TaxTMI 
TaxTMI 
TaxTMI 
Preferential transactions and relevant time [ Section 43 & 44 ]
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....actions and in such manner as laid down in section 43(2) to any persons as referred to in section 44(4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44. What is the preference [ Section 43(2) ] * A corporate debtor shall be deemed to have given a preference, if- * (a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and * (b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a ben....
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.... but does not include a financial debt or operational debt substituted for existing financial debt or operational debt. Relevant Time for Preference [ Section 43(4) ] * A preference shall be deemed to be given at a relevant time, if- * (a) It is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or * (b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date. Order in case of preferential transactions [ Section 44 ] * (1) The Adjudicating Authority, may, on an application made by the resolution professional or liquidator under section 43(1), by an order : ....
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.... debts or operational debts which arose from, or were released or discharged wholly or in part by the giving of the preference: * Provided that an order under this section shall not- * (a) affect any interest in property which was acquired from a person other than the corporate debtor or any interest derived from such interest and was acquired in good faith and for value; * (b) require a person, who received a benefit from the preferential transaction in good faith and for value to pay a sum to the liquidator or the resolution professional. * Explanation I.-For the purpose of this section, it is clarified that where a person, who has acquired an interest in property from another person other than the corporate debtor, or who has rec....
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....given a preference at a relevant time if: * (i) there is a transfer of property or the interest thereof of the CD for the benefit of a creditor or surety or guarantor for or on account of an antecedent financial debt or operational debt or other liability; * (ii) such transfer has the effect of putting such creditor or surety or guarantor in a beneficial position than it would have been in the event of distribution of assets in accordance with section 53 of the Code; and * (iii) preference is given, either during the period of two years/one year preceding the ICD when the beneficiary is a related/an unrelated party. However, such deemed preference may not be an offending preference, if it falls into any or both exclusions provided b....
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....of the CD; * (vi) examine the scanned and scrutinised transactions to find, if the transfer has the effect of putting such creditor/surety/ guarantor in beneficial position, then it would have been in the event of distribution of assets under section 53. If answer is in the affirmative, the transaction shall be deemed to be of preferential, provided it does not fall within the exclusion under section 43(3); and then * (vii) apply to the AA for necessary orders, after carrying out the aforesaid volumetric and gravimetric analysis of the transactions. * (c) Undervalued and fraudulent transactions: * As the transactions are held as preferential, it is not necessary to examine whether these are undervalued and/or fraudulent. In prefere....
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....s approved and the new management takes over. His continuation beyond the closure of the CIRP would in effect mean an interference in the conduct and management of the company. * The successful resolution applicant cannot file an avoidance application, as it is neither for the benefit of the resolution applicant nor for the CD after the resolution is complete. * Section 26 of the Code cannot be read in a manner to mean that an application for avoidance of transactions under section 25(2)(j) of the IBC can survive after the CIRP. Once the CIRP process itself comes to an end, an application for avoidance of transactions cannot be adjudicated. If the CoC or the RP are of the view that there are any transactions which are objectionable in n....