TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 389
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....e Debtor i.e., M/s. Sholingur Textiles Limited was admitted by the Adjudicating Authority, National Company Law Tribunal on 04.02.2019 in CP(IB)/1037/2018 in an Application filed under the Insolvency and Bankruptcy Code, 2016. The Respondent herein was appointed as Interim Resolution Professional by the Learned 'Adjudicating Authority'. (3) The Appellant and the Corporate Debtor offered to settle the debt owed to the Appellant by the Corporate Debtor by conveying to the Appellant, the property belonging to the Corporate Debtor. Accordingly, the land belonging to the Corporate Debtor was conveyed by the Director of the Corporate Debtor to the Appellant vide sale deed dated 04.07.2018 bearing Document No. 1812/2018 for a recorded sum of Rs. 1,69,07,250/- extinguishing the liability which stood as due and outstanding on the said date. While so, the Resolution Professional on 24.06.2019 submitted an Application before the Hon'ble Adjudicating Authority ((National Company Law Tribunal, Chennai), alleging that the aforementioned transaction wherein the Corporate Debtor settled the Operational Debt of the Company by conveying land to the Creditor, was a preferential transaction within th....
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....Para 9 of the grounds of Appeal. The Learned Counsel submitted that the Adjudicating Authority failed to take note of the fact that the Appellant herein has been supplying the cotton to the Corporate Debtor since 2012 and there were accumulated dues which were to be settled by the Corporate Debtor. The Corporate Debtor was undergoing liquidity crisis, the Corporate Debtor chose to partially settle the debt of the Appellant by transferring to him a piece of land, being a non-core asset belonging to the Corporate Debtor. The Respondent failed to demonstrate the collusion between the Appellant and the Corporate Debtor or to demonstrate any attempt to defraud the creditors. Also, there was no dishonesty on the part of either of the parties and that the allegations put forth by the Respondent are devoid of any merit or evidence. Further, the relationship between the Appellant and the Corporate Debtor is a legitimate business relationship where the Appellant supplied cotton, the most essential raw material in the textile industry to the Corporate Debtor. There is no dispute with regard to the debt owed by the Corporate Debtor to the Appellant. The Adjudicating Authority failed to observe....
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....e Corporate Debtor has executed sale deed dated 04.07.2018 in favour of the Appellant whereby the Corporate Debtor conveyed land to the Appellant for a consideration towards sale of land which has been reflected in the document for an amount of Rs. 1,69,07,520/- The Appellant also stated that it has supplied cotton to the Corporate Debtor and the Corporate Debtor owed to the Appellant a sum of Rs. 1,92,39,541/-. An Application filed for initiation of Corporate Insolvency against the Corporate Debtor was admitted on 04.02.2019 by the very same Adjudicating Authority in CP(IB)/1037/2018 and appointed the Respondent as Interim Resolution Professional and he was confirmed as the Resolution Professional. (11) While matter stood thus the Respondent filed an Application in MA/745/2019 in CP(IB)/1037/2018 praying the Adjudicating Authority to set aside the sale deed dated 04.07.2018 on the ground that the said transaction is a preferential transaction and therefore the same need to be set aside in the interest of the Corporate Debtor. The Ld. Adjudicating Authority allowed the said MA by accepting the prayer as made in MA/745/2019 by the Resolution Professional. The following reliefs have....
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....annot be considered to be excepted from the ambit of transactions as provided under the said Section itself. 29. The 1st Respondent also not being the related party, it is also seen that the transaction under consideration in this Application has been carried as between the parties within one year period being the prescribed period for an unrelated party i.e., the 1st Respondent. 30. In the circumstances, this Application is required to be allowed as filed by the Resolution Professional by granting the reliefs as sought extracted supra in paragraph No.7. (13) Before proceeding to decide the issue and the findings, the relevant provision of Law under which the Application was made by the Respondent is need to be addressed. Section 43 of the I & B Code 2016 reads thus, 43. Preferential transactions and relevant time- (1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential tran....
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....vency commencement date. (14) In due compliance of the above Provisions of Law, if the 'Adjudicating Authority' is of the opinion that the said transaction is 'preferential' in nature and is within the period of one year preceding the Insolvency commencement date, the said transaction can be declared as void and reverse the effect of such transaction in accordance with Section 45 sub-section (1) of the I & B Code and in accordance with the Chapter III of the I & B Code, 2016. (15) As stated supra, the Ld. Adjudicating Authority relied upon the Judgment of the Hon'ble Supreme Court in the matter of Anuj Jain, Interim Resolution Professional (mentioned supra in paragraph 9) whereat Hon'ble Supreme Court has given the ratio to be adopted in relation to the provisions of the Section 43 of the IBC, 2016. Para 28.1 of the said Judgment is reproduced, hereat :- 28.1. Looking to the legal fictions created by Section 43 and looking to the duties and responsibilities per Section 25, in our view, for the purpose of application of Section 43 of the Code in any insolvency resolution process, what a resolution professional is ordinarily required to do could be illustrated as follows: 1. In....
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....neficial position than it would have been in the event of distribution of assets per Section 53 of the Code. If answer to this question is in the affirmative, the transaction under examination shall be deemed to be of preference within a relevant time, provided it does not fall within the exclusion provided by sub-section (3) of Section 43. 6. In the next and equally necessary step, the transaction which otherwise is to be of deemed preference, will have to pass through another filtration to find if it does not answer to either of the clauses (a) and (b) of sub-section (3) of Section 43. After the resolution professional has carried out the aforesaid volumetric as also gravimetric analysis of the transactions on the defined coordinates, he shall be required to apply to the Adjudicating Authority for necessary order/s in relation to the transaction/s that had passed through all the positive tests of sub-section (4) and sub-section (2) as also negative test of sub-section (3). (16) From the ratio of the above Judgment of the Hon'ble Supreme Court, the issue to be determined and to arrive at whether the said transaction is a preferential transaction or not? The Resolution Professio....