Mr. Ramkumar SV Vs. M/s. Serum Institute of India Limited - As to Section 66 is concerned, here the case is that R1 is creditor to the Corporate Debtor company, therefore the Corporate Debtor was under obligation to make payment to R1 herein. If at all payment has been made other than in ordinary course of business, at the most it could be considered as a preferential transaction but not as a fraudulent transaction because payment was made towards the Creditor.

 NCLT Chennai (10.01.2019) in Mr. Ramkumar SV Vs. M/s. Serum Institute of India Limited  [MA/92/ 1B/2018 in CP/540/IB/CB/2017] Held that;

• To say it is a preferential transaction, it has to be  tested u/s.43 of the Code, to say it is fraudulent trading, it has to be  tested u/s.66 of the Code.

• As to Section 66 is concerned, here the case is that R1 is creditor to the  Corporate Debtor company, therefore the Corporate Debtor was under  obligation to make payment to R1 herein. If at all payment has been made  other than in ordinary course of business, at the most it could be  considered as a preferential transaction but not as a fraudulent transaction  because payment was made towards the Creditor.

• Payments made to the creditors and such payments cannot be  brought under the caption of either fraudulent trading or wrongful  trading, moreover legislature normally will not provide overlapping  jurisdiction under two heads,

Excerpts of the order;

Order dictated in the open court on 08.01.2019 It is an application the Resolution Professional filed u/s 43 & 66 of  Insolvency and Bankruptcy Code, 2016 against M/s. Serum Institute of  India Limited (R1) and the Promoter-Director of the company (R2)  stating that R2 herein made a fraudulent payment seeking reliefs as  follows: 

• (a) to declare the payment under the transaction constitute preferential  transaction violating Section 43 of the Code; 

• (b) to direct the payments under transaction by the Corporate Debtor to  Rl be vested in the Corporate Debtor; 

• (c) to direct any person (including R2) to make contribution to the assets  of the Corporate Debtor as it may deem fit; and 

• (d) any other reliefs including u/s.44, 66 and 67 of the Code as it may  deem fit in the facts and circumstances of the case. 

# 2. Facts of the Case: The Resolution Professional states that Corporate  Debtor entered into a loan agreement on 22nd February, 2012 with R1 and  R2 (Promoter/Guarantor) for undertaking a debt of *25crores.  Thereafter, according to this Resolution Professional, RI made a claim of  only * 12,01,63,982 in Form-C on 6th September, 2017, but as to  remaining balance around  13crores payable by the corporate debtor to  R1, no documents have been provided to the applicant. Basing on this  factual background, this applicant assuming  13 crores, to which no  claim was made, should have gone as preferential payment to R1 putting  it in a beneficial position than it would have been in the event of a  distribution of assets being made in accordance with section 53 of the  Code. 

# 3. On perusal of this application, there is no definite information with this  applicant to say that the Corporate Debtor either made payment of this  13 crores to Ri in preference to other Creditors or made fraudulent  payment to Ri, except the applicant assumption as reflected in this  application. 

# 4. As against this MA, R1 filed reply stating that this Corporate Debtor and  another paid *27,43,50,000 (* 20 crores by the Corporate Debtor and  *7,43,50,000 by Orchid Healthcare Private Limited) on 23rd August,  2014 against the case (SCC/416462) R1 filed against the Corporate  Debtor and another u/s 138 of Negotiable Instruments Act before the  Court of I Class Additional Magistrate, Pune.  

# 5. On looking at the pleadings and the material papers of R1 and the  Applicant, it appears that this Resolution Professional developed the case  in his rejoinder stating that the Corporate Debtor made payment of *27,43,50,000 to R1 therefore it is a fraudulent transaction falling within  the ambit of Section 66 of Insolvency & Bankruptcy Code. Until before  R1 filed its reply, this Applicant was not even aware any payment was  made to the corporate debtor, on his own assumption this case was filed  assuming this case would fall under section 43 or under section 66 of the  Code. 

# 6. On hearing the submissions of either side, it appears that this applicant  has not filed this application with any definite information showing that  the Corporate Debtor made preferential payment to R1 or fraudulent  trading at a given point of time, except elaborating it in his rejoinder by  looking at the details R1 given in its reply. 

# 7. If we see whether those transaction are under preferential transaction or  under fraudulent trading, to say it is a preferential transaction, it has to be  tested u/s.43 of the Code, to say it is fraudulent trading, it has to be  tested u/s.66 of the Code. 

# 8. On reading Section 43, it is evident that the Resolution Professional can  initiate proceedings under the head of preferential transaction only when  there is material to show that a preferential payment was made to a  creditor within two years if he is a related party or within one year if  party is not related as stated under the Code. Since this transaction has  taken place and payment was made on 23rd August, 2014, it is very much  clear that this transaction does not fall within the ambit of Section 43 of  the Code. R1 made it clear that he is not related to the Corporate Debtor,  to which the Resolution Professional has not raised any counter argument  saying that he is a related party to the Corporate Debtor, except stating  that R1 is a shareholder in the Corporate Debtor. 

# 9. As to Section 66 is concerned, here the case is that R1 is creditor to the  Corporate Debtor company, therefore the Corporate Debtor was under  obligation to make payment to R1 herein. If at all payment has been made  other than in ordinary course of business, at the most it could be  considered as a preferential transaction but not as a fraudulent transaction  because payment was made towards the Creditor. Moreover, section 66 of  the Code talks about fraudulent trading or wrongful trading so as to  defraud creditors of the corporate debtor or for fraudulent purpose, not in  relation to payments made to the creditors and such payments cannot be  brought under the caption of either fraudulent trading or wrongful  trading, moreover legislature normally will not provide overlapping  jurisdiction under two heads, besides this, subject matter jurisdiction  under these two heads is different. Therefore, we are of the view that this   transaction will not fall within the ambit of Section 66 of the Code.  

# 10.That apart, it is evident on record that R1 candidly placed material saying  that Corporate Debtor made this payment only when R1 initiated criminal  proceedings against the Corporate Debtor u/s.138 of Negotiable  Instruments Act. 

# 11.In this background of factual matrix and in the light of Section 43 and 66  of the Code, we are of the view that this transaction will neither fall under  preferential transaction nor under fraudulent transaction, therefore  MA/92/IB/2018 is hereby dismissed as misconceived. 

 

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