2025 (3) TMI 580 - AT - IBC

NCLAT upholds preferential transaction determination under Section 49, dismisses delayed appeal challenging land sale investigation

Aarif Ahsan Khan Versus Jayesh Sanghrajka & Ors.

Aarif Ahsan Khan Versus Jayesh Sanghrajka & Ors. - TMI ISSUES PRESENTED and CONSIDEREDThe core legal issues considered by the National Company Law Appellate Tribunal (NCLAT) in this judgment are as follows:1. Whether the transactions involving the Appellant, specifically the investment in Aryan Spaces, constituted a preferential transaction under Section 49 of the Insolvency and Bankruptcy Code, 2016 (the Code).2. Whether the Appellant's appeal against the order dated 02.05.2023 was filed within the permissible limitation period, and if not, whether the delay could be condoned.3. Whether the Tribunal's order dated 02.05.2023, which allegedly did not consider the Appellant's reply, could be subject to modification or recall.ISSUE-WISE DETAILED ANALYSISIssue 1: Preferential Transaction under Section 49 of the Code- Relevant Legal Framework and Precedents: Section 49 of the Code pertains to transactions that are deemed preferential if they are made to benefit certain creditors over others during the insolvency resolution process.- Court's Interpretation and Reasoning: The Tribunal found that the transaction involving the investment in Aryan Spaces, owned by the Appellant, was indeed preferential. The Tribunal noted that the corporate debtor had entered into an unregistered memorandum of understanding (MOU) for the purchase of land, and funds were allegedly misutilized for this purpose.- Key Evidence and Findings: The transaction audit report indicated that a sum of Rs. 1.20 crores was outstanding as an investment in Aryan Spaces. The Tribunal questioned the legitimacy of the transaction due to the lack of evidence of the same person being involved in multiple roles.- Application of Law to Facts: The Tribunal directed the Resolution Professional to investigate whether the Appellant and another individual involved in the transactions were the same person, which could indicate concealment of facts and preferential treatment.- Treatment of Competing Arguments: The Appellant argued that the transaction was not included under Section 49 in the audit report. However, the Tribunal focused on the evidence presented in the transaction audit report and the suspicious nature of the transactions.- Conclusions: The Tribunal concluded that if the Appellant and the other individual were the same, Aryan Spaces would be liable to contribute Rs. 1.20 crores to the corporate debtor.Issue 2: Limitation Period for Filing the Appeal- Relevant Legal Framework and Precedents: The limitation period for filing an appeal is governed by the Code and relevant procedural laws. The Tribunal's jurisdiction to condone delays is limited.- Court's Interpretation and Reasoning: The Tribunal held that the limitation period for filing an appeal against the order dated 02.05.2023 commenced from the date the order was passed. The subsequent application filed by the Appellant did not affect this limitation period.- Key Evidence and Findings: The Tribunal noted that the Appellant was present during the hearing on 02.05.2023, and the limitation period should be calculated from that date.- Application of Law to Facts: The Tribunal found that the appeal was filed beyond the permissible period, and the delay could not be condoned as it exceeded the Tribunal's jurisdiction to condone delays.- Treatment of Competing Arguments: The Appellant argued for the exclusion of the period during which the application was pending. The Tribunal rejected this argument, citing lack of merger between the orders.- Conclusions: The Tribunal dismissed the appeal on grounds of limitation, as the delay could not be condoned.Issue 3: Modification or Recall of the Tribunal's Order- Relevant Legal Framework and Precedents: The Tribunal's power to modify or recall its orders is limited, and it does not have inherent power to review its judgments.- Court's Interpretation and Reasoning: The Tribunal clarified that the statement regarding non-filing of a reply was inadvertently recorded and pertained to other respondents, not the Appellant.- Key Evidence and Findings: The Tribunal noted that the Appellant's reply was considered, particularly the MOU dated 15.11.2018, during the original order.- Application of Law to Facts: The Tribunal found no procedural error that would warrant recalling the order, as the Appellant's contentions were already addressed.- Treatment of Competing Arguments: The Appellant argued that the order violated principles of natural justice. The Tribunal rejected this, stating the Appellant's reply was considered.- Conclusions: The Tribunal found no merit in the Appellant's request for modification or recall of the order.SIGNIFICANT HOLDINGS- The Tribunal affirmed that the transaction involving Aryan Spaces was preferential under Section 49 of the Code, subject to further investigation by the Resolution Professional.- The Tribunal upheld the limitation period for filing an appeal, dismissing the Appellant's appeal on grounds of delay.- The Tribunal clarified that the Appellant's reply was considered in the original order, and no procedural error justified recalling or modifying the order.- The Tribunal's decision was upheld by the Hon'ble Supreme Court, which concurred with the Tribunal's view on the limitation issue.