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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 ..... the Code, is fulfilled, considering the fact that the Insolvency beginning date, was 21.12.2021, and the Transactions, were held between the Related Parties / Appellants / Respondents, being the Former Directors of the Corporate Debtor. No wonder, the lookback period of two years, squarely applies to the facts of the instant case. Although, on behalf of the Appellants / Respondents, a stand was taken (Before the Adjudicating Authority), that the Transactions, were made in the Ordinary Course of their Business, and the amounts, withdrawn from the Corporate Debtor s Account, etc., and usurping the same in respect of the Antecedent Debt, cannot tantamount to carrying on business in an ordinary manner of the Corporate Debtor, or in the Financial Affairs of the Respondents. Looking at from any angle, the impugned transactions, are not exempted transactions, as per Section 43 (3) of the Code, in the considered opinion of this Tribunal - In the present case, the NPA, was made on 23.02.2021 and the transactions, pointed out by the Appellants / Respondents, were before the earlier Date of the NPA, is not omitted. As far as the present case is concerned, on account of the Preferential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay 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 / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the Respondent / Petitioner , under Section 43(1) read with Section 44 of the I B Code, 2016), passed by the Adjudicating Authority ( National Company Law Tribunal , Kochi Bench, Kochi). 2. While passing the impugned order , dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed under Section 43(1) read with Section 44 of the I B Code, 2016), the Adjudicating Authority ( National Company Law Tribunal , Kochi Bench, Kochi), at Paragraph Nos. 15 to 18 (For Point No.3), had observed the following: Point No 3: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 , dated 25.01.2023 in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the Respondent / Petitioner , under Section 43(1) read with Section 44 of the I B Code, 2016), passed by the Adjudicating Authority / Tribunal , the Learned Counsel for the Appellants / Respondent Nos. 1, 3 and 5, submits that the Adjudicating Authority , had committed an error in accepting the conclusions in Forensic Report , which does not amount to Delegation of Powers of the Resolution Professional , and further the Resolution Professional , had made a determination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 regulation 35A(2), the Resolution Professional shall apply to the Adjudicating Authority for the appropriate relief on or before the one hundred and thirty-fifth day of the insolvency commencement date. In this case, the one hundred and thirty fifth day is on 23 May 2018. The instant application being IA. (IBC) 346/KB/2019 has been filed on 20 March 2019, thus making it clear that the Applicant has not complied with the provisions of regulation 35A within the timeline provided therein. 6.9. Even if we go by the decision of the Hon ble NCLAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NTIAL 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 debtor s assets; specif., an insolvent debtor s transfer of a property interest for the benefit of a creditor who is owed on an earlier debt, when the transfer occurs no more than 90 days before the date when the bankruptcy petition is filed or (if the creditor is an insider) within one year of the filing, so that the creditor receives more than it would otherwise receive through the distribution of the bankruptcy estate. Under the circumstances described in 11 USCA A 547, the bankruptcy trustee may, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation. 25.6.2. Taking up the transactions in question, we are clearly of the view that even when furnishing a security may be one of normal business practices, it would become a part of ordinary course of business of a particular corporate entity only if it falls in place as part of the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 noted, that the Payments , made to the Directors , with knowledge of Company s Financial State , created the Presumption of Preference , and they were to payback, as per decision in Exchange Travel Holdings Ltd. (No 4) Re 1999 BCC 291 (CA). Constructive Trustee : 21. A Person , who receives Payment , under Preference , in respect of the Company , turns out to be its Constructive Trustee , and he has to payback , as per decision in Clasper Group Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 respect of Tenny Jose Pvt. Ltd. A total Sum of Rs.47,13,869/- was the Journal Adjustment of the 1st Appellant / 1st Respondent, with Paptrade India Pvt. Ltd. 28. In respect of the 3rd Appellant / 5th Respondent, he withdrew a total Sum of Rs.23,94,728/- and further the Bank Transfer from Steel House Pvt. Ltd. to and in his favour (3rd Appellant / 5th Respondent) a Sum of Rs.4,88,024/- was made. Also the Cash Payment from Steel House Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 made, the Appellants / Creditors , were placed in a higher Beneficial Pedestal , than that of the Financial Creditors , when Distribution of Assets , are made as per Section 53 of the Code . 37. In the instant case, the Transactions that took place between the period from 27.12.2019 and 12.04.2021, were rightly taken into account, and undoubtedly, the period specified in Section 43 (4) (a) of the Code , is fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Appellant / 1st Respondent, to pay an amount of Rs.3,96,04,622/-, the 2nd Appellant / 3rd Respondent, to pay an amount of Rs.30,39,400/- and the 3rd Appellant / 5th Respondent, to pay a Sum of Rs.37,86,943/-, and the Paptrade India Pvt. Ltd. (6th Respondent in IA (IBC) / 206 / KOB / 2022), to pay a Sum of Rs.47,13,869/-, within a month from the date of Order, failing which, the amounts will carry 12% Simple Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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