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 transaction audit which identified Rs. 3,67,900 paid to the director as a preferential transaction. The NCLAT held that the payment improperly benefited the director by prioritizing his unsecured loan over other creditors, violating Section 53's waterfall mechanism. The tribunal rejected the director's argument that the liquidator failed to form an independent opinion, noting the liquidator properly relied on the audit report before filing the application.

---

---

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.

---