National Company Law Appellate Tribunal
Tenny Jose vs Prathap Pillai on 4 August, 2023
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (INS.) No. 96 of 2023
(Filed under Section 61 (1) of the Insolvency and Bankruptcy Code, 2016)
(Arising out of the `Order' dated 25.01.2023 in IA(IBC) / 206 / KOB / 2022
in CP (IB) / 25 / KOB / 2021, passed by the `Adjudicating Authority',
(`National Company Law Tribunal', Kochi Bench, Kochi, under
Section 43(1) read with Section 44 of the I & B Code, 2016)
In the matter of:
1. Mr. Tenny Jose
White Mansion, Chirammel House,
Museum Cross Lane, Chembukkavu,
Thrissur - 680020
2. Mr. Arun C. Tenny
White Mansion, Chirammel House,
Museum Cross Lane, Chembukkavu,
Thrissur - 680020
3. Mr. Kiran C. Tenny
White Mansion, Chirammel House,
Museum Cross Lane, Chembukkavu,
Thrissur - 680020 ..... Appellants / Respondent
Nos.1, 3 & 5
v.
Mr. Prathap Pillai
Resolution Professional of
M/s. Tenny Jose Limited,
BLRA 15, Bridge Lane,
Medical College P.O.,
Thiruvananthapuram,
Kerala - 695001 ..... Respondent / Petitioner
Resolution Professional
Comp. App (AT) (CH) (INS) No. 96 of 2023
Page 1 of 22
Present:
For Appellants : Mr. Pradeep Joy, Advocate
ORDER
(Virtual Mode) Justice M. Venugopal, Member (Judicial):
IA No. 335 of 2023 in Comp. App (AT) (CH) (INS.) No. 96 of 2023:
Heard the Learned Counsel for the `Petitioners / Appellants', in IA No. 335 of 2023 in Comp. App (AT) (CH) (INS.) No. 96 of 2023.
2. According to the Petitioners / Appellants, there has occasioned a `Delay of 5 days', in preferring, the instant Comp. App (AT) (CH) (INS.) No. 96 of 2023.
3. The 1st Petitioner / 1st Appellant, is suffering from various `Ailments', and because of his age, the `Travel', has become an issue for him. Further, the `Appellants', were either out of India / Out of Station and not able to give due instructions, to prefer the `Appeal', well `within 30 days from the date of Impugned Order, on 25.01.2023, passed by the `Adjudicating Authority' / `Tribunal', in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021.
Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 2 of 22
4. This `Tribunal', on being subjectively satisfied, as to the reasons ascribed for, and by on behalf of the `Petitioners / Appellants', in regard to the `Condonation of delay of 5 days', in preferring, the instant `Appeal', by adopting a `practical', `liberal', `purposeful', `meaningful', a `pragmatic', and a `rational' approach, extends its `Judicial Arm of Generosity', in `Condoning' the `delay in question', to prevent an `Aberration of Justice', and to `Promote Substantial Cause of Justice', accordingly, allows the `IA No. 335 of 2023 in Comp. App (AT) (CH) (INS.) No. 96 of 2023', but, without costs.
JUDGMENT (Virtual Mode) Justice M. Venugopal, Member (Judicial):
Background:
Comp. App (AT) (CH) (INS.) No. 96 of 2023:
The `Appellants / Respondent Nos. 1, 3 & 5', have preferred the instant Comp. App (AT) (CH) (INS.) No. 96 of 2023, as an `Aggrieved Persons', in respect of the `impugned order', dated 25.01.2023 in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the `Respondent / Petitioner', under Section 43(1) read with Section 44 of the Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 3 of 22 I & B Code, 2016), passed by the `Adjudicating Authority' (`National Company Law Tribunal', Kochi Bench, Kochi).
2. While passing the `impugned order', dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed under Section 43(1) read with Section 44 of the I & B Code, 2016), the `Adjudicating Authority' (`National Company Law Tribunal', Kochi Bench, Kochi), at Paragraph Nos. 15 to 18 (For Point No.3), had observed the following:
``Point No 3: -
15. From the list of impugned transactions mentioned in the petition the corporate debtor made preferential payments to Respondents 1, 3, 5 and 6 to the extent of amount mentioned below:
1) 1st Respondent Rs. 3,96,04,622/-
2) 3rd Respondent Rs.30,39,400/-
3) 5th Respondent Rs.37,86,943/-
4) 6th Respondent Rs.47,13,869/-
16. From the materials Produced it is established that the Respondents 1, 3, 5 and 6 in Preferential transaction, and gained unlawfully at the cost of other Creditors, hence they are liable to refund the amount. Further because of the Preferential transactions, the person and companies mentioned in table No- II also unlawfully enriched however since they are not arrayed as parties to this application, no order can be passed against them.
17. The corporate debtor not made any payments to Respondents 2 and 4 and there is no iota of materials to implicate them with the preferential transactions set out in the petition. It is informed that the 4th respondent was appointed as an independent director in non-executive cadre on 18.06.2018 and resigned as such from office on 12.07.2021.
18. In the application it is stated that the corporate debtor made a sale transaction worth Rs.12,68,707/- to Paptrade with 6th respondent. It is stated that this credit sale transaction concluded after the initiation CIRP order. It appears that this transaction held during the moratorium Period, in such a situation, the transactions are void ab initio. The transactions carried out Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 4 of 22 during the moratorium period does not full under Section 43 of IBC. If any transaction carried out by the Erstwhile directors of corporate debtor, the RP can retrieve the assets or he can file appropriate application seeking assistance of Adjudicating authority to retrieve the loss caused to the corporate debtor from the person or persons benefited by such void transaction. Further in this application the applicant has not furnished sufficient materials in this regard; hence no order has been passed in this regard and liberty is granted to the applicant to take necessary steps to recover the amount involved in the sale transaction concluded during the moratorium period.'' and resultantly, directed the 1st Appellant / 1st Respondent, to pay a Sum of Rs.3,96,04,622/-, the 2nd Appellant / 3rd Respondent, was directed to pay a Sum of Rs.30,39,400/- and the 3rd Appellant / 5th Respondent, was directed to pay a Sum of Rs.37,86,943/- and the 6th Respondent therein, was directed to pay a Sum of Rs.47,13,869/- to the Respondent / Resolution Professional / Petitioner, within one month from today, failing which, the said Amounts, are to be paid with 12% Interest Per Annum, from the `Date of the Order', to till the `Date of Realisation of Amount', and in respect of 2nd and 4th Respondents therein, the `Petition / Application', was `Dismissed', but, without costs. Appellants' Contentions:
3. Assailing the `Validity', `Propriety' and `Legality' of the `impugned order', dated 25.01.2023 in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the `Respondent / Petitioner', under Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 5 of 22 Section 43(1) read with Section 44 of the I & B Code, 2016), passed by the `Adjudicating Authority' / `Tribunal', the Learned Counsel for the Appellants / Respondent Nos. 1, 3 and 5, submits that the `Adjudicating Authority', had committed an error in accepting the conclusions in `Forensic Report', which does not amount to `Delegation of Powers of the Resolution Professional', and further the `Resolution Professional', had made a determination of his own, when the said `Forensic Report' itself, mentions a `Disclaimer' that `No person should act on such information, without appropriate Professional Advice, based on the circumstances of a particular situation'.
4. The Learned Counsel for the Appellants, points out that there is no determination made by the Resolution Professional, while filing the IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Before the `Adjudicating Authority'), and the said `Application', was just a reproduction of `Forensic Audit Report'.
5. According to the Learned Counsel for the Appellants, the `Respondent / Resolution Professional', has to express and explain, `Application of Mind', based on the `Books of Accounts', `Financial Statements', and `Data of the Corporate Debtor', and none of the same, was produced, before the `Adjudicating Authority', and also no submissions, were made by the `Resolution Professional', on that basis.
Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 6 of 22
6. The Learned Counsel for the Appellants, takes a stand that the Respondent / Resolution Professional, simply cannot repeat the extracts or observations, mentioned in the `Forensic Auditor's Report', and in fact, the Resolution Professional could not make an independent decision, in regard to the nature of transactions, as required by Regulation 35A (2) of the `Corporate Insolvency Resolution Process' Regulations.
7. The Learned Counsel for the Appellants, places reliance upon the decision of the `Tribunal', in Jitendra Lohiya v. Nikhil Chowdhury & Ors., reported in (2022) ibclaw.in 337 NCLT, wherein, at Paragraph 16, it is observed as under:
16. ``We have carefully seen the averments of the application and corresponding reply of the respondents. We have noticed that the allegations made in application do not constitute anything actionable against the respondents. It was the duty of the RP to come to conclusive determination before filing an application with the Adjudicating Authority. Simply by repeating the extracts or observations made in the forensic auditors report, the RP could not make an independent determination about the nature of transactions as required by Regulation 35A (2) of the CIRP Regulations.''
8. The Learned Counsel for the Appellants, cites the decision in Kshitiz Chhawchharia v. Madhumalati Merchandise Private Limited & Ors., reported in (2022) ibclaw.in 630 NCLT Kolkata, wherein, at Paragraph Nos. 6.7 to 6.9, it is observed as under:
6.7. ``According to regulation 35A(1) of the CIRP Regulations, the Resolution Professional shall form an opinion whether the corporate debtor has been subjected to any transaction covered under sections 43, 45, 50 or 66 on or Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 7 of 22 before the seventy-fifth day of the insolvency commencement date. According to the regulation 35A(2), on or before the one hundred and fifteenth day of the insolvency commencement date, the Resolution Professional is also required to make a determination to that effect.
6.8. Further, Regulation 35A(3) of the CIRP Regulations provides that upon making such determination under regulation 35A(2), the Resolution Professional shall apply to the Adjudicating Authority for the appropriate relief on or before the one hundred and thirty-fifth day of the insolvency commencement date. In this case, the one hundred and thirty fifth day is on 23 May 2018. The instant application being IA. (IBC) 346/KB/2019 has been filed on 20 March 2019, thus making it clear that the Applicant has not complied with the provisions of regulation 35A within the timeline provided therein. 6.9. Even if we go by the decision of the Hon'ble NCLAT in Aditya Kumar Tibrewal RP Vs. Om Prakash Pandey, Suspended Director that the timeframe is directory, we do not see any "determination" within the meaning of regulation 35A of the CIRP Regulations. Therefore, we will not act as court of first instance to determine the nature of the transactions mentioned hereinabove.''
9. The Learned Counsel for the Appellants, points out that the purported `Preferential Transactions', were conducted in the `Ordinary Course of Business' of the `Corporate Debtor', and hence, they are `excluded'. Besides this, the `Respondent / Resolution Professional / Petitioner', had failed to `establish the existence of an `Antecedent Debt', as per Section 43 of the I & B Code, 2016.
10. The Learned Counsel for the Appellants, contends that the `Respondent / Resolution Professional', had failed to reasonably explain the delay, in preferring the `Application', beyond `time prescribed', as per Regulation 35A of the `Insolvency and Bankruptcy Board of India Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 8 of 22 (Insolvency Resolution Process for Corporate Persons) Regulations', 2016.
11. The Learned Counsel for the Appellants, submits that the `Adjudicating Authority' / `Tribunal', should have considered the decision of the Hon'ble Supreme Court of India, in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited and Ors., reported in (2020) 8 SCC 402, wherein at Paragraph Nos. 17, 17.1, 18.1, 18.3 & 18.4, it is observed as under:
17. ``Having regard to the questions involved, a brief insight into the theory relating to avoidance of certain transactions as being preferential would be pertinent at this stage.
17.1. The basic concept of 'preference' as per the law dictionaries and lexicons is the act of 'paying or securing to one or more of his creditors, by an insolvent debtor, the whole or part of their claims, to the exclusion of the rest'.
We may usefully take note of the meaning, definition and basic ingredients of 'preference' and 'preferential transfer', as defined in Black's Law Dictionary:
preference. (15c) 1. The favouring of one person or thing over another. 2. The person or thing so favoured. 3. The quality, state, or condition of treating some persons or things more advantageously than others. 4. Priority of payment given to one or more creditors by a debtor; a creditor's right to receive such priority. 5. Bankruptcy.
PREFERENTIAL TRANSFER.
* insider preference. (1981) A transfer of property by a bankruptcy debtor to an insider more than 90 days before but within one year after the filing of the bankruptcy petition.
* liquidation preference. (1936) A preferred shareholder's right, once the corporation is liquidated, to receive a specified distribution before common shareholders receive anything.
* voidable preference. See ``preferential transfer"
*** *** *** Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 9 of 22 "preferential transfer. (1874) Bankruptcy. A prebankruptcy transfer made by an insolvent debtor to or for the benefit of a creditor, thereby allowing the creditor to receive more than its proportionate share of the debtor's assets; specif., an insolvent debtor's transfer of a property interest for the benefit of a creditor who is owed on an earlier debt, when the transfer occurs no more than 90 days before the date when the bankruptcy petition is filed or (if the creditor is an insider) within one year of the filing, so that the creditor receives more than it would otherwise receive through the distribution of the bankruptcy estate.
Under the circumstances described in 11 USCA A§547, the bankruptcy trustee may, for the estate's benefit, recover a preferential transfer from the transferee. - Also termed preference; voidable preference; voidable transfer; preferential assignment; preferential debt payment.... 18.1 ........ If twin conditions specified in sub-section (2) of Section 43 are satisfied, the transaction would be deemed to be of preference. As per clause
(a) of sub-section (2) of Section 43, the transaction, of transfer of property or an interest thereof of the corporate debtor, ought to be 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 as per Clause (b) thereof, such transfer ought to be of the effect of putting such creditor or surety or guarantor in beneficial position than it would have been in the event of distribution of assets under Section 53.
18.3. However, even if a transaction of transfer otherwise answers to and comes within the scope of Sub-sections (4) and (2) of Section 43 of the Code, it may yet remain outside the ambit of Sub-section (2) because of the exclusion provided in Sub-section (3) of Section 43.
18.4. Sub-section (3) of Section 43 specifically excludes some of the transfers from the ambit of sub-section (2). Such exclusion is provided to: (a) a transfer made in the ordinary course of business or financial affairs of the corporate debtor or transferee 38; (b) a transfer creating security interest in a property acquired by the corporate debtor to the extent that such security interest secures new value and was given at the time specified in sub-clause (i) of clause (b) of Section 43(3) and subject to fulfilment of other requirements of sub-clause (ii) thereof. The meaning of the expression "new value" has also been explained in this provision.''
12. The Learned Counsel for the Appellants, refers to the decision in Down Distributions Co. Pty. Ltd. v Associated Blue Star Pty Ltd. (in liq) Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 10 of 22 (1948) 76 CLR 463, wherein, it is observed as under:
``As was pointed out in Burns v. McFarlane 3 the issues in sub-section 2 (b) of Section 95 of the Bankruptcy Act 1924-1933 are (1) good faith; (2) valuable consideration; and (3) ordinary course of business." This last expression it was said ``does not require an investigation of the course pursued in any particular trade or vocation and it does not refer to what is normal or usual in the business of the debtor or that of the creditor." It is an additional requirement and is cumulative upon good faith and valuable consideration. It is, therefore, not so much a question of fairness and absence of symptoms of bankruptcy as of the everyday usual or normal character of the transaction. The provision does not require that the transaction shall be in the course of any particular trade, vocation or business. It speaks of the course of business in general. But it does suppose that according to the ordinary and common flow of transactions in affairs of business there is a course, an ordinary course. It means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation.'' 25.6.2. Taking up the transactions in question, we are clearly of the view that even when furnishing a security may be one of normal business practices, it would become a part of `ordinary course of business' of a particular corporate entity only if it falls in place as part of `the undistinguished common flow of business done'; and is not arising out of `any special or particular situation', as rightly expressed in Downs Distributing Co. (supra).''
13. The Learned Counsel for the Appellants, advancing an argument that Regulation 35A of the `Corporate Insolvency Resolution Process' Regulations, requires a `Resolution Professional', to form an opinion, on whether the `Corporate Debtor', was subjected to any `Avoidance Transaction', on or before the `75th day of the Insolvency Commencement Date' (``ICD'') i.e. 21.12.2021 in the instant case. Where he is of the opinion that the Corporate Debtor has been subjected to any transactions Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 11 of 22 covered under the aforesaid sections, he shall make a determination, on or before, the 115th day of `ICD'.
14. The Learned Counsel for the Appellants, brings to the notice of this `Tribunal' that the `Resolution Professional / Petitioner', is required to `apply', to an `Adjudicating Authority', within 135 days of `Commencement of Insolvency Date'. Besides this, it is represented on behalf of the `Appellants' that the `Final Audit Report', was submitted by the `Auditor', on 04.06.2022, and that the `Petition', was filed on 15.07.2022 (after 206 days of Commencement of CIRP Proceedings, i.e., on 21.12.2021).
15. The Learned Counsel for the Appellants, proceeds to point out that there was no intent, whatsoever to `defraud' / `cause', any `loss' / `damages', to the `Creditors' or any `Stakeholder' of the `Corporate Debtor', for that matter.
16. The Learned Counsel for the Appellants, contends that the IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, is a `Misconceived' one (Filed by the `Resolution Professional' / `Petitioner), and prays for `setting aside', the `impugned order', dated 25.01.2023, passed by the `Adjudicating Authority'/ `Tribunal', and consequently, to Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 12 of 22 `allow', the instant `Appeal', in furtherance of `Substantial Cause of Justice'.
Preferential Transaction:
17. Section 43 of the I & B Code, 2016, defines `Preferential Transaction', referring to the opinion of a `Resolution Professional', which implies that the `Opinion', was reached at during a `Resolution Stage', during the `pendency of Resolution Process', the ingredients of Section 43 of the `Code', can be pressed into service. Onus:
18. When a `Transaction', is purported to be a `Preferential', the `burden', falls on the intended `Beneficiary', to `repudiate the presumption' that, on the `balance of probabilities', the alleged `preferer', was acting solely, by `reference to proper commercial consideration', as per decision in Oxford Pharmaceuticals Ltd., Re (2009) 2 BCLC 485. Preference:
19. A preference, shall be deemed to be given at a relevant time, if 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 a `Preference', is given to a `Person', other than Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 13 of 22 the `Related Party', during the period of one year, preceding the `Insolvency Commencement Date'.
Presumption of Preference:
20. To be noted, that the `Payments', made to the `Directors', with knowledge of `Company's Financial State', created the `Presumption of Preference', and they were to payback, as per decision in Exchange Travel Holdings Ltd. (No 4) Re 1999 BCC 291 (CA).
Constructive Trustee:
21. A `Person', who receives `Payment', under `Preference', in respect of the `Company', turns out to be its `Constructive Trustee', and he has to `payback', as per decision in Clasper Group Services Ltd. Re (1989) BCLC 143 (ChD).
Evaluation:
22. Before the `Adjudicating Authority' / `Tribunal', the `Resolution Professional' / `Petitioner', had filed IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (under Section 43(1) read with Section 44 of the I & B Code, 2016), seeking a `Declaration' that the `Transactions reported at Paragraph 3.6.1 of the `Forensic Report', fall under Section 43 of the I & B Code, 2016, for `Issuance of Direction', to the Appellant Nos. 1, 3 and 5 (Respondent Nos. 1, 3 and 5 and Others in `Petition'), to repay a Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 14 of 22 Sum of Rs.6,35,61,367/- or any such Amounts, back to the `Corporate Debtor', and to direct the `Respondents', to `repay' a Sum of Rs.12,68,707.71/-, being a `Credit Sale', conclude after the `Insolvency Commencement Date', or any such amounts, back to the `Corporate Debtor'.
23. According to the Respondent / Resolution Professional / Petitioner, the main CP (IB) / 25 / KOB / 2021, was accepted by the `Adjudicating Authority' / `Tribunal', and by an Order dated 21.12.2021, `Corporate Insolvency Resolution Process', was initiated and an `Interim Resolution Professional', was appointed, etc.
24. It comes to be known that the `Resolution Professional' / Petitioner had filed IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, in the teeth of `Preferential Transactions', carried out by the Appellants / Respondents, being the `Directors', of the `Corporate Debtor'. The conclusions of the `Resolution Professional / Petitioner', are quite in tune with the `Findings', of the `Forensic Audit', made by the `Forensic Auditor'.
25. It is the version of the Respondent / Resolution Professional (Before the Adjudicating Authority') that as seen from the `Forensic Report' (vide Paragraph No.3.6.1), numerous `Parties', including the `Directors', were paid a total Sum of Rs.6,35,61,367/-, as `Preferential Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 15 of 22 Transactions', and these `Transactions', were made between 27.12.2019 and 25.02.2022, which clearly falls within the four corners of Section 43 of the I & B Code, 2016. As a matter of fact, these `Transactions', the `Corporate Debtor', had carried out, during the `Look Back Period', are `Preferential in Character', whereby, the `Loss', was caused to the `Corporate Debtor', to an extent of Rs.6,35,61,367/-.
26. A mere glance of the IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (Filed by the Respondent / Resolution Professional / Petitioner), indicates that the 1st Appellant / 1st Respondent, had withdrew a Sum of Rs.3,66,54,622/- (amount withdrawn from `Bank' - Preferential Payments and in respect of the 1st Appellant / 1st Respondent), the Journal Adjustment, providing `Credit' to `Steel House Pvt. Ltd.', resulting in a Bank Transfer from Steel House to the 1st Appellant / 1st Respondent, amounted to Rs.262,000/-. Likewise, the Cash Payment from Steel House Pvt. Ltd., to the 1st Appellant / 1st Respondent, amounted to Rs.24,88,000/-.
27. Apart from the above, the 1st Appellant / 1st Respondent withdrew a Sum of Rs.50,00,000/- from `Bank', to transfer it to George Kurian. Also that, Rs.2,76,752/- was the Journal Adjustment, in respect of Tenny Jose Pvt. Ltd. A total Sum of Rs.47,13,869/- was the Journal Adjustment of the 1st Appellant / 1st Respondent, with Paptrade India Pvt. Ltd. Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 16 of 22
28. In respect of the 3rd Appellant / 5th Respondent, he withdrew a total Sum of Rs.23,94,728/- and further the Bank Transfer from Steel House Pvt. Ltd. to and in his favour (3rd Appellant / 5th Respondent) a Sum of Rs.4,88,024/- was made. Also the Cash Payment from Steel House Pvt. Ltd., to 3rd Appellant / 5th Respondent, was made, amounting to Rs.4,45,000/-. `Journal Adjustment', against `Sales to Steelion Prefab Infra Solutions Pvt. Ltd., in respect of the 3rd Appellant / 5th Respondent, amounted to Rs.4,59,191/-. That apart, the Journal Adjustment with Steelion Prefab Infra Solutions Pvt. Ltd., in respect of the 3rd Appellant / 5th Respondent) was Rs.3,52,649/-.
29. In respect of the 2nd Appellant / 3rd Respondent, the Sum withdrawn from the `Bank', amounted to Rs.30,39,400/-.
30. A glance of the contents of IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021 (vide Paragraph 15), shows under the Caption Sree Seetharama Paper Agencies, the amount withdrawn from the Bank, amounting to Rs.30,00,000/-, under the `Head' Oxyo Financial Services, the amount transferred from the `Bank', was Rs.2,79,709/-.
31. It is evident that a Sum of Rs.12,70,290/-, was paid to `Tenny Jose Loan Account', by `Tenny Jose Limited' (Oxyo Financial Services) - `Adjusted' with `Tenny Jose Loan Account'.
Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 17 of 22
32. In IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, the Resolution Professional / Petitioner, under the `Caption' Fullerton India Credit Company Limited, a Sum of Rs.7,90,145/- was shown as `Amount Transferred'. Likewise, under the `Head' Fullerton India Credit Company Limited, as Sum of Rs.7,90,494/- was said to be adjusted with 1st Appellant / 1st Respondent's Loan Account, which was later paid to him by Tenny Jose Limited.
33. Also, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, under the `Head' Fullerton India Credit Company Limited, the `Journal Adjustment', against Paptrade India Private Limited was shown as Rs.6,56,494/-. According to the Respondent / Resolution Professional, the GST return for December, showed that on 22.12.2022, the Corporate Debtor, made a `Sale Transaction', worth Rs.12,68,707/- to Paptrade (Future Ventures Pvt. Ltd.), a related Party, which falls within Section 43 of the `Code', and hence, directed to be awarded.
34. According to the `Resolution Professional / Petitioner', the conduct of the `Suspended Directors', is / was `detrimental', to all the `Creditors' interest, and therefore, they were to be directed to refund the said Sum, which could be utilised, to settle the `Creditors Dues'. In short, to restore the Loss, caused to the `Corporate Debtor', the Resolution Professional / Petitioner, had filed IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 18 of 22 2021 (Before the `Adjudicating Authority' / `Tribunal'), for seeking necessary `Orders' / `Directions'.
35. The Appellants / Respondent Nos. 1 to 5 (in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021), were the `Directors' of the `Corporate Debtor', and that the `Paptrade India Pvt. Ltd. / Company', being a `Related Party', advanced some `Loans', to the `Corporate Debtor', and therefore, they were `Unsecured Creditors' of the `Corporate Debtor',
36. It is brought to the fore, that the `Corporate Debtor', had transferred Sums, from its `Bank Account', to the `Appellants / Respondents', with a view to `Discharge its Antecedent Operational Debt', and by virtue of the `Payments' so made, the `Appellants / Creditors', were placed in a `higher Beneficial Pedestal', than that of the `Financial Creditors', when `Distribution of Assets', are made as per Section 53 of the `Code'.
37. In the instant case, the Transactions that took place between the period from 27.12.2019 and 12.04.2021, were rightly taken into account, and undoubtedly, the period specified in Section 43 (4) (a) of the `Code', is fulfilled, considering the fact that the `Insolvency' beginning date, was 21.12.2021, and the Transactions, were held between the `Related Parties' / `Appellants' / `Respondents', being the `Former Directors' of the Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 19 of 22 `Corporate Debtor'. No wonder, the lookback period of two years, squarely applies to the facts of the instant case.
38. Although, on behalf of the Appellants / Respondents, a stand was taken (Before the `Adjudicating Authority'), that the `Transactions', were made in the `Ordinary Course of their Business', and the amounts, withdrawn from the `Corporate Debtor's Account, etc., and usurping the same in respect of the `Antecedent Debt', cannot tantamount to carrying on business in an ordinary manner of the `Corporate Debtor', or in the `Financial Affairs' of the `Respondents'. Looking at from any angle, the `impugned transactions', are not exempted transactions, as per Section 43 (3) of the `Code', in the considered opinion of this `Tribunal'.
39. In the present case, the `NPA', was made on 23.02.2021 and the transactions, pointed out by the `Appellants / Respondents', were before the earlier `Date of the NPA', is not omitted.
40. In so far as the plea taken on behalf of the Appellants, that there was a negation of `Regulation 35A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations', 2016, it is pointed out by this `Tribunal', that the said Regulation, is only `Directory in Nature', and is not a `Mandatory' one. Viewed in that perspective, the `contra plea', taken on behalf of the `Appellants', is `unworthy of acceptance', as held by this `Tribunal'. Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 20 of 22
41. As far as the present case is concerned, on account of the `Preferential Transactions', the `Individual' and the `Companies', were gained at the cost of `Creditors' and in `Law', the Appellant Nos. 1, 3 and 5 / Respondent No. 1, 3 and 5 and Paptrade India Pvt. Ltd. / Company (6th Respondent in IA (IBC) / 206 / KOB / 2022, are in `Preferential Transaction'.
42. As regards, the `Credit Sale Transaction', that was complete after the initiation of `Corporate Insolvency Resolution Process' Order, the `Sale Transaction', effected by the `Corporate Debtor', amounting to Rs.12,68,707/- to the 6th Respondent in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, was one, made during the `Moratorium Period' and such a `Transaction' in `Law', does not come under the `ambit' of Section 42 of the `Code'.
43. In the `impugned order' dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, the `Adjudicating Authority' / `Tribunal', had directed the `Resolution Professional / Petitioner', to take necessary steps, to recover the Sum concerned in the `Sale Transaction', effected during the `Moratorium Period'.
44. Be that, as it may, this `Tribunal', on a careful consideration of the contentions advanced on behalf of the `Appellants', considering the facts and circumstances of the case, and on going through the `impugned order' Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 21 of 22 dated 25.01.2023, in IA (IBC) / 206 / KOB / 2022 in CP (IB) / 25 / KOB / 2021, passed by the `Adjudicating Authority' / `Tribunal', in directing the `1st Appellant / 1st Respondent, to pay an amount of Rs.3,96,04,622/-, the 2nd Appellant / 3rd Respondent, to pay an amount of Rs.30,39,400/- and the 3rd Appellant / 5th Respondent, to pay a Sum of Rs.37,86,943/-, and the Paptrade India Pvt. Ltd. (6th Respondent in IA (IBC) / 206 / KOB / 2022), to pay a Sum of Rs.47,13,869/-, within a month from the date of Order, failing which, the amounts will carry 12% `Simple Interest', till the date of `Realisation', is free from any `Legal Infirmities'. Accordingly, the `Appeal', sans merits and it fails. Result:
In fine, the instant Comp. App (AT) (CH) (INS.) No.96 of 2023, is `Dismissed'. No costs. The connected pending IA No. 334 of 2023 (`For Stay') is `Closed'.
[Justice M. Venugopal] Member (Judicial) [Shreesha Merla] Member (Technical) 04 / 08 / 2023 SR / TM Comp. App (AT) (CH) (INS) No. 96 of 2023 Page 22 of 22