Account', to the 'Appellants / Respondents', with a view to 'Discharge its Antecedent Operational Debt', and by virtue of the 'Payments' so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in 'Preferential Transaction'. 42. As regards, the 'Credit Sale Transaction', that was complete after the initiation of 'Corporate Insolvency Resolution Process' Order, the 'Sale Transaction', effected by the 'Corporate Debtor', amounting to Rs.12,68,707/- to the 6th Respondent in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, was one, made during the 'Moratorium Period' and such a 'Transaction' in 'Law', does not come under the 'ambit' of Section 42 of the 'Code'. 43. In the 'impugned order' dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, the 'Adjudicating Authority' / 'Tribunal', had directed the 'Resolution Professional / Petitioner', to take necessary steps, to recover the Sum concerned in the 'Sale Transaction', effected during the 'Moratorium Period'. 44. Be that, as it may, this 'Tribunal', on a careful consideration of the contentions advanced on behalf of the 'Appellants', considering the facts and circumstances of the case, and on going through the 'impugned order' dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, passed by the 'Adjudicating Authority' / 'Tribunal', in directing the '1st Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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