Tribunal cancels mortgage as preferential transaction under IBC, upholds refund order

The tribunal concluded that the creation of security interest by mortgaging the property was a preferential transaction under Section 43 of the IBC and canceled the mortgage, making the property part of the corporate debtor's unencumbered assets. Additionally, the transfer of Rs.1,02,09,360/- to SAKS Developers LLP was deemed a preferential transaction, and the order directing the refund was upheld. The appeal was allowed with these modifications, and no costs were awarded.

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Issues Involved:
1. Whether the creation of security interest by mortgaging the property was a preferential transaction under Section 43 or a fraudulent transaction under Section 66 of the IBC.
2. Whether the transfer of Rs.1,02,09,360/- to SAKS Developers LLP was a preferential transaction under Section 43 of the IBC.

Summary:

Issue 1: Creation of Security Interest by Mortgaging Property
The appeals challenged the order dated 30.07.2021, which concluded that the charge on the corporate debtor's property in favor of Bajaj Finance Ltd. was not created with intent to defraud creditors and was not a fraudulent transaction. The corporate debtor mortgaged property No. K-3, 5th Floor, Brahm Datt Tower, Sector 18, Noida, to secure loans for the benefit of certain individuals and companies, which did not benefit the corporate debtor itself. The liquidator argued that the transactions were preferential and should be avoided under Section 43 of the IBC, citing the Supreme Court judgment in Anuj Jain, which emphasized the importance of examining the ultimate beneficiaries of transactions. The tribunal concluded that the mortgage was for the benefit of related parties and within the two-year look-back period, thus infringing Section 43. The tribunal set aside the adjudicating authority's decision and canceled the mortgage, making the property part of the corporate debtor's unencumbered assets.

Issue 2: Transfer of Rs.1,02,09,360/- to SAKS Developers LLP
The transfer of Rs.1,02,09,360/- to SAKS Developers LLP was deemed a preferential transaction. The MoU between the corporate debtor and SAKS Developers was signed during a period when the moratorium was not in force, but the tribunal found that the transaction was intended to siphon off funds to a related party. The tribunal held that the transfer was within the two-year look-back period and violated Section 43 of the IBC. The tribunal upheld the adjudicating authority's order directing SAKS Developers LLP to refund the amount to the corporate debtor.

Conclusion:
1. The order holding that the security interest created in the mortgaged property was not a violation of Section 43 of the IBC was erroneous. The mortgage on the property should be canceled, and the property should revert to the corporate debtor's assets.
2. The transfer of Rs.1,02,09,360/- to SAKS Developers LLP was correctly held as a preferential transaction, and the order directing the refund was upheld.

The appeal was allowed with the above modifications, and no order as to costs was made.

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