Liquidator's Reliance On Transaction Audit Report Sufficient To File Application For Avoidance Of Preferential Transactions U/S 43 Of IBC: NCLAT

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that when the Liquidator has got a Transaction Audit Report done and on the basis of which has come to a conclusion that this is a preferential transaction, it cannot be said that he has not formed an independent opinion before filing an application for avoidance of preferential transactions under section 43 of the IBC. Brief Facts The present Appeal is filed by the Appellant, the Suspended Director, under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) against the Order dated 05.06.2024 passed by the Hon'ble National Company Law Tribunal in I.A. No. 5166/2023 in CP (IB) /223/2020 whereby the said I.A. was allowed and the Appellant was directed to deposit a sum of Rs. 3,67,900/- (Rupees Three lakhs, sixty-seven thousand and nine hundred only. Appellant/Director of the Corporate Debtor met with one Mr. Vijay Thapar, who assured the Director to get him a big loan and took hefty amounts of money as service charges. However, he turned out to be a con and never arranged for the assured loan for the Corporate Debtor. After paying the money to him, the finances of the Company went into doll-drum and resulted into the collapse of the Company. Due to the inability of the Corporate Debtor to pay its Creditors, they approached the Hon'ble Adjudicating Authority, and the Corporate Debtor was placed under CIRP on 17.05.2022 and subsequently under liquidation on 12.10.2022. The Liquidator filed I.A. No. 5166 of 2023 under Section 43 of the IBC based upon the Transaction Audit Report. Contentions The appellant submitted that the amount under contention in the Transaction Audit Report was withdrawn by the Appellant against the amount payable by the Corporate Debtor to him and the amount was utilised for the benefit of the Corporate Debtor to keep it running and protected from the rigors of CIRP. That the Liquidator had failed to form his independent opinion about the existence of the preferential transaction and that as per the provisions of Section 43, the Application by the Resolution Professional or the Liquidator, as the case may be, is to be filed after forming his opinion in this regard. That the Impugned Order is liable to be set aside as the Adjudicating Authority has passed an Order, without due Application of mind and cogent reasons in respect of its conclusion/findings. NCLAT's Analysis The tribunal, at the outset, referred to section 43 of the IBC which provides that A corporate debtor shall be deemed to have given a preference, if 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 and transfer 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. The tribunal while applying the above law to the facts of the present case noted that the Liquidator had got a Transaction Audit Report made, which had various findings, and in one such finding it was noted that Rs. 3,67,900/- (Rupees Three lakhs, sixty-seven thousand and nine hundred only) had been paid to the Suspended Director i.e. Alok Tripathi and was found to be a preferential transaction. The tribunal further noted that the Adjudicating Authority has rightly noted that the Appellant/ Mr Alok Tripathi was put in a beneficial position when aforesaid payment was made against his unsecured loan as in terms of the provisions of Section 53 of the Code, the secured Creditors and workmen get precedence over unsecured Creditors against the payment of dues. The tribunal further rejected the contention of the appellant that the liquidator should have formed an independent opinion before filing an application for avoidance of preferential transactions under section 43 (1) of the IBC. The tribunal observed that when the Liquidator has got a Transaction Audit Report done and on the basis of which has come to a conclusion that this is a preferential transaction, after which he filed an I.A. before the Adjudicating Authority, in such conditions, we cannot agree with the submissions of the Appellant that the Liquidator has not formed an opinion. We reject the submissions of the Appellant accordingly. Accordingly, the present appeal was dismissed. Case Title: Alok Tripathi, Suspended Director v. Mohit K Gupta, Liquidator Case Reference: Company Appeal (AT) (Insolvency) No. 1817 of 2024 Judgment Date: 08/11/2024 Click Here To Read/Download The Order

Liquidator's Reliance On Transaction Audit Report Sufficient To File Application For Avoidance Of Preferential Transactions U/S 43 Of IBC: NCLAT

Mohd Malik Chauhan

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