Tribunal Upholds Decision on Preferential Transactions: Appellants' Claims Dismissed

The Tribunal upheld the Adjudicating Authority's decision, declaring transactions between the appellants and the corporate debtor as preferential, undervalued, and fraudulent under Sections 43, 45, and 66 of the Insolvency and Bankruptcy Code. The Option Agreements were deemed null and void, and claims by the appellants were found not binding on the corporate debtor. The transactions were considered avoidance transactions, leading to the dismissal of the appeals with no costs awarded.

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Issues Involved:

1. Whether the transactions between the appellants and the corporate debtor were preferential, undervalued, and fraudulent under Sections 43, 45, and 66 of the Insolvency and Bankruptcy Code (IBC).
2. Whether the claims lodged by the appellants in the Corporate Insolvency Resolution Process (CIRP) of the corporate debtor were valid and binding.

Issue-wise Detailed Analysis:

1. Preferential, Undervalued, and Fraudulent Transactions:

The appellants, Pray Projects Private Limited and Fervent Securities Private Limited, challenged the order of the Adjudicating Authority (National Company Law Tribunal, Mumbai) which held their transactions with the corporate debtor, Mayurpankh Properties Private Limited (MPPL), as preferential, undervalued, and fraudulent under Sections 43, 45, and 66 of the IBC.

Pray Projects' Transaction:
- In 2014, Pray Projects gave an unsecured loan of Rs. 5 crores to Sunshine Housing Infra Pvt. Ltd. (SHIPL).
- In 2018, SHIPL transferred Rs. 5 crores to Pray Projects for onward transfer to MPPL as consideration for an Option Agreement (Option Agreement-I).
- Pray Projects paid Rs. 5 crores to MPPL in five tranches, and an Option Agreement was signed on 15.12.2018, giving Pray Projects an option to purchase an area in MPPL's "Chambers" project.

Fervent Securities' Transaction:
- Fervent Securities advanced Rs. 1 crore to MPPL, and an Option Agreement (Option Agreement-II) was signed on 17.12.2018, granting an option to purchase an area in the "Chambers" project.

Transaction Audit Report (TAR):
- The TAR revealed that the corporate debtor transferred the amounts received from Pray Projects and Fervent Securities to related parties, Sunshine Urban Infrastructure Ltd (SUIL) and Sunshine Tracon Pvt. Ltd. (STPL), almost immediately.
- The report suggested that these transactions were used as conduits for fund transfers among related parties, indicating preferential and undervalued transactions.

Legal Provisions:
- Section 43 IBC: Defines preferential transactions as those benefiting a creditor over others in the period preceding the insolvency commencement date.
- Section 45 IBC: Defines undervalued transactions as those where the consideration is significantly less than the value of the assets transferred.
- Section 66 IBC: Addresses fraudulent trading and wrongful trading, holding parties liable for defrauding creditors.

Analysis:
- The transactions were deemed preferential as they were executed within one year preceding the insolvency commencement date and benefited specific creditors (Pray Projects and Fervent Securities).
- The transactions were undervalued as the consideration received by MPPL was immediately transferred to related parties, thus not adding value to MPPL's assets.
- The timing of the transactions, just before the insolvency commencement date, and the lack of proper documentation and board resolutions, indicated fraudulent intent to defraud actual creditors.

2. Validity and Binding Nature of Claims:

Arguments by Appellants:
- The appellants claimed that the transactions were genuine commercial transactions done at arm's length and were unaware of the impending CIRP.
- They argued that their claims were accepted by the Resolution Professional as unsecured financial creditors.

Judgment:
- The Tribunal found that the amounts paid by Pray Projects and Fervent Securities were not retained by MPPL but transferred to related parties, thus not forming part of MPPL's assets.
- The Option Agreements were declared null and void, and the interest created in MPPL's property was deemed non-existent.
- The Tribunal held that the transactions were preferential, undervalued, and fraudulent, and thus the claims lodged by the appellants were not binding on MPPL.

Conclusion:
- The appeals were dismissed, and the Impugned Order was upheld, declaring the transactions as avoidance transactions under Sections 43 and 45 of the IBC and not binding on the corporate debtor. The appellants' claims were invalidated, and no costs were awarded.

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