Transactions not preferential under Insolvency Code

The Tribunal found that the transactions in question were made in the ordinary course of business and did not fall within the one-year period preceding the insolvency commencement date. Therefore, the transactions were not considered preferential under Section 43 of the Insolvency and Bankruptcy Code, 2016. As a result, the Tribunal set aside the previous order and allowed the appeal.

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Issues Involved:
1. Whether the transactions dated 8th December, 2017; 11th December, 2017; and 14th December, 2017 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.
3. Whether the transactions fall within the relevant time period as defined under Section 43(4) of the Insolvency and Bankruptcy Code, 2016.
4. Whether the Resolution Professional formed an independent opinion before filing the application under Section 43(1) of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Preferential Transactions:
The main plea taken by the Appellant – ICICI Bank was that the transactions in question were not 'preferential transactions' and were made in the usual course of business. The Resolution Professional argued that for a transaction to be considered preferential under Section 43, it must meet certain criteria, including whether the transfer was made in respect of an existing financial debt or other liability, and whether it put the creditor in a beneficial position than it would have been in the event of a distribution of assets under Section 53 of the Insolvency and Bankruptcy Code, 2016.

2. Ordinary Course of Business:
The Appellant contended that the transactions were made in the ordinary course of business, citing Clause 10(iii) of the Agreement, which allowed the bank to debit amounts from the Corporate Debtor’s account. The Resolution Professional, however, argued that the transactions exposed the Corporate Debtor to other liabilities and were not in the ordinary course of business. The Tribunal found that all transactions were indeed made in the ordinary course of business, as evidenced by the email from the Resolution Professional requesting the bank to allow the Corporate Debtor to purchase goods on the basis of 'Letters of Credit'.

3. Relevant Time Period:
Section 43(4) of the Insolvency and Bankruptcy Code, 2016, defines the relevant time period for preferential transactions. For non-related parties, the period is one year preceding the insolvency commencement date. The Tribunal noted that the transactions were made on 8th December, 2017; 11th December, 2017; and 14th December, 2017, and the insolvency commencement date was 8th December, 2017. Therefore, the transactions were either on the date of commencement of the corporate insolvency resolution process or during its pendency, and not within the one-year period preceding the insolvency commencement date.

4. Independent Opinion by Resolution Professional:
The Appellant argued that the Resolution Professional did not form an independent opinion before filing the application under Section 43(1). The Tribunal did not find this argument compelling, as the focus was more on whether the transactions were preferential and within the relevant time period.

Conclusion:
The Tribunal concluded that the transactions were made in the ordinary course of business and not within the one-year period preceding the insolvency commencement date. Consequently, the transactions could not be treated as preferential. The Tribunal set aside the impugned order dated 12th March, 2019, and allowed the appeal.

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