2018 (10) TMI 592 - AT - Insolvency and Bankruptcy

Tribunal upholds rejection of petition on preferential transaction under Insolvency Code

The Tribunal upheld the Adjudicating Authority's decision to reject the petition under Section 43 of the Insolvency and Bankruptcy Code concerning a ... Application u/s 43 of the Insolvency and Bankruptcy Code, 2016 - Preferential transactions and relevant time - Held that:- Admittedly, the 2nd Respondent is not a related party to the Corporate Debtor and therefore, for preferring an application under Section 43 in respect to transaction made with 2nd Respondent one has to refer to clause (b) of Sub- section (4) of Section 43. In the said provision the period of one year preceding the insolvency commencement date is prescribed to find out whether any preferential transaction was made in favour of any person other than the related party. Admittedly, the insolvency commencement date (date of admission) in the present case is 16.06.2017, the execution of Sale Deed reached finality on 30.05.2016 that is much prior to one year preceding the insolvency commencement dated. In that view of the aforesaid finding we hold that the application under Section 43 of I&B Code in respect of 2nd Respondent was not maintainable and the Adjudicating Authority has rightly rejected the petition. Issues involved:1. Preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016.Analysis:1. The appeal was filed by the Resolution Professional/Liquidator against the order rejecting the application under Section 43 of the I&B Code. The dispute centered around a preferential transaction made by the Corporate Debtor in favor of the 2nd Respondent through a Sale Deed. The key argument was whether the final payment for the transaction was made before or after the execution of the Sale Deed.2. The Appellant contended that the Corporate Debtor executed a Sale Deed on 30.05.2016, with the final payment being completed between 30.06.2016 and 14.10.2016. On the other hand, the 2nd Respondent disputed this claim, stating that the consideration amount was paid to the Corporate Debtor before the Sale Deed through Demand Drafts, which were credited to the Corporate Debtor on 30.06.2016 and 14.10.2016.3. The crucial point of contention was the timing of the payment in relation to the execution of the Sale Deed. The Tribunal held that since the Demand Drafts were prepared before 30.05.2016 and were considered as part of the consideration amount in the Sale Deed, the sale was deemed complete on 30.05.2016. The exact date of deposit into the Corporate Debtor's account did not alter the completion date of the transaction.4. Section 43 of the I&B Code deals with preferential transactions and the relevant time for such transactions. It outlines the conditions under which a preference is deemed to have been given, including transfers for the benefit of creditors that put them in a more advantageous position than they would have been under normal asset distribution.5. As per the provisions of Section 43, a preference is considered to have been given at a relevant time if it involves a related party within two years preceding the insolvency commencement date, or to a non-related party within one year preceding the said date. In this case, since the transaction with the 2nd Respondent was completed on 30.05.2016, well before the one-year period preceding the insolvency commencement date of 16.06.2017, the application under Section 43 against the 2nd Respondent was deemed not maintainable.6. Consequently, the Tribunal upheld the decision of the Adjudicating Authority to reject the petition under Section 43 of the I&B Code concerning the 2nd Respondent, as the transaction in question did not fall within the prescribed period preceding the insolvency commencement date. The appeal was dismissed on the grounds of lack of merit, with no costs awarded.This detailed analysis of the judgment highlights the key legal arguments, interpretations of relevant provisions, and the final decision reached by the Appellate Tribunal.