The , has directed the suspended director and a related party of to refund approximately ₹2.85 crore to the company’s account. This ruling follows an application filed by the alleging that the engaged in that significantly prejudiced the interests of creditors during the . In an order dated , the bench comprising Judicial Member Vinay Goel and Technical Member Charanjeet Singh Gulati held that financial transfers and the adjustment of personal assets against promoter liabilities constituted under .
The tribunal’s directive mandates that Respondent No. 1, Bhushan Pundlikrao Patil, and Respondent No. 3, Anita Bhushan Patil, repay a cumulative sum of ₹2,85,43,809 within 30 days. The amount is to be deposited with the , with the addition of interest calculated at the ’s Prime Lending Rate plus 2% from the date of the transactions until actual realization. The decision underscores the tribunal’s strict stance on the depletion of corporate assets by related parties, particularly when such actions occur during the “look-back” period defined under the code.
Questioning Commercial Justifications
The legal dispute centered on whether payments made to related parties during the CIRP were legitimate business expenses or deliberate attempts to prefer certain creditors over others. The RP had flagged several transactions, including payments totaling ₹87,25,174 made to , a proprietary firm of Respondent No. 3, and various adjustments against the unsecured loan account of the promoter, Bhushan Pundlikrao Patil. The respondents argued that these transactions were conducted in the to ensure the continuity of the company's operations during the challenging economic conditions of the pandemic.
However, the tribunal found this defense insufficient. In its analysis, the bench observed: “In terms of Section 43(2) of the Code a transaction is deemed to be preferential transaction and for the exception provisions of 43(3) to operate it needs to be demonstrated that the transaction/transfer has taken place in and such fact specifically needs to be established and it just cannot be assumed.” Despite the respondents' assertions, they failed to provide documentary evidence, such as invoices, purchase orders, or delivery challans, that could support the claim that these payments were linked to genuine business requirements. The tribunal emphasized that without such granular evidence, the court could not classify the transfers as routine commercial activities exempt under the IBC.
Asset Transfers and Loan Adjustments
A significant portion of the tribunal's scrutiny was directed at the transfer of assets—specifically a Skoda Rapid car and a Hero Honda motorcycle—from the to Bhushan Pundlikrao Patil. The audit report revealed that these vehicles were initially booked as assets of in the 2013-14 fiscal year. During the insolvency period, the company’s books were adjusted to record these vehicles as property owned by the promoter, with their value deducted from the amount the company owed him.
The tribunal noted that these entries reduced the 's liability to its promoter from over ₹4.36 crore to approximately ₹2.38 crore. The court found this behavior highly problematic, noting that it was a clear case of "" used to satisfy an to a related party at the expense of other stakeholders. The tribunal highlighted that if the vehicles had truly been the personal property of the promoter from the outset, their return to him would not have resulted in a reduction of the company’s debt. This discrepancy was cited as evidence that the transfers were not mere administrative corrections but calculated maneuvers to improve the promoter's financial standing at the cost of the corporate entity's insolvency estate.
Establishing the Legal Standard
The ruling provides a critical clarification on the interpretation of Section 43 of the IBC. The NCLT emphasized that the burden of proof to establish the “” exception lies squarely with the respondents. The tribunal noted that the transaction-based audit report, while technically an advisory document, served as a sufficient basis for the RP to form a reasonable opinion regarding the preferential nature of the payments. The respondents' attempt to discredit the auditor by terming the process as "mechanical" was dismissed, with the court noting that the promoters had adequate opportunity to participate in the audit and provide clarifications during the process.
Furthermore, the court clarified the scope of its intervention. While it found against the promoter and his relative regarding the majority of the impugned amounts, it took a nuanced approach toward other claims. For instance, the claim regarding a ₹40 lakh payment to was rejected because the transaction occurred outside the statutory stipulated by Section 43(4). This demonstrates the bench’s commitment to strictly adhering to the timeline constraints set by the legislature, even while ensuring that clear instances of fund diversion are penalized.
The judgment concludes by reinforcing that directors have a to the company, which continues to be relevant during insolvency. By ordering the recovery of the funds, the NCLT Mumbai has reaffirmed its role in safeguarding the interests of the collective creditor base. The parties involved are now under a strict legal obligation to remit the specified amounts to the , ensuring that the assets which were inappropriately extracted are returned to the insolvency pool for potential distribution according to the under Section 53 of the IBC. The case serves as a stern reminder to promoters that any attempt to settle personal loans or siphon off corporate assets during a period of financial distress will face rigorous judicial scrutiny and potential recovery orders.
preferential transaction - corporate insolvency
