2022 (5) TMI 316 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision on Preferential Transactions, Ex-Director Ordered to Transfer Funds

The Tribunal upheld the Adjudicating Authority's decision regarding preferential transactions under Section 46 of the IBC, directing the ex-Director to ... Transfer of money back to the Corporate Debtor’s account within two weeks - HELD THAT:- It is noted that the ledger submitted by Mr. Sandeep Sood was maintained by Simran Technologies Pvt. Ltd. (attached at pp.163-164 of the appeal paper book), which do not make it clear as to the purpose for which such transactions were made. Moreover, Mr. Sandeep Sood has not given any proof or evidence to the RP to establish that these payments were made against supply of goods. Similarly his e-mail dated 4.10.2019 (attached at pp.167-168 of the appeal paper book), he has stated that the Genset lying at his home has been purchased by him against value consideration from Seitz India Pvt. Ltd., but there is no mention about the consideration or any proof thereof. Non-submission of reply by Mr. Sandeep Sood - HELD THAT:- It is noted that the proxy Counsel undertook to file reply within two weeks, when the matter in CA No. 574/2019 was taken up on 16.12.2020. But the reply was not filed and the case was listed for ex-parte hearing on 16.2.2021. While it is correct that a copy of the reply was sent to Mr. Alexander Seitz, it is clear from the order-sheet dated 22.7.2021 that the case had already been proceeded ex-parte vide order dated 21.1.2021 and no reply has come on record nor any relief is sought from the court. Thus, it is clear that the Appellant was completely remis in seeking permission of the Adjudicating Authority for taking its reply on record and hence the matter was finally adjudicated ex-parte. The transactions that are the subject of Impugned Order were all done after 5.8.2018 and therefore, in the absence of any reply/clarification/ explanation by Mr. Sandeep Sood to explain the transactions - the Adjudicating Authority has not committed any error in inferring that the said transactions were hit by section 46 of the IBC. Thus, the Adjudicating Authority has correctly directed Mr. Sandeep Sood, ex-Director of the Corporate Debtor to transfer the monies which are stated in paragraph 4 of the Impugned Order back to the Corporate Debtor account - appeal dismissed. Issues Involved:1. Validity of the ex-parte proceedings against the appellant.2. Legitimacy of the transactions carried out by the ex-Director of the Corporate Debtor.3. Compliance with procedural requirements by the appellant in the adjudicating process.4. Determination of preferential transactions under Section 46 of the IBC.Issue-wise Detailed Analysis:1. Validity of the ex-parte proceedings against the appellant:The appellant contended that the proceedings were conducted ex-parte against him despite having valid reasons for his absence. The appellant claimed he was not given an opportunity to present his defense adequately. The Tribunal noted that the appellant's proxy counsel undertook to file a reply within two weeks on 16.12.2020, but failed to do so, leading to the case being listed for ex-parte hearing on 16.2.2021. The Tribunal concluded that the appellant was remiss in seeking permission from the Adjudicating Authority to take his reply on record, resulting in the ex-parte adjudication.2. Legitimacy of the transactions carried out by the ex-Director of the Corporate Debtor:The appellant argued that the transactions with Simran Technologies and Lotus Imports were genuine business transactions. The Tribunal examined the records and found that the appellant, Mr. Sandeep Sood, had not provided satisfactory explanations or proof that the transactions were related to business dealings. The Tribunal observed that significant amounts were debited from the Corporate Debtor's accounts without clear purposes or supporting evidence, leading to the inference that these transactions were not conducted in the ordinary course of business.3. Compliance with procedural requirements by the appellant in the adjudicating process:The appellant failed to file his reply on time and did not seek permission from the Adjudicating Authority to take his reply on record. The Tribunal noted that the appellant's reply was submitted after the case had been ordered to be heard ex-parte. The Tribunal emphasized that the appellant's failure to comply with procedural requirements resulted in the ex-parte proceedings and the subsequent judgment.4. Determination of preferential transactions under Section 46 of the IBC:The Tribunal evaluated whether the transactions in question were preferential under Section 46 of the IBC. The transactions, amounting to significant sums, were carried out within two years prior to the initiation of the Corporate Insolvency Resolution Process (CIRP). The Tribunal found that the appellant did not provide satisfactory explanations or evidence to prove that these transactions were part of normal business operations. Consequently, the Tribunal upheld the Adjudicating Authority's decision that the transactions were preferential and directed the appellant to transfer the monies back to the Corporate Debtor's account.Conclusion:The Tribunal concluded that the Adjudicating Authority correctly directed the ex-Director of the Corporate Debtor to transfer the disputed amounts back to the Corporate Debtor's account within two weeks. The appeal was dismissed, and no order as to cost was made.