Santanu T Ray (RP) Vs. Sunil Kumar Trivedi and Ors. - It is not case of the applicant that the cash so withdrawn was not accounted for in the cash books, accordingly, the said cash in hand accounts these alleged withdrawals. Hence, the transaction of withdrawal per-se can not be impugned as fraudulent after such withdrawal having been recorded for in the books of accounts.

 NCLT Mumbai (2026.01.09) in Santanu T Ray (RP) Vs. Sunil Kumar Trivedi and Ors.[(2026) ibclaw.in 39 NCLT, IA 4619/2023 in Company Petition No. 4738 of 2018] held that; 

• It is not case of the applicant that the cash so withdrawn was not accounted for in the cash books, accordingly, the said cash in hand accounts these alleged withdrawals. Hence, the transaction of withdrawal per-se can not be impugned as fraudulent after such withdrawal having been recorded for in the books of accounts.

• Accordingly, in the absence of any details of these expenditure, we do not consider it appropriate to hold it as fraudulent in the absence of any basis of determination of impugned amount.

• Nonetheless, neither the auditor nor the applicant made any inquiry from the relevant bank to ascertain the details of payee, which has to be available in records of payee bank, to ascertain the correct beneficiary of amounts and make determination accordingly. Accordingly, we are of considered view that no order can be passed in relation to this transaction.

• Further, the provision of bank guarantee for the business of subsidiary per se can not be said to be a fraudulent transaction. as per the books of the Corporate Debtor.

• As regards the proceeds of sale post CIRP amounting to Rs. 21,45,408/-not directed to the Corporate Debtor, this transaction if happened is in violation of section 14 of IBC and is required to be recovered from the concerned party. In case, the concerned party fails to pay the same, the Respondent No. 1 to 4 shall jointly or severally pay the said amount within 30 days along with interest @ 12% p.a. from the date of this order.

Excerpts of the Order;

# 1. This Application IA 4619/2023 was filed on 23.04.2024 by Mr. Santanu T Ray (Applicant), the Resolution Professional of Neo Corp International Limited (“Corporate Debtor”) in Corporate Insolvency Resolution Process (“CIRP”) under section 66 (1) read with section 60 (5) of the Insolvency and Bankruptcy Code 2016, seeking following reliefs:-

• a. This Hon’ble Tribunal may be pleased to allow this instant application;

• b. To direct Respondent No. 1 to 4 to make contribution of Rs. 2,21,51,367/- for the benefit of the stakeholders of the corporate debtor, as the same was reported to have been fraudulently withdrawn in cash from the account of Punjab National Bank, in order to defraud the secured creditors;

• c. To direct Respondent No. 1 to 4 to make contribution of Rs. 1,76,90,000/- for the benefit of the stakeholders of the corporate debtor, as the same was reported to have been expended as “other expenses” as reflecting in FY 2016-17, even though a lease agreement was entered into by the corporate debtor with Prism. Flexible Solutions Pvt. Ltd. wherein the manufacturing facilities of the corporate debtor was leased to Prism Flexible Solutions Pvt. Ltd. vide agreement dated 01/04/2016;

• d. To direct Respondent No. 1 to 4 to make contribution of Rs. 114,72,13,585/- for the benefit of the stakeholders of the corporate debtor, as the said Respondent had intentionally siphoned off money from the corporate debtor’s bank account to unknown accounts which ranges from January 2012-May 2016 in order;

• e. To direct the Respondents 1 to 4 to make contribution of Rs. 2,50,09,29,173/- for the benefit of the creditors of the corporate debtor which has been transferred maliciously to the related parties of the corporate debtor;

• f. To direct the Respondents 1 to 4 to make contribution of Rs. 1,82,35,119/-, which has been illegally siphoned off by transfer of vehicles to the ex-employees or has undergone accidental damage as alleged;

• g. That the Hon’ble Tribunal be pleased to refer the matter to the Central Government (Ministry of Corporate Affairs) in terms of section 213 of the Companies Act; 2013 for investigating the affairs of the Corporate Debtor and for further investigating upon against the Respondent No.1 and 2 with respect to the invoices raised by the corporate debtor against its related parties to the tune of Rs. 91,67,74,589.48/-, where the proceeds pertaining to such exports have not been repatriated into India and involves contravention of FEMA, 1999;

• h. To direct the Respondent No. 1 to 5 to provide necessary information whether proceeds of sale were received with respect to the invoices raised for an amount of Rs. 21,45,408/- on customers for job work in the account of Prism Flexible Project Solutions Private Limited and to make contribution of such proceeds for the benefit of the creditors of the corporate debtor. Further since these invoices were raised during the course of CIRP without disclosing the same to the Resolution Professional, the Applicant herein prays before the Hon’ble Tribunal to pass necessary orders under Section 70 of the Code, 2016;

• i. Such further or other Order or Orders as this Hon’ble Tribunal may deem fit and proper in the ends of justice.

# 2. Respondent No. 1 to 4 viz. Mr. Sunil Trivedi, Mr. Utkarsh Trivedi, Mr. Ladharam Patel, and Ms. Kiran Phulpagar are suspended directors of the Corporate Debtor and Respondent No. 5 is M/s Prism Flexible Solutions Private Limited (“PFSPL”), a company of which Respondent No. 1 was director from 2012 to 2016, and thereafter, the relatives of Respondent Nos. 1 and 2 were alleged to its shareholders / Directors and directly or indirectly controlling and managing its affairs.

# 3. The Corporate Insolvency Resolution Process of Neo Corp International Limited was initiated under Section 9 of the Insolvency & Bankruptcy Code, 2016 by Plastiblends India Limited and the CIRP commenced by an order dated 19/09/2019 passed in CP (IB) No. 4738/IBC/NCLT/MB/2018 by this Tribunal. The Applicant was appointed as Resolution Professional in the first COC Meeting held on 19/10/2019.

# 4. In 3rd Meeting of COC, the members of COC approved the appoint Secmark Consultants Pvt. Ltd. as transaction auditor for conducting the transaction audit of the Corporate Debtor for a period of 2 years from FY 2013-14, and accordingly it was appointed on 13.12.2019 to conduct the transaction audit for the corporate debtor and submitted its report dated 19.5.2020.

3 5. The Applicant has impugned the following transactions :

a. Cash withdrawal from the Punjab National Bank to the tune of Rs. 2,21,51,367/- from 27.10.2014 to 11.07.2015 observed by the Transaction Auditor;

b. Drastic increase in ‘other expenses’ of the Corporate Debtor from Quarter 1 of FY 16-17 to Quarter 4 of FY 16-17. The increase in amount was from 2,48,00,000/- to 8,55,00,000/- in three quarters without any explanation as to increase in sales or manufacturing;

c. Rs. 114,72,13,585/- was transferred to unknown accounts which ranges from January 2016 to May 2016 until the bank account of the Corporate Debtor was seized by the Income Tax Department;

d. Extension of Bank Guarantee (vide Deed of Guarantee dated 11th October 2013) towards related party Sacos Indigo Pvt. Ltd. of Rs. 2,20,16,00,000/- in 2013 as per the books of the Corporate Debtor, and further transactions amounting to Rs. 25,23,46,542/- undertaken with related parties without any supporting documents;

e. Vehicles amounting to 1,82,35,119/- are written off in the books either as ‘Accidental Damage’ or ‘Transferred to ex-employees;

f. The Corporate Debtor has made exports to its related parties to the tune of Rs. 91,67,74,589/- from FY 2011-2016, however, the proceeds of the same have not been repatriated to India thereby violating principles of FEMA, 1999;

g. The proceeds of sale post CIRP amounting to Rs. 21,45,408/- were not directed to the Corporate Debtor.

# 6. It is stated that since the inception of CIRP, the suspended directors have been non-cooperative towards the former Interim Resolution Professional and the Applicant and thereafter an application under Section 19(2) of the Code was filed before the Hon’ble NCLT, Mumbai, however, till date the suspended Directors of the corporate debtor has ignored and failed to provide the books of accounts of the corporate debtor. It is further stated that the suspended management have neither filed the financial statements / annual returns with the Registrar of Companies or BSE nor filed any income tax returns from the FY 2016-2017 onwards, therefore based on the limited co-operation provided by the suspended management and the transaction audit report prepared by the transaction auditor, the present application is being filed.

# 7. The Respondents No. 1 and 2 have filed common reply and were represented by their counsel in the hearing, however, no other respondents has filed any reply. The Respondent No. 1 & 2 have pleaded that the financial records of the corporate debtor were seuzed by the Income Tax Department in a search operation carried out in terms of Section 132 of the Income Tax act, 1961 and have placed on record a panchnama dated 3.3.2015 drawn pursuant to said search operation commencing from 27.2.2015. The Respondent No. 1 and 2 have also submitted that most of the transactions that are alleged to be fraudulent relate to a period much prior to the commencement of CIRP and are well beyond the look-back period as the transactions relate back to a period mostly prior to 2016, and the applicant has not impugned any transaction during the look-back period. It is also submitted that the period in relation to which the transactions have been alleged to be fraudulent are when the books of the Corporate Debtor {a listed company) were duly audited and uploaded on the stock exchanges. It is also submitted that the Corporate Debtor turned NPA after 31st March 2016, and there is nothing to demonstrate that the Corporate Debtor was in financial difficulty prior to that, therefore, it cannot be said that the mandatory requirement of Section 66(2) is met. It is also contended that section 66 of the Code requires the RP to demonstrates that a transaction has been carried out (i) knowingly and (ii) with the intent to defraud creditors or (iii) for any fraudulent purpose. It is also contended that sections 66(1) and 66(2) are limited to passing an order against the promoters for making contribution, and no investigation or direction of disclosure can be ordered in these provisions.

# 8. Heard the learned counsel and perused the material on record.

# 9. Indubitably, the present application has been filed on basis of audited financial statements as on 31.3.2016 and unaudited statements for FY 2016-17 available with the Applicant as well as the transaction auditor. The panchnama drawn by Income Tax Search team reveals that the servers, including SAP server storing data in relation to Corporate Debtor, were seized. This Tribunal had requested the concerned office of Director General as well Director of Investigation, Indore to make available certified copies of the records vide order(s) orders dated 20th January 2025, 11th March 2025, 2nd April 2025, 5th May 2025, 11th June 2025, 18th August 2025, and 30th October 2025, however, the Ld. Counsel for the applicant submitted that the said records is still wanting and requested to proceed further in the matter.

# 10. It is pertinent to note that no effort was carried out by the applicant to collate the bank statements and records and other relevant documents and information from persons specified in Regulation 4 of CIRP Regulations, which enabled the Resolution Professional as well to do so after its amendment from 14.7.2021. The applicant, instead of compiling the books of accounts on basis of such records, kept waiting for co-operation of the respondents, who already had already found solace in having records of corporate debtor under seizure with Income Tax Authorities, while the respondents could have exercised their statutory right to have cloned copy of server records. The inaction on part of the respondents can be understood considering that it suited their objective of avoiding the consequences arising from the availability of information and transfer of manufacturing facilities on lease to Respondent No. 5 from 1.4.2016 to keep their business going. The heavy dependence of insolvency professional on provision of financial information from the suspended board requires proper training of the insolvency professional as well as CoC members so that they may explore alternative available avenues, which are readily there with third persons in this digital era, to assimilate historical financial information in relation to corporate debtor. The IBBI may look into this aspect and consider disseminating proper advisory to Insolvency Professionals to do so and to the Financial Creditors/CoC members to insist upon the same by having regular updates from insolvency professional in their meetings on this aspect.

# 11. At this juncture, it is pertinent to note that the search operations were carried out on 27.2.2015 and the records, including SAP records were seized on 3.3.2015. There is no qualification in the audit report for the year ended 31.3.2016 that books of account were not produced before the auditors. Instead, the auditors have stated at para 8 of their report that

• “The Company has maintained its account on a highly integrated computerized software system namely “SAP” but the books of accounts generated through the software system differs /ram the Indian traditional formats of the books of accounts. However, on the basis of viewing the data and report generated in the computerized form, we conducted our audit. We are of the view that the appropriate feeding of the primary data from the corresponding source documents, their processing on SAP and resultant trial balance generated by the system provide a reasonable basis for us in expressing our opinion on the standalone financial statements under reference to this report.” 

This contradicts the stand taken by the suspended board that the corporate debtor had no record as the same was seized by the income tax department. The explanation offered by the suspended board is patently false. Further, the Respondents have stated that financial statements for financial year 2016-17 could not be filed as its auditors were arrested in another matter, and in absence of Noc from previous auditors, they could not engage another auditor in view of mandate contained as per Clause 8 Part 1 of the First Schedule of Chartered Accountants Act, 1949. Though, this explanation is also patently false, as said provision only requires an incoming auditor to communicate with the outgoing auditor only, but this does not support the excuse of seizure of records by Income Tax Authorities, the suspended board members had taken to deny provision of accounting records for the subsequent periods along with supporting documents thereof.

# 12. Nonetheless, we consider it appropriate to proceed on basis of evidences/pleadings placed before us for adjudication of impugned transactions.

# 13. As regards cash withdrawal from the Punjab National Bank to the tune of Rs. 2,21,51,367/- from 27.10.2014 to 11.07.2015 observed by the Transaction Auditor, it is noted that the books of account for the year ended on 31.3.2016 were duly audited and the cash in hand as on 31.3.2016 is stated as Rs. 36,40,987/-. It is not case of the applicant that the cash so withdrawn was not accounted for in the cash books, accordingly, the said cash in hand accounts these alleged withdrawals. Hence, the transaction of withdrawal per-se can not be impugned as fraudulent after such withdrawal having been recorded for in the books of accounts. Vide order dated 11.12.2025, this Tribunal, after hearing the parties, directed them to indicate the amount of cash in hand available as on CIRP commencement date with the Corporate Debtor and whether such cash was handed over to RP or not. The Respondent No. 1 and 2 have, instead of providing the said information, have conveniently ignored it by stating that it is not the RP’s allegation that cash available at the commencement of CIRP has not been handed over to the RP. It is pertinent to note that, even the Respondent No. 1 & 2 have not contended that the cash in hand as reflected in the financial statements as on commencement of CIRP were handed over. Since, the financial statement for the year ended 31.3.2016 has only been placed on record and it reflects cash in hand as Rs. Rs. 36,40,987/-, which ought to have been made available to the applicant on commencement of CIRP or in alternate, the suspended board ought to have given account thereof, we consider it appropriate to direct Respondent No. 1 to 4 to jointly or severally contribute this amount to the assets of the Corporate Debtor along with interest @ 12% p.a. from 1.4.2016 within 30 days.

# 14. As regards drastic increase in ‘other expenses’ of 2,48,00,000/- in Quarter 1 of FY 16-17 to Rs. 8,55,00,000/- in Quarter 4 of FY 16-17, the applicant has sought an order for contribution of Rs. 1,76,90,000/-, however, the applicant has not provided any basis therefor. The applicant has alleged these expenses fraudulent on basis of financial results reported to BSE by the Corporate Debtor stating that showing drastic increase of expenses from Quarter 1 of FY 2016-17 to Quarter 4 of FY 2016- 17 and providing no explanation with respect to increase in ‘other expense is suspicious in nature and is done with a mala-fide intention to defraud the creditors of the corporate debtor. However, it is made clear that these expenses cannot be held to be genuine as well considering the manufacturing facilities of the corporate debtor were leased out from 1.4.2016 to Respondent No. 5, and this prayer is not considered solely for the reasons that the applicant has failed to substantiate the basis of determination of amount. Accordingly, in the absence of any details of these expenditure, we do not consider it appropriate to hold it as fraudulent in the absence of any basis of determination of impugned amount.

# 15. As regards transfer of Rs. 114,72,13,585/- unknown accounts which ranges from January 2016 to May 2016 until the bank account of the Corporate Debtor was seized by the Income Tax Department, it is noted that the Transaction Auditor has listed the extract of bank statements, where the name of payee could not be ascertained. It is noted that the financial statements for the year ended 31.3.2016 is duly audited and the auditor has not commented in its report that any bank transaction was found unrecorded. Accordingly, it cannot be that a transfer is made from the bank account of the Corporate Debtor and the same is not duly recorded in its books of accounts. Nonetheless, neither the auditor nor the applicant made any inquiry from the relevant bank to ascertain the details of payee, which has to be available in records of payee bank, to ascertain the correct beneficiary of amounts and make determination accordingly. Accordingly, we are of considered view that no order can be passed in relation to this transaction.

# 16. As regards provision of Bank Guarantee (vide Deed of Guarantee dated 11th October 2013) of Rs. 2,20,16,00,000/- in 2013 towards related party Sacos Indigo Pvt. Ltd., it is noted that said company is a subsidiary of the Corporate Debtor. It is not case of the applicant that Rs.220 Crores was paid by the Corporate Debtor to the subsidiary. Further, the provision of bank guarantee for the business of subsidiary per se can not be said to be a fraudulent transaction. as per the books of the Corporate Debtor. As regards further transactions amounting to Rs. 25,23,46,542/- undertaken with related parties without any supporting documents, these transactions pertain to financial year 2013-14 and 2014-15 and the applicant has listed payments in nature of lease charges, remuneration, sale and purchase transaction with related parties. The financial statements of these years have been duly audited. Merely because, these transactions were entered with related parties, it can not be said that these transactions were entered to defraud the creditors, more so when these transactions are regular and duly recorded in the books of accounts and there is no adverse inference from any tax authorities in relation to these transactions. Accordingly, we are of considered view that no order can be passed in relation to this transaction.

# 17. As regards, vehicles amounting to 1,82,35,119/- written off in the books either as ‘Accidental Damage’ or ‘Transferred to ex-employees, this Tribunal had directed the parties to furnish the ownership details of the car/vehicles, in question, in RTO portal as on date along with date of its transfer from corporate debtor in the records. Though, the Respondent No. 1 & 2 have not furnished the date of such transfer, however, they have provided the downloaded copy of motor vehicle registration in respect of these vehicles and following details giving name of its current owner :

# 18. From the above table, it is clear that above cars, except at sl. No. 4 and 8 transferred to employees & at sl. No. 3, 7, 9 to 11 standing in name of the corporate debtor, have been transferred to associate companies, including respondent No. 5 (which was stated to be transferred to ex-employee as explained earlier to the applicant). Further, no details has been provided in relation to Car Jaguar, Elantra Car 1.6 SX (АT), Ford ECO Sport, Eicher Bus-FA-2643, and Nissan Micra. The remaining vehicles in relation to which details have not been provided by Respondent No. 1 & 2 consequent upon direction by us are stated to be transferred to employees or damaged in accident. Considering these facts, it can not be denied that the vehicles listed in above table, except at sl. No. 4 & 8 as well as sl. No. 3, 7, 9 to 11, as well as Car Jaguar, Elantra Car 1.6 SX (АT), Ford ECO Sport, Eicher Bus-FA-2643, and Nissan Micra have been transferred by the suspended board, which is in itself a fraudulent conduct in view of section 66(2) of the Code. Further, the absence of details of insurance claims lodged in relation to vehicles stated to be damaged in accident, also leads to an inevitable conclusion that those vehicles claimed to be damaged were also siphoned off by the suspended board. Accordingly, we consider it appropriate to direct the applicant to determine the written down value of each such vehicle, after apply depreciation @ 15% p.a. on written down value, as on 31.3.2016. Respondent No. 1 to 4 shall be jointly or severally liable to contribute the sum so arrived at along with interest @ 12% p.a. thereon from 1.4.2016 within 30 days. As regards vehicle sl. No. 3, 7, 9 to 11 standing in name of the corporate debtor above, the Respondents shall provide the details of those vehicles and hand over the same within 15 days to the Applicant, failing which they shall be liable to contribute written down value of vehicles, standing in name of corporate debtor but not handed over, in the same manner as explained above.

# 19. As regards non realisation of debtors amounting to Rs. 91,67,74,589/- due from the related parties against exports made by the corporate debtor from FY 2011-2016, it is stated that the proceeds of the same have not been repatriated to India thereby violating principles of FEMA, 1999. It is explained by Respondent No. 1 and 2 thatt he related-party-transactions (RPTs) mentioned by the applicants are nothing but the divisions of the Corporate Debtor except for Sacos Indigo Private Limited which was a wholly owned subsidiary (Sacos). It is noted that the applicant has listed four entities from whom the export proceeds are to be received. As explained by the Respondent No. 1 & 2, three parties named therein are divisions or corporate debtor itself, which we find substantiated after referring to the names, as one of them is corporate debtor itself, another two are stated to be division as financial statements for the year ended on 31.3.2016. Further, it is noted from the application that a sum of Rs. 35.50 crore is due from the subsidiary and as against it only Rs. 0.46 crores have been received lying as unappropriated as claimed by the Respondent. The applicant has not explained if any effort was made to recover the said amounts from the subsidiary company and whether any correspondence was exchanged after commencement of CIRP. If the said amount is recoverable and acknowledge by the subsidiary, the applicant ought to make efforts to realise the same. Accordingly, we are of considered view that no order can be passed in relation to this transaction.

# 20. As regards the proceeds of sale post CIRP amounting to Rs. 21,45,408/-not directed to the Corporate Debtor, this transaction if happened is in violation of section 14 of IBC and is required to be recovered from the concerned party. In case, the concerned party fails to pay the same, the Respondent No. 1 to 4 shall jointly or severally pay the said amount within 30 days along with interest @ 12% p.a. from the date of this order.

# 21. In terms of the above, IA 4619 of 2023 is partly allowed and disposed of.

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CA Sreenivasan P R RP of Aston Properties and Developers Private Limited Vs. Astern Realtors Private Limited & Ors. - In the present case, while the Corporate Debtor made preferential payments and asset transfers aggregating to Rs. 15,24,10,709/- in favour of Respondent No.1 during the look-back period, it is simultaneously evident that Respondent No.1 infused additional funds and incurred expenses amounting to Rs. 7,31,75,140.50/- during the same period for the benefit of the Corporate Debtor, which were duly recorded as unsecured loans. To avoid unjust enrichment of the Corporate Debtor and to give effect to the true intent of the avoidance provisions, the said amount of Rs. 7,31,75,140.50/- is liable to be adjusted against Rs. 15,24,10,709/. After such adjustment, the net preferential benefit derived by Respondent No.1 is quantified at Rs. 7,92,35,568.50/-, which alone is liable to be refunded to the Corporate Debtor in terms of Section 44 of the Code.

 NCLT Kochi (2026.01.06) in CA Sreenivasan P R RP of Aston Properties and Developers Private Limited Vs. Astern Realtors Private Limited & Ors. [IA(IBC)/239/KOB/2025 in CP(IBC)/12/KOB/2024] held that; 

• The transfer of immovable property belonging to the Corporate Debtor to discharge the liability of Respondent No.1 clearly constitutes a transfer of the Corporate Debtor’s property for the benefit of a related-party creditor.

• In the present case, although payments and asset transfers aggregating to Rs. 15,24,10,709/- were made by the Corporate Debtor in favour of Respondent No.1 during the look-back period, it is also evident from the record that Respondent No.1 had, during the same period, infused additional funds and incurred expenses amounting to Rs. 7,31,75,140.50/- for the benefit of the Corporate Debtor, which were recorded as unsecured loans.

• These transactions are part of a continuous financial relationship between the same parties and cannot be viewed in isolation. If the entire amount of Rs. 15,24,10,709/- is directed to be refunded without accounting for the funds infused by Respondent No.1 during the same period, it would result in unjust enrichment of the Corporate Debtor, which is not the intent of the Code.

• In the present case, while the Corporate Debtor made preferential payments and asset transfers aggregating to Rs. 15,24,10,709/- in favour of Respondent No.1 during the look-back period, it is simultaneously evident that Respondent No.1 infused additional funds and incurred expenses amounting to Rs. 7,31,75,140.50/- during the same period for the benefit of the Corporate Debtor, which were duly recorded as unsecured loans. To avoid unjust enrichment of the Corporate Debtor and to give effect to the true intent of the avoidance provisions, the said amount of Rs. 7,31,75,140.50/- is liable to be adjusted against Rs. 15,24,10,709/. After such adjustment, the net preferential benefit derived by Respondent No.1 is quantified at Rs. 7,92,35,568.50/-, which alone is liable to be refunded to the Corporate Debtor in terms of Section 44 of the Code.

• That payments made by the Corporate Debtor towards personal liabilities, medical expenses, loan repayments or reimbursements of directors or their relatives do not fall within the ‘ordinary course of business’ and squarely constitute preferential transactions under Section 43 of the Code, especially when such transactions place related parties in a more beneficial position than under Section 53.

Blogger’s Comments; In the present case, applicant CA Sreenivasan P R is  RP of the CD, and at the same time liquidator of the respondent no. 1 (Asten Realtors Private Limited). It is a clear cut case of conflict of interest & manipulative submissions on behalf of CD & respondent as evident as under.

Applicant has submitted;

• “ This included repayment of Rs. 8,05,24,631/- towards the unsecured loan and the transfer of 13 completed apartments (out of 25 apartments that were attached in arbitration proceedings) valued at Rs.7,18,86,078/- to Silpa Projects & Infrastructure India Private Limited under a settlement dated 08.08.2022 to discharge Asten Realtors’ liability.”

• “ As of the commencement of the CIRP, the building was incomplete, with only the structure finished, so the transfer in the settlement agreement is only an allotment without actual possession of completed apartments. Therefore, Silpa Projects & Infrastructure Pvt Ltd remains an allottee and unsecured creditor in the Corporate Debtor’s books.  . . . . . . . Silpa Projects & Infrastructure Pvt Ltd’s admitted claim constitutes approximately 11.16% of the unsecured debt.”

Thus the so-called transferred properties (flats) continued in possession of the CD and remained as assets of the CD in the books of the CD. Further the so-called transferee of the property continued as unsecured creditor in the books of CD, with claim admitted in CIRP of CD. 

Excerpts of the Order;

# 1. This application is filed by the Resolution Professional of M/s Asten Properties and Developers Private Limited, the Corporate Debtor, against Respondent No. 1, Asten Realtors Private Limited, the holding company of the Corporate Debtor holding 99% of its shareholding. Respondent No. 1 is presently undergoing liquidation under the Insolvency and Bankruptcy Code, 2016, (hereinafter ‘Code’), and the Applicant is also acting as its Liquidator. Respondent No. 2, Mr. Siraj Mather, is a Director of the Corporate Debtor, and Respondent No. 3, Moon Day Realtors Private Limited, is a related party of the Corporate Debtor, with Respondent No. 2 being a common Director in both entities. The present application is filed under Sections 43 and 44 of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the NCLT Rules, 2016, seeking the following reliefs:—

a) Pass an order for avoidance of the preferential transaction and direct the Asten Realtors Private Limited to pay an amount of Rs. 15,24,10,709.00/- to the account of the Corporate Debtor maintained by the Resolution Professional in the interest of justice, and

b) Pass an order for avoidance of the preferential transaction and direct Mr. Siraj Mather to pay an amount of Rs.40,15,000.00/- to the account of the Corporate Debtor maintained by the Resolution Professional in the interest of justice, and c) Pass an order for avoidance of the preferential transaction and direct the Moon Day Realtors Private Limited to pay an amount of Rs.80,000/- to the account of the Corporate Debtor maintained by the Resolution Professional in the interest of justice, and/or

d) pass such other order(s) that this Hon'ble Tribunal may deem fit in the facts and circumstances of the case

The Brief facts of the case are as follows: -

# 2. The applicant submitted that, vide order dated 13.06.2024 in CP (IBC) No. 12/KB/2024, this Tribunal admitted the application filed by Mr. Nizam Saleem Tharakandathil and others (Financial Creditors) under Section 7 of the Code against Asten Properties and Developers Private Limited, the Corporate Debtor, and appointed Mr. Rajendran P. R. as the Interim Resolution Professional.

# 3. It is submitted that the Interim Resolution Professional made a public announcement in Form-A on 14.06.2024, inviting claims, with the last date for submission being 27.06.2024. Upon collation and verification of the claims, the Interim Resolution Professional admitted total claims amounting to Rs.1,15,87,75,683/- and accordingly reconstituted the Committee of Creditors, comprising Piramal Trusteeship Services Private Limited, Westex Realty & Infra LLP, Silpa Projects & Infrastructure India Private Limited, Isac Joseph, Kim George Koshy, Dr. K. S. Mathew, Mibu John Paduthottu, Anish Khalid, Dr. Sunil A. Antony, Nizam Saleem Tharakandathil, and E. K. Paul as members.

# 4. It is submitted that the Corporate Debtor is engaged in the business of real estate development and its major asset is a partially constructed residential project named “Dew Dale.” The project comprises a 19-storey building with multiple apartments, of which approximately 30% of the construction has been completed, and the work is presently stalled. The project is situated near Kanjirappally Town on the Ponkunnam–Kanjirappally Road and is constructed on land admeasuring 129.06 cents owned by the Corporate Debtor, with a total plinth area of 13,022.53 sq. meters. 

# 5. It is further submitted that in the fourth meeting of the Committee of Creditors held on 19.08.2024, the CoC resolved to replace the Interim Resolution Professional and appointed the Applicant as the Resolution Professional, which appointment was confirmed by this Tribunal vide order dated 02.12.2024.

# 6. It is submitted that the Resolution Professional examined the transactions of the Corporate Debtor during the look-back period from 13.06.2022 to 12.06.2024 and identified certain transactions as preferential within the meaning of Section 43(1) of the Code, 2016. Pursuant to the recommendation of the Committee of Creditors in its meeting held on 26.12.2024, a Transaction Auditor, Mr. Vibin Vincent, FCA (Membership No. 222494), was appointed as Transaction Auditor on 07.01.2025. The Transaction Auditor submitted his final report dated 25.03.2025, which was received on 09.04.2025. After examining the audited financial statements, available books of accounts, bank statements up to the date of the order, the Transaction Audit Report, and the explanations provided, the Resolution Professional decided on 07.04.2025, declaring the following transactions as preferential.

# 7. It is submitted that preferential transactions aggregating to Rs.15,24,10,709/- were carried out by the Corporate Debtor in favour of Asten Realtors Private Limited, the holding company and a related party holding 99% shareholding. The opening balance of the unsecured loan payable to Asten Realtors as on 13.06.2022 was Rs. 17,76,49,789.73. During the relevant two-year look-back period, the Corporate Debtor made preferential transactions in favour of Asten Realtors aggregating Rs.15,24,10,709/-. This included repayment of Rs. 8,05,24,631/- towards the unsecured loan and the transfer of 13 completed apartments (out of 25 apartments that were attached in arbitration proceedings) valued at Rs.7,18,86,078/- to Silpa Projects & Infrastructure India Private Limited under a settlement dated 08.08.2022 to discharge Asten Realtors’ liability. These transactions resulted in preference being given to a related party over other creditors and were therefore determined as preferential transactions under Section 43 of the Code, 2016.

# 8. It is submitted that Mr. Siraj Mather, a director of the Corporate Debtor and therefore a related party, was an unsecured creditor with an opening loan balance of Rs. 9,95,649/- as on 13.06.2022. During the relevant two-year period prior to the commencement of CIRP, he infused additional funds of Rs. 32,05,834/-, making the total loan outstanding Rs.42,01,483/. Between 12.06.2022 and 31.07.2023, Mr. Siraj Mather withdrew Rs.40,15,000/- from the Corporate Debtor. The Resolution Professional has determined that such withdrawals, made when other creditor dues existed, constitute preferential transactions. Consequently, the total preferential transaction in favour of Mr. Siraj Mather is Rs. 40,15,000/-, and he is not eligible for any set-off against the Corporate Debtor’s dues. 

# 9. It is submitted that Moon Day Realtors Private Limited, a creditor of the Corporate Debtor, is a related party as Mr. Siraj Mather is a common director of both entities. As on 13.06.2022, the outstanding balance payable to Moon Day Realtors was Rs. 1,49,993/-. On 08.02.2024, the Corporate Debtor paid Rs. 80,000/- against this outstanding debt. There were no regular business transactions between the Corporate Debtor and Moon Day Realtors during the relevant period. The Resolution Professional has determined that this payment constitutes a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016. Accordingly, the total preferential transaction in favour of Moon Day Realtors Private Limited is Rs. 80,000/-.

# 10. The Resolution Professional is of the opinion that the Corporate Debtor had given preference to certain related parties through transactions during the relevant period. In terms of Section 43 read with Section 44(1)(d) of the Code, the Resolution Professional may apply to the Adjudicating Authority for avoidance of such preferential transactions and for directing the concerned persons to pay the amounts received from the Corporate Debtor. Accordingly, the present application is filed seeking a direction against Respondents No. 1 to 3 to repay the amounts determined as preferential transactions to the account of the Corporate Debtor maintained by the Resolution Professional.

# 11. It is further submitted by the RP that the Corporate Debtor is undergoing the Corporate Insolvency Resolution Process (“CIRP”) pursuant to the order of this Tribunal dated 13.06.2024, with the CIRP extended up to 09.07.2025. Under Regulation 35A, an application under Section 43 is to be filed within 130 days from the CIRP commencement date. The present application is filed on 14.06.2025, showing a delay of 366 days from the CIRP commencement. The delay occurred because the Interim Resolution Professional was replaced and the Resolution Professional was appointed only on 02.12.2024, after which a Transaction Auditor was appointed on 07.01.2025 and submitted the final report on 03.04.2025. The Resolution Professional made the determination on 07.04.2025, and counting from his appointment, the application is filed within 194 days, resulting in a delay of only 64 days beyond 130 days. It is submitted that the timeline under Regulation 35A is directory and not mandatory, and sufficient cause exists to condone the delay and admit the application.

# 12. The Respondent No. 1, in its reply affidavit, stated that Respondent No.1 is a related party of the Corporate Debtor and, being its wholly owned holding company, there were continuous business transactions between them. Both entities are engaged in the real estate business, with three projects of Asten Realtors and one project of the Corporate Debtor under active construction during the relevant period. Respondent No.1 had completed approximately 90% of the work in its Rajagiri Campus Court project, while the Corporate Debtor’s project “Dew Dale” had only its building structure completed.

# 13. Respondent No. 1 submitted that, as per the financial statements of the Corporate Debtor, Asten Realtors Private Limited, the holding company, was an unsecured creditor with an opening loan balance of Rs.17,76,49,789.73 as on 13.06.2022, two years prior to the Insolvency Commencement Date. The Resolution Professional has determined that a total of Rs. 15,24,10,709/- as a preferential transaction in favour of Asten Realtors. During the relevant period, Asten Realtors advanced Rs.3,00,000 in cash and Rs. 7,27,75,308.58 by bank transfers, and incurred expenses of Rs. 99,832 on behalf of the Corporate Debtor, totaling Rs.7,31,75,140.58. Against these credits, the Corporate Debtor transferred Rs. 27,72,855 in cash and Rs. 7,83,51,776.03 by bank transfer back to Asten Realtors, totaling Rs. 8,05,24,631.03. Since these transfers were made when an antecedent financial debt of Rs. 17,76,49,789.73 was outstanding, the amount of Rs. 8,05,24,631.03 has been identified by the applicant as a preferential transaction under Section 43 of the Code, 2016. 

# 14. Respondent No. 1 further stated that regarding the second part of the preferential transaction, based on the forensic audit report and the settlement agreement, the Applicant observed that liabilities of Asten Realtors Private Limited were settled through the transfer of immovable property of the Corporate Debtor to Silpa Projects & Infrastructure India Private Limited. Silpa Projects had initiated arbitration (CMA 452/2020) against Asten Realtors for Rs. 7,18,86,078/-, and vide order dated 14.12.2020, 25 apartments of the Corporate Debtor were allowed to be attached against Asten Realtors’ liability. Subsequently, on 18.08.2022, Asten Realtors and the Corporate Debtor jointly entered into a settlement agreement with Silpa Projects, under which 13 completed apartments were transferred to settle Asten Realtors’ liability of Rs. 7,18,86,078/- and the Corporate Debtor’s liability of Rs. 2,82,15,988/-.

# 15. Since the liability of the Corporate Debtor amounting to Rs. 7,18,86,078/- was settled through the transfer of assets, this amount is treated as a preferential transaction. As of the commencement of the CIRP, the building was incomplete, with only the structure finished, so the transfer in the settlement agreement is only an allotment without actual possession of completed apartments. Therefore, Silpa Projects & Infrastructure Pvt Ltd remains an allottee and unsecured creditor in the Corporate Debtor’s books. No resolution plan has been approved for the Corporate Debtor, and this Tribunal has ordered its liquidation. Consequently, Silpa Projects & Infrastructure Pvt Ltd is entitled to claim the amount under Section 53(1) of the Code and share in the distribution of assets accordingly. There are no secured creditors to the Corporate Debtor. Silpa Projects & Infrastructure Pvt Ltd’s admitted claim constitutes approximately 11.16% of the unsecured debt. The settlement agreement was entered to amicably resolve various claims and lift court attachments involving the Corporate Debtor and Respondent No. 1, fulfilling their financial obligations towards Silpa Projects & Infrastructure Pvt Ltd and the Corporate Debtor.

# 16. Respondent No. 2 & Respondent No. 3 in their reply statement pointed out that the Applicant has failed to establish the essential elements required under Section 43 of the Code. Section 43 provides that a corporate debtor is deemed to have given a preference if:

• There is a transfer of property or an interest in property by the corporate debtor for the benefit of a creditor, surety, or guarantor on account of an antecedent financial or operational debt, or other liabilities owed by the corporate debtor; and

• Such transfer places the creditor or surety, a guarantor, in a beneficial position than it would have been in the event of a distribution of assets being made under Section 53 of the Code;

# 17. According to Respondent No. 2 & Respondent No. 3, certain transfers are excluded from being treated as preferences, including those made in the ordinary course of business or those creating a security interest in newly acquired property under specified conditions. Furthermore, any transfer ordered by a court is not excluded from being considered a preference. The relevant time period for determining preference depends on whether the transaction was with a related party (two years preceding the insolvency commencement date) or a non-related party (one year preceding the insolvency commencement date).

# 18. It is submitted by Respondent No. 2 & Respondent No. 3 that for any transaction to qualify as a preferential transaction under Section 43 of the Code, two conditions must be met: firstly, there must be a transfer of property or an interest therein by the Corporate Debtor for the benefit of a creditor, surety, or guarantor on account of an antecedent financial debt, operational debt, or other liabilities owed by the Corporate Debtor; and secondly, such transfer must result in placing the creditor, surety, or guarantor in a more beneficial position than they would have been in the event of a distribution of assets in accordance with Section 53 of the Code.

# 19. It is submitted by Respondent No. 2 & Respondent No. 3 that the Applicant has failed to prove that the payments made by the Corporate Debtor to the 2nd Respondent arose ‘on account of an antecedent financial debt.’ The application states that the unsecured loan outstanding as of 13.06.2022 was Rs. 9,95,649/- and that the 2nd Respondent infused additional funds amounting to Rs. 32,05,834/- during the look-back period. However, the Applicant has not demonstrated how this infusion of funds during the look-back period constitutes an antecedent debt within the meaning of Section 43(2) of the Code. Furthermore, the Applicant fails to demonstrate how such transfers or withdrawals placed the 2nd Respondent in a more favourable position, especially since all creditors of the Corporate Debtor are unsecured. The Applicant does not explain how the transaction with the 2nd Respondent disadvantaged other lenders or creditors, including banks and financial institutions. Moreover, the Applicant has not shown whether any payments owed to other creditors were not honoured or if any preferential treatment was given at the time of such transaction or withdrawal. 

# 20. It is further submitted by Respondent No. 2 & Respondent No. 3 that the Applicant has failed to demonstrate in its determination or in this Application whether the transactions in question fall within the exception for transfers made in the ordinary course of business, as provided under Section 43(3)(a) of the Code.

# 21. It is further submitted by Respondent No. 2 & Respondent No. 3 that the Applicant has intentionally omitted or wholly suppressed the observations of the Transaction Auditor in his report dated 25.03.2025, which clearly state that the transactions involving the 2nd Respondent, specifically the infusion of additional funds, are regarded as repayments of short-term infusions made by directors and therefore do not qualify as preferential payments. However, the present application remains silent on these observations and fails to provide any reasoning or justification for disregarding the Transaction Auditor’s categorical finding that such payments constitute short-term infusions and should not be considered preferential transactions.

# 22. The 3rd Respondent contends that the determination made by the Applicant with respect to such allegations is baseless, illegal, arbitrary, and does not satisfy the requirements of Section 43 Code. It is further stated that the Applicant has failed to demonstrate how the alleged payment put the 3rd Respondent in a beneficial position relative to other creditors, most of whom are unsecured, or whether such payment adversely affected the repayment to any other creditors. 23. It is submitted that the Applicant has not undertaken the necessary steps as required under Section 43 of the Code for the determination of preferential transactions, as has been emphasized by the Hon’ble Supreme Court in Anuj Jain vs. Axis Bank Limited and Ors. [MANU/SC/0228/2020; dated 26.02.2020]. According to Respondent No. 2 & Respondent No. 3, the application is based on an arbitrary and legally untenable determination, founded on incomplete data. The transactions alleged as preferential are in fact transactions conducted in the ordinary course of business of a real estate company and, therefore, do not warrant any relief under the Code.

# 24. The Applicant in the rejoinder submitted that both Respondent No.2 and Respondent No.3 are related parties of the Corporate Debtor. Respondent No.2 is a director of the Corporate Debtor, and Respondent No.2 is also a director of Respondent No.3. The Applicant submits that any transactions carried out by the management of the Corporate Debtor in favour of its director or related parties of the director, while there are outstanding liabilities to other creditors, constitute a preferential transaction under Section 43 of the Code. Further, the Respondents have failed to produce any evidence to prove that such transactions were conducted in the ordinary course of business and, therefore, cannot claim the benefit of any exceptions under Section 43 of the Code. Accordingly, the transactions in question have conferred a preference on the Respondents over other creditors of the Corporate Debtor, placing them in a more favourable position than they would have been in the event of distributing assets in accordance with Section 53 of the Code. 

# 25. The Applicant submitted that his determination was made after verification of the records of the Corporate Debtor and following a detailed transaction audit. The determination of the Resolution Professional satisfies the requirements of Section 43 of the Code. It is incorrect to claim that there is no antecedent financial debt as of the date of commencement of the Corporate Insolvency Resolution Process (CIRP). The antecedent financial debt must be determined as on the commencement date of CIRP.

# 26. The Applicant further submitted that the Respondent No.2 has received a preferential transaction of Rs. 40,15,000/-. As per the audited balance sheet of the Corporate Debtor as on 13.06.2024, there exists an antecedent debt of Rs. 42,01,483/- owed to Respondent No.2. The evidence supporting these transactions is available in the ledger statements produced at Pages 166–167, along with Annexure A/4 – Transaction Audit Report. Respondent No.2 has not produced any evidence to show that the payments made during the period from 12.06.2022 to 31.07.2023 were made in the ordinary course of business.

# 27. It is submitted that Respondent No.3 has received a preferential transaction of Rs. 80,000/-. As per the audited balance sheet of the Corporate Debtor as on 13.06.2022, there exists an antecedent debt of Rs.1,49,993/- payable to Respondent No.3. The relevant ledger statement is produced at Page 168 of the Application. Respondent No.3 has also not produced any evidence to prove that the transaction was done in the ordinary course of business.

# 28. It is further submitted that Respondents No.2 and 3 are related parties of the Corporate Debtor and do not enjoy any priority over other unsecured financial creditors, even if the payment made by Respondent No.2 is considered as an unsecured financial debt. The Applicant has received total claims of Rs. 1,15,87,75,682/- from various creditors as on the insolvency commencement date. The Corporate Debtor was in the development of the real estate project "Dew Dale" and received advances from home buyers. As per the audited balance sheet as on 31.03.2021, customer advances amounted to Rs. 46,463,112.64. Out of this, the liability towards home buyers in the Dew Dale project was Rs. 4,62,07,468.60/-. The Resolution Professional has received claims totalling Rs. 18,47,54,408/- from home buyers.

# 29. The project is incomplete, and the amounts payable to home buyers are still due. Furthermore, the Corporate Debtor had provided a corporate guarantee to Piramal Trusteeship Services Private Limited, which had raised a claim of Rs. 64,20,34,777/-. The erstwhile management was aware of the dues of these creditors, who are entitled to preference over Respondents No.2 and 3 in the event of distribution, yet knowingly transferred funds to related parties. Therefore, any withdrawals by Respondents No.2 and 3 without settlement of the dues of home buyers and other unsecured creditors constitute a preferential transaction under Section 53(1) of the Code. While there are no secured financial creditors, the dues of home buyers and other unsecured creditors take precedence over the claims of Respondents No.2 and 3, whose claims are negligible.

# 30. The Applicant has produced the Transaction Audit Report. According to the Applicant, the Resolution Professional does not have the authority to adjust payments against short-term infusions when the payments are made in respect of an antecedent financial debt. There is no evidence that the transactions arose in the ordinary course of business. Further, none of the provisions of law permit the Resolution Professional to adjust such payments. The provisions of the Code do not restrict antecedent financial debt to only the look-back period. If a transfer is made for the benefit of a creditor in preference to other creditors entitled to priority in distribution, the Respondents are liable to return such amounts under Section 43 of the Code.

FINDINGS:

# 31. This Adjudicating Authority has heard the learned Counsel for the Applicant, the learned Counsel appearing for the Respondents and has carefully perused the Transaction Audit Report, ledger statements, audited financials, and other materials placed on record.

# 32. The Resolution Professional has pointed out that there has been a delay in filing the present application. However, it is alleged that such a delay is neither deliberate nor fatal to the maintainability of the application. In this regard, the Hon’ble Appellate Tribunal, in Jagdish Kumar Parulkar, Resolution Professional v. Vinod Agarwal & Ors., (2023) ibclaw.in 132 NCLAT, has categorically held that the timelines prescribed under Regulation 35-A of the CIRP Regulations for the formation of opinion, determination, and filing of avoidance applications are directory and not mandatory. The Hon’ble Appellate Tribunal observed that the time required by a Resolution Professional depends on several factors, including the availability of records, non-cooperation of the suspended management, complexity and layering of transactions, and delays in completion of transaction audits, many of which are beyond the control of the Resolution Professional. It was further held that mere delay from the Insolvency Commencement Date cannot, by itself, render such applications non-maintainable, particularly where sufficient and bona fide reasons are shown. In view of the aforesaid settled position of law, the delay in filing the present application stands duly explained and does not affect its maintainability. 

# 33. The present Application has been filed under Sections 43 and 44 of the Insolvency and Bankruptcy Code, 2016, seeking avoidance of preferential transactions allegedly carried out by the Corporate Debtor in favour of Respondents No.1 to 3, all of whom are admittedly related parties within the meaning of Section 5(24) of the Code.

# 34. Section 5(24) of the Code is as under :–

“related party“, in relation to a corporate debtor, means—

# 35. In the present case, Respondent No.1 is the holding company of the Corporate Debtor holding 99% of its share capital, Respondent No.2 is a Director of the Corporate Debtor, and Respondent No.3 is a private company in which Respondent No.2 is a common Director. Accordingly, all three Respondents squarely fall within the definition of “related party” under Section 5(24) of the Code. The existence of such a relationship is admitted and not in dispute.

3 36. Section 43(2) of the Code provides that a transaction shall be deemed to be preferential if:

(i) there is a transfer of property or interest thereof for the benefit of a creditor, surety, or guarantor on account of an antecedent financial or operational debt; and

(ii) such transfer has the effect of putting such creditor in a more beneficial position than it would have been in the event of distribution of assets under Section 53 of the Code.

# 37. The Hon’ble Supreme Court in Anuj Jain, IRP of Jaypee Infratech Ltd. v. Axis Bank Ltd. & Ors. has authoritatively held that, for the determination of a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority is required to examine: (i) the existence of an antecedent financial or operational debt; (ii) the timing of the transfer in relation to the insolvency commencement date; (iii) the effect of such transfer on the priority of distribution under Section 53 of the Code; and (iv) whether the transaction falls within any of the statutory exclusions provided under Section 43(3) of the Code. The Hon’ble Supreme Court has further clarified that transactions involving related parties require strict scrutiny, as such transactions are inherently susceptible to conferring preference over other creditors.

# 38. In the case of related parties, the relevant look-back period is two years preceding the insolvency commencement date, as prescribed under Section 43(4)(a).

# 39. It is undisputed that as on 13.06.2022, i.e., two years prior to the Insolvency Commencement Date, Respondent No.1 was an unsecured creditor of the Corporate Debtor with an outstanding antecedent debt of Rs. 17,76,49,789.73. During the look-back period, the Corporate Debtor made the following transfers in favour of Respondent No.1:

Description	Amount
Actual payments made towards an unsecured loan (A)	Rs. 8,05,24,631.00
Transfer of 13 apartments to Silpa Projects & Infrastructure (I) Pvt. Ltd. towards Respondent No.1’s liability (B)	Rs. 7,18,86,078.00
Additional funds infused / expenses met by Respondent No.1 during look-back period (C)	(Rs. 7,31,75,140.50)

40. This Adjudicating Authority finds that:

a. The payments of Rs. 8,05,24,631/- were made towards an existing unsecured loan, thereby satisfying the test of antecedent debt under Section 43(2)(a).

b. The transfer of immovable property belonging to the Corporate Debtor to discharge the liability of Respondent No.1 clearly constitutes a transfer of the Corporate Debtor’s property for the benefit of a related-party creditor.

c. Such transfers were effected when substantial dues of home buyers and other unsecured creditors were outstanding, thereby placing Respondent No.1 in a more beneficial position than it would have occupied under the waterfall mechanism prescribed under Section 53.

# 41. The Hon’ble Supreme Court in Anuj Jain (supra) has held that the burden to establish that a transaction falls within the exclusion under Section 43(3) squarely lies on the beneficiary of the transaction. No documentary evidence has been produced to establish that repayment of old unsecured loans or alienation of assets to settle a holding company’s liability constitutes the ordinary course of business of a real estate developer.

# 42. This Adjudicating Authority notes that the purpose of avoidance of preferential transactions under Sections 43 and 44 of the Insolvency and Bankruptcy Code, 2016, is to restore the financial position of the Corporate Debtor and not to impose a penalty on the beneficiary of the transaction. The objective is to reverse the unfair advantage gained by a creditor and place all creditors on an equal footing, as they would have been under Section 53 of the Code.

# 43. In the present case, although payments and asset transfers aggregating to Rs. 15,24,10,709/- were made by the Corporate Debtor in favour of Respondent No.1 during the look-back period, it is also evident from the record that Respondent No.1 had, during the same period, infused additional funds and incurred expenses amounting to Rs. 7,31,75,140.50/- for the benefit of the Corporate Debtor, which were recorded as unsecured loans.

# 44. These transactions are part of a continuous financial relationship between the same parties and cannot be viewed in isolation. If the entire amount of Rs. 15,24,10,709/- is directed to be refunded without accounting for the funds infused by Respondent No.1 during the same period, it would result in unjust enrichment of the Corporate Debtor, which is not the intent of the Code.

# 45. The avoidance provisions are intended to neutralise the preferential effect of a transaction and restore the Corporate Debtor’s estate to the position it would have occupied but for such preference, and not to impose a punitive liability on the beneficiary. In the present case, while the Corporate Debtor made preferential payments and asset transfers aggregating to Rs. 15,24,10,709/- in favour of Respondent No.1 during the look-back period, it is simultaneously evident that Respondent No.1 infused additional funds and incurred expenses amounting to Rs. 7,31,75,140.50/- during the same period for the benefit of the Corporate Debtor, which were duly recorded as unsecured loans. To avoid unjust enrichment of the Corporate Debtor and to give effect to the true intent of the avoidance provisions, the said amount of Rs. 7,31,75,140.50/- is liable to be adjusted against Rs. 15,24,10,709/. After such adjustment, the net preferential benefit derived by Respondent No.1 is quantified at Rs. 7,92,35,568.50/-, which alone is liable to be refunded to the Corporate Debtor in terms of Section 44 of the Code. 

# 46. Respondent No.2, being a Director of the Corporate Debtor, is a related party. As on the insolvency commencement date, an antecedent unsecured debt of Rs. 42,01,483/- stood recorded in his favour. During the look-back period, withdrawals aggregating to Rs. 40,15,000/- were made.

# 47. The contention that such payments were mere adjustments of short-term infusions is untenable. The audited balance sheet and ledger statements clearly establish the existence of an antecedent financial debt. The Hon’ble Appellate Tribunal in Jagdish Kumar Parulkar, Resolution Professional v. Vinod Agarwal & Ors., (2023) ibclaw.in 132 NCLAT, further held that payments made by the Corporate Debtor towards personal liabilities, medical expenses, loan repayments or reimbursements of directors or their relatives do not fall within the ‘ordinary course of business’ and squarely constitute preferential transactions under Section 43 of the Code, especially when such transactions place related parties in a more beneficial position than under Section 53.

# 48. No evidence has been produced to establish that these withdrawals were made in the ordinary course of business. Therefore, the amount of Rs. 40,15,000/- received by Respondent No.2 is held to be a preferential transaction and is liable to be refunded.

# 49. Similarly, Respondent No.3 is a related party of the Corporate Debtor, and as on 13.06.2022, an antecedent unsecured debt of Rs. 1,49,993/- stood recorded in its favour. During the relevant look-back period, a payment of Rs. 80,000/- was made on 08.02.2024. The said payment has not been supported by any contemporaneous agreement, invoice, or documentary material to establish that it arose out of any genuine commercial transaction or was made in the ordinary course of business of the Corporate Debtor. The existence of an antecedent debt coupled with the timing of the payment during the look-back period clearly satisfies the ingredients of Section 43(2)(a) of the Code. Further, in the absence of any evidence to bring the transaction within the exclusion carved out under Section 43(3), the payment had the effect of conferring a preference upon Respondent No.3, a related-party unsecured creditor, by enabling it to recover its dues ahead of other similarly placed creditors, thereby placing it in a more beneficial position than it would have occupied in the event of distribution under Section 53 of the Code. Accordingly, the payment of Rs. 80,000/- made in favour of Respondent No.3 is held to be a preferential transaction liable to be avoided. 

# 50. In exercise of powers under Section 44(1)(d) of the Insolvency and Bankruptcy Code, 2016, this Adjudicating Authority directs as follows:

• a. Respondent No.1 – Asten Realtors Private Limited shall refund a sum of Rs. 7,92,35,568.50/- to the account of the Corporate Debtor maintained by the Resolution Professional;

• b. Respondent No.2 – Mr Siraj Mather shall refund a sum of Rs. 40,15,000/- to the account of the Corporate Debtor maintained by the Resolution Professional;

• c. Respondent No.3 – Moon Day Realtors Private Limited shall refund a sum of Rs. 80,000/- to the account of the Corporate Debtor maintained by the Resolution Professional.

# 51. It is clarified that the avoidance of preferential transactions under Sections 43 and 44 of the Insolvency and Bankruptcy Code, 2016, shall not result in the extinguishment or waiver of the underlying debts or claims of the Respondents. The amounts involved in such preferential transactions, once reversed, shall restore the financial position of the Corporate Debtor as if the preferential payments had not been made. Consequently, the original claims of the Respondents shall revive and shall be treated strictly in accordance with the priority of payments prescribed under Section 53 of the Code. 

# 52. The Resolution Professional is directed to include the amounts recovered from the avoidance of preferential transactions into the Corporate Debtor’s estate and treat the Respondents as creditors in accordance with law. However, being related parties, Respondents No.1 to 3 shall not be entitled to any voting rights in the Committee of Creditors, and the Committee shall be reconstituted accordingly in line with the provisions of the Code and settled legal position.

# 53. In view of the above directions, IA(IBC)/239/KOB/2025 IN CP(IBC)/12/KOB/2024 is partly allowed and disposed of.

# 54. The Registry is hereby directed to send e-mail copies of the order forthwith to all the parties and their counsel for information and for taking necessary steps.

# 55. Let the certified copy of the order be issued upon compliance with requisite formalities.

# 56. File be consigned to records.

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