TaxTMI 
TaxTMI 
2026 (2) TMI 439
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....itiated against M/s M.K. Printech Pvt. Ltd, (Corporate Debtor). Mr. Anish Kumar Sanghi, the Resolution Professional and subsequently Liquidator of the Corporate Debtor, is the sole Respondent in both appeals. The first appeal has been preferred against the order dated 28.08.2024 passed by the Learned National Company Law Tribunal (Adjudicating Authority), New Delhi Bench (Court-II), in I.A. No. 937/2023, whereby the Adjudicating Authority allowed an application filed by the Respondent under Section 43 of the Insolvency and Bankruptcy Code, 2016 and directed the Appellant to contribute a sum of Rs. 19,66,689.77 to the assets of the Corporate Debtor, after proceeding against the Appellant ex-parte and without granting him an effective opportunity of hearing. 2. Subsequent thereto, the Appellant, filed I.A. No. 4681/2024 before the Adjudicating Authority seeking to set aside order dated 04.06.2024 vide which appellant was proceeded as ex-parte and recall of the consequential order dated 28.08.2024 in I.A. No. 937/2023. The aforesaid recall application came to be dismissed by a speaking order dated 01.04.2025, leading the Appellant to file the connected appeal assailing the said dis....
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....ed by the Tribunal. vii. Even prior to the first listing of the application, the Appellant had already filed his detailed reply on 30.05.2023, contesting the allegations raised in I.A. No. 937/2023, and the filing details of the reply were duly reflected on the DMS portal. viii. After completion of pleadings, the application remained pending and was repeatedly listed on several dates including 25.07.2023, 31.08.2023, 10.10.2023, 07.11.2023, 19.12.2023, 05.02.2024, 20.03.2024 and 02.05.2024, during which period the Appellant consistently appeared before the Adjudicating Authority, though the matter could not be taken up on merits due to paucity of time. ix. When the matter was taken up on 04.06.2024, the main counsel representing the Appellant was engaged before the Hon'ble National Consumer Disputes Redressal Commission, and accordingly, a junior counsel appeared before the Adjudicating Authority and requested a pass over, which request was declined. Despite the presence of counsel for the Appellant being recorded, the Adjudicating Authority proceeded to treat the Appellant as ex-parte on the same date, recording that there was no representation on his be....
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....ith standard banking procedures, automatically deducted EMIs from the common loan account towards servicing the Appellant's loan. The deductions were system-driven and not at the instance of the Corporate Debtor, thereby negating any allegation of a transfer initiated by the Corporate Debtor. 8. It is his submission that merely because the Appellant's own funds were routed through a common loan account does not convert such routing into a transfer of assets by the Corporate Debtor. At no point did the Corporate Debtor part with its funds, nor did it confer any benefit upon the Appellant through its own assets. 9. He submitted that the foundational requirement under Section 43 of the IBC, namely, a transfer of property of the Corporate Debtor, is wholly absent in the present case. Since the EMIs were discharged entirely from the Appellant's own funds, the question of a preferential transaction does not arise. 10. Ld. Counsel submits that during the period alleged by the Respondent as the relevant look-back period, deposits exceeding Rs.72,00,000/- were infused into the common loan account through G.K. Sales. These deposits are clearly reflected in the ledger and bank statem....
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....retation would lead to indiscriminate invocation of Section 43 for routine commercial transactions. It is his submission that in the present case, the alleged payments were nothing but automatic EMI deductions from a common account funded by the Appellant's own resources. Treating such transactions as preferential would penalise standard banking operations and defeat the legislative intent underlying Section 43 of the IBC. 18. Ld. Counsel submitted that the automatic EMI deduction mechanism adopted by Canara Bank was the only practical and feasible method available for repayment of the loan availed by the Appellant. This mechanism ensured regular servicing of the loan in accordance with the sanctioned terms and further the Appellant had no alternative repayment arrangement. Therefore, the use of the common loan account, funded by his own resources including deposits through G.K. Sales, was both necessary and unavoidable for timely repayment. 19. Ld. Counsel submitted that none of the transactions undertaken satisfy the statutory requirements of Section 43 of the IBC. The allegation that payments aggregating to INR 19,66,698.77 were made to the Appellant within two years is fa....
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.... Debtor repaid an aggregate amount of Rs. 19,66,698.77 to the Appellant within the look-back period, thereby conferring undue preference upon a related party. These repayments were neither in the ordinary course of business nor commercially justified, and directly resulted in placing the Appellant in a more beneficial position vis-à-vis other creditors, particularly the secured financial creditor. 26. Ld. Counsel submitted that such transactions squarely fall within the ambit of Section 43 of the Code. Section 43(4)(a) explicitly deems a transaction to be preferential, if it is made in favour of a related party within two years preceding the insolvency commencement date. The impugned transactions satisfy every statutory ingredient of a preferential transaction. 27. Ld. Counsel further submitted that the Appellant's contention that the application under Section 43 was barred by limitation on account of alleged non-compliance with Regulation 35A of the CIRP Regulations is legally untenable. The Ld. Adjudicating Authority correctly held that Regulation 35A is directory in nature. 28. He further submitted that the Code itself, under Section 35(1)(l) and Section 43(1), e....
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....681/2024. The said application was filed belatedly, without any plausible or sufficient explanation for repeated non-appearance, and without seeking condonation of delay. 32. Ld. Counsel further submits that the submission of appellant regarding miscommunication on behalf of a junior counsel who wrongly noted the next date of hearing in I.A. No. 937/2023 as 28.09.2024, which incidentally was a Saturday is neither legally acceptable nor factually convincing. On Saturday, the Tribunal does not function, and a diligent litigant or counsel could not have reasonably made such an error. 33. It is his submission that Rule 49(2) of the NCLT Rules mandates demonstration of sufficient cause for non-appearance. Prior professional engagement before another forum does not constitute an unavoidable circumstance. Accepting such excuses would render judicial discipline nugatory. 34. In this regard, Ld. Counsel places reliance upon the judgment of this Hon'ble Appellate Tribunal in 'Srigopal Chaudhary v. SREI Equipment Finance Ltd.' [Comp. App. (AT) (Ins.) No. 1690 of 2023], wherein it was categorically held that mistaken noting of dates or absence of counsel does not automatically constit....
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....hich is impermissible under the NCLT Rules. There exists no provision empowering the Tribunal to review its own orders. 38. Summing up his arguments, Ld. Counsel states that in view of the foregoing facts, statutory provisions, and binding precedents, it is submitted that the impugned order dated 28.08.2024 suffers from no illegality, perversity, or jurisdictional error. The present appeal is nothing but an attempt to delay the liquidation process and defeat the object of the Insolvency and Bankruptcy Code. He prays for dismissal of the present appeal and award cost in favour of respondent. Analysis and findings 39. We have heard both the parties in detail, gone through the records of the case and written submissions of the parties. After considering the facts of the case and submissions of the parties we frame the following two issues for determination: i. Whether the transactions amounting to Rs. 19,66,698.77 made in favour of the Appellant during the look-back period constitute preferential transactions under Section 43 of the Insolvency and Bankruptcy Code, 2016. ii. Whether the impugned order dated 28.08.2024 suffers from any procedural illegality, v....
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.... the ordinary course of business and squarely fall within the ambit of Section 43 of the Code. 43. We now have a look at Section 43 of the Code, which is extracted below: "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 transactions and for, one or more of the orders referred to in section 44. (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 beneficial position than it would have been in the event of a ....
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....ment date is 20.09.2022 and that the payments of Rs. 19.66 lakhs, which are treated as preferential transaction, were made to the appellant within two years prior to this date i.e. in the period between 21.09.2020 and 20.09.2022. It is also an admitted fact the appellant is a related party. 45. The main defence of the appellant is that the transaction of Rs. 19.66 lakhs is a transaction under the Section 43(3)(a) of the Code, which relates to transactions which are made in ordinary course of business. Such transactions cannot be treated as preferential transactions under Section 43(2) in view of exemptions given by Section 43 (3) (a) of the Code. The respondent on the other hand has argued that the aforesaid transactions are covered by Section 43(4)(a) of the code which provides that a preference shall be deemed to be given at a relevant time to a party, if it is a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date. 46. It is the submission of the appellant that the funds for such payments were obtained from a family company GK Sales, which had deposited nearly Rs. 77 lakhs during the look ....
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....ffect of the transaction, namely that the Corporate Debtor's liability towards the Appellant stood reduced by that amount which is contrary to the provisions of Section 43(2) which has been extracted above. 49. In these circumstances, we are of the view that the Adjudicating Authority was correct in holding that the payments amounting to Rs. 19,66,698.77 satisfy the requirements of a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016. Issue No. (i) is accordingly decided against the Appellant and in favour of the Respondent. 50. Issue No. (ii) concerns the procedural validity of the proceedings leading to the impugned order dated 28.08.2024. While the substantive legality of the transactions has already been examined under Issue No. (i), this issue requires us to consider whether the impugned order is vitiated on account of any procedural illegality, denial of reasonable opportunity, or lack of jurisdiction, so as to justify interference in appeal. We will take up the issues raised by the appellant one by one. 51. In his oral submissions before this Tribunal, the initial submission made by the appellant was that the appellant is neither a....
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.... statutory records, login credential of GST/ Income Tax are still pending from them." 55. We have gone through the reply of the appellant to the said I.A. and this contention of the respondent has not been disputed by the appellant in his reply to the said I.A. It is therefore clear from the above that the ledger prepared to reflect the transactions between 21.09.2020 to 20.09.2022 has been prepared by using the Tally accounting system, based on the data inputs during the time the appellant was in control of the CD. Such documents are created based on the historical data available in the system and a ledger for any specified period can be prepared using Tally. There is no illegality, if the aforesaid ledger for the look back period was prepared on 30.09.2022 through Tally. Since the reports from Tally are prepared based on historical data available in the system, irrespective of date of printing, such ledger for CD would always show the same result. Similarly, the claim about entry of Rs. 9 lakh payment in cash to the appellant is also based on historical data input in Tally system, which would have been done in the period when appellant was in control and such entry could not h....
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....d legal objections. The impugned order shows that the Adjudicating Authority has taken note of these submissions and has decided the matter on merits. Therefore, this is not a case where the Appellant was condemned unheard or denied a reasonable opportunity of being heard. 60. The Adjudicating Authority has, while dismissing the subsequent recall application, clearly recorded that the order dated 28.08.2024 was passed after considering the replies filed by the Appellant. The explanation of incorrect noting of dates or internal miscommunication within the office of counsel cannot, by itself, invalidate a reasoned order passed on merits, particularly when no specific prejudice is demonstrated. The relevant extract of order dated 01.04.2025 in recall application filed vide I.A. No. 4681 of 2024 are extracted below: "....It cannot be gainsaid that it is our regular experience in proceedings before us that counsels often choose to represent one respondent on one day and the other respondent on a different day. In PUFE applications, such practices are quite common. In the present case, it may be so that the reply filed on behalf of Respondent No. 2 is identical to that of Res....
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.... filed a reply on merits, and the explanation offered for non-appearance is based on alleged miscommunication or incorrect noting of dates. In light of the above judgment, such a plea cannot invalidate the impugned order on the ground of violation of natural justice. 63. The objection of the appellant regarding the violation of mandatory timelines for determining a preferential transaction and for filing an application before the Adjudicating Authority in accordance with Regulation 35A of the CIRP Regulations is equally untenable. It is settled law that the timelines prescribed under Regulation 35A are directory and not mandatory. We further note that under Section 35(1)(l) of the Code, the Liquidator is expressly empowered to investigate the financial affairs of the Corporate Debtor to determine undervalued or preferential transactions during liquidation, which was initiated by the Adjudicating Authority on 06.06.2023. The Adjudicating Authority, therefore, acted well within its jurisdiction in entertaining and deciding the application under Section 43. 64. This Appellate Tribunal in 'Aditya Kumar Tibrewal, Resolution Professional vs. Om Prakash Pandey, Suspended Director & ....