2024 (11) TMI 409 - AT - IBC

Suspended director loses appeal against preferential transaction order worth Rs. 3.67 lakh under Section 53

The NCLAT dismissed an appeal by a suspended director challenging the NCLT's order regarding a preferential transaction. The liquidator had conducted a ... Waterfall Mechanism - Appeal filed by the Appellant, the Suspended Director, under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the Order passed by the Hon’ble National Company Law Tribunal (Adjudicating Authority), New Delhi - Appellant contends that the Liquidator had failed to form his independent opinion about the existence of the preferential transaction - HELD THAT:- The Liquidator had got a Transaction Audit Report made, which had various findings, and in one such finding it was noted that Rs. 3,67,900/- had been paid to the Suspended Director i.e. Alok Tripathi and was found to be a preferential transaction. The Adjudicating Authority has rightly noted that the Appellant/ Mr Alok Tripathi was put in a beneficial position when aforesaid payment was made against his unsecured loan as in terms of the provisions of Section 53 of the Code, the secured Creditors and workmen get precedence over unsecured Creditors against the payment of dues It is to be noted that even if any amount was payable to the Appellant/ Mr Alok Tripathi qua its outstanding unsecured loan could have staked his claim before the Liquidator and could have got his share in terms of the provisions of Section 53 of the Code. It is worth noting that the Adjudicating Authority noted that the Liquidator shall look into the claim of the amount of the Appellant/ Mr Alok Tripathi while distributing the assets/funds/properties of the Corporate Debtor as per the waterfall mechanism under Section 53 of the Code. When the Liquidator has got a Transaction Audit Report done and basis that has come to a conclusion that this is a preferential transaction, after which he filed an I.A. before the Adjudicating Authority, in such conditions, the submissions of the Appellant that the Liquidator has not formed an opinion, cannot be agreed upon - Appeal dismissed. Issues:1. Appeal against the Order of National Company Law Tribunal under Section 61 of IBC.2. Allegations of financial irregularities leading to Corporate Debtor's collapse.3. Liquidator's Application under Section 43 of IBC based on Transaction Audit Report.4. Contention regarding preferential transaction and failure to form independent opinion.5. Challenge to Adjudicating Authority's Order and relief sought by the Appellant.Analysis:Issue 1: The Appellant filed an Appeal under Section 61 of the Insolvency and Bankruptcy Code against the Order of the National Company Law Tribunal directing him to deposit a sum of Rs. 3,67,900.Issue 2: The Corporate Debtor faced financial crunch due to alleged fraudulent transactions by a third party, leading to its collapse and subsequent admission into CIRP and liquidation.Issue 3: The Liquidator filed an Application under Section 43 of the IBC based on a Transaction Audit Report highlighting financial irregularities, including a preferential transaction of Rs. 3,67,900 in favor of the Appellant.Issue 4: The Appellant contended that the Liquidator failed to form an independent opinion regarding the preferential transaction and challenged the Adjudicating Authority's Order on grounds of lack of due application of mind.Issue 5: The Appellant sought relief to set aside the Impugned Order, arguing that the Adjudicating Authority did not consider all relevant aspects and did not follow the procedures under Section 43 of the IBC.The Adjudicating Authority considered the Transaction Audit Report and found the payment to the Appellant to be a preferential transaction, putting him in a beneficial position against other creditors. The Liquidator's actions were deemed appropriate, and the Appeal was dismissed, with no order as to costs.