NCLT rules repayment as preferential transaction under IBC, petitioner must return funds to Liquidator

The National Company Law Tribunal (NCLT) found a repayment made by a Company to the petitioner as a preferential transaction under the Insolvency and Bankruptcy Code (IBC). The NCLT directed the petitioner to return the amount to the Liquidator and instructed legal proceedings for recovery. The petitioner's challenge against the Liquidator's authority to freeze the account without a prior hearing was dismissed by the Court, emphasizing limited interference in NCLT matters. The Court upheld the NCLT's power to freeze the account as per its order, advising the petitioner to seek remedies through NCLT or NCLAT.

---

---

Issues Involved:
- Preferential transaction under the Insolvency and Bankruptcy Code, 2016
- Authority of the Liquidator to freeze the petitioner's account

Summary:

Issue 1: Preferential transaction under the Insolvency and Bankruptcy Code, 2016

The petitioner, as the Director of a Company undergoing corporate insolvency resolution process, faced a challenge regarding a preferential transaction where the Company repaid a loan to the petitioner instead of other obligations. The National Company Law Tribunal (NCLT) deemed this repayment as a preferential transaction under the Insolvency and Bankruptcy Code (IBC). The NCLT directed the petitioner to return the amount to the Liquidator within two weeks and instructed the Liquidator to initiate legal proceedings for recovery. The petitioner appealed this decision to the National Company Law Appellate Tribunal (NCLAT) while the Liquidator was directed by the NCLT to take further steps for recovery.

Issue 2: Authority of the Liquidator to freeze the petitioner's account

A writ petition was filed challenging the Liquidator's authority to freeze the petitioner's account without a prior hearing. The petitioner argued that the Liquidator lacked the power to freeze the account without following the prescribed procedure under the IBC. The petitioner contended that the freezing of the account was done without providing an opportunity for the petitioner to be heard.

The respondent Bank justified the freezing of the account based on a subsequent order of the NCLT. The Bank maintained that the action was taken in accordance with the Standard Operating Procedure.

The Court dismissed the writ petition, citing the limited scope of interference in matters pending before the NCLT as established by Supreme Court decisions. The Court emphasized that the IBC is a self-contained Code, and High Courts should refrain from intervening in the resolution process. The petitioner was advised to pursue remedies before the NCLT or NCLAT, acknowledging the authority of the NCLT to freeze the petitioner's account as per its order.

---