Tribunal Upholds Commercial Decisions, Reverses Machinery Transfer

The Tribunal dismissed claims of preferential and undervalued transactions, deeming them part of the ordinary course of business and outside relevant look-back periods. The sub-lease agreement was upheld as a necessary commercial decision, and the machinery transfer was ordered to be reversed to the Corporate Debtor. The application was disposed of accordingly.

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Issues Involved:
1. Preferential Transaction
2. Undervalued Transaction
3. Sub-lease Agreement
4. Machinery Transferred

Issue-wise Detailed Analysis:

Preferential Transaction
The Resolution Professional alleged that the change in the business model from manufacturing and selling Indian-made foreign liquor to bottling job work resulted in the transfer of Rs. 43.85 crores to the holding company, Tilaknagar Industries Ltd., during 2015-16 and 2016-17. This was claimed to be a preferential transaction as it benefited one creditor over others and was not intimated to creditors for approval. The Respondents argued that the change in the business model occurred on 1.4.2015, outside the two-year look-back period preceding the initiation of the Corporate Insolvency Resolution Process (CIRP) on 27.6.2017. The Tribunal concluded that the transaction fell outside the look-back period and was in the ordinary course of business, thus not qualifying as a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code (I&B Code).

Undervalued Transaction
The Applicant claimed that the Corporate Debtor engaged in undervalued transactions by charging Rs. 65 per case for bottling services, which was lower than the rate charged by another job worker, Soaring Spirits Pvt Ltd. The forensic audit report highlighted that this resulted in a revenue reduction for the Corporate Debtor. However, the Tribunal noted that the transaction took place in the ordinary course of business and thus did not meet the criteria for an undervalued transaction under Section 45(2) of the I&B Code. The Liquidator failed to provide sufficient evidence or identify the transferee/counterparty of the alleged undervalued transaction.

Sub-lease Agreement
The Applicant sought to nullify the sub-lease agreement with MS Biotech Pvt. Ltd., arguing that it was prejudicial to creditors' interests and not approved by them. The Respondents countered that the sub-lease was necessary due to the Corporate Debtor's financial difficulties and inability to utilize its enhanced production facilities. The Tribunal found that the sub-lease agreement was a commercial decision made in the ordinary course of business to generate funds and was not intended to defraud creditors. Thus, the relief sought by the Applicant was not maintainable.

Machinery Transferred
The Applicant requested the return of machinery worth Rs. 11.35 crores transferred to the Shrirampur unit of the holding company, arguing it was a preferential transaction. The Respondents explained that the transfer was a commercial decision made years before the CIRP initiation to prevent the assets from rusting and being wasted. The Tribunal noted that the assets were not sold but transferred for better utilization and remained part of the Corporate Debtor's liquidation estate. The holding company agreed to return the machinery, and the Tribunal directed the assets to be restored to the Corporate Debtor within one month.

Conclusion
The Tribunal dismissed the claims of preferential and undervalued transactions, finding them to be in the ordinary course of business and outside the relevant look-back periods. The sub-lease agreement was upheld as a necessary commercial decision, and the machinery transfer was ordered to be reversed to the Corporate Debtor. The application was disposed of accordingly.

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