Jasvinder Singh Makan vs Anish Kumar Sanghi

(Arising against the impugned order dated 28.08.2024 passed by the National Company Law Tribunal, New Delhi, in I.A. No. 937/2023 filed in C.P. (IB) No. 550/ND/2020)

IN THE MATTER OF:

Jasvinder Singh Makan ...Appellant Member of the suspended Board of Directors of M/s M.K. Printech Pvt. Ltd.

Versus

Anish Kumar Sanghi ...Respondent

Resolution Professional of M/s M.K. Printech Pvt. Ltd.

Present:

For Appellant: Mr. Abhay Gupta and Ms. Varsha Malinga, Advocates. For Respondents: Mr. Gautam Singhal, Mr. Rajat Chaudhary, Ms. Anjali Maurya, Ms. Suraksha Mandhyan, Ms. Aastha Vishnoi, Advocates.

With

Company Appeal (AT) (Ins.) No. 735 of 2025

(Arising against the impugned order dated 01.04.2025 passed by the National Company Law Tribunal, New Delhi, in I.A. No. 4681/2024 filed in C.P. (IB) No. 550/ND/2020)

IN THE MATTER OF:

Jasvinder Singh Makan ...Appellant

Versus

Cont'd..../ -2-

Anish Kumar Sanghi ...Respondent

Present: For Appellant: Mr. Abhay Gupta and Ms. Varsha Malinga, Advocates. For Respondents: Mr. Gautam Singhal, Mr. Rajat Chaudhary, Ms. Anjali

Maurya, Ms. Suraksha Mandhyan, Ms. Aastha Vishnoi, Advocates.

J U D G M EN T (6th February, 2026)

INDEVAR PANDEY, MEMBER (T)

These appeals have been filed by the Appellant, Mr. Jasvinder Singh

Makan, under Section 61 of the Insolvency & bankruptcy Code, 2016

(hereinafter the 'Code') and arise from the proceedings in C.P. (IB) No.

550/ND/2020 whereby the Corporate Insolvency Resolution Process (CIRP)

was initiated against M/s M.K. Printech Pvt. Ltd, (Corporate Debtor). Mr.

Anish Kumar Sanghi, the Resolution Professional and subsequently

Liquidator of the Corporate Debtor, is the sole Respondent in both appeals.

The first appeal has been preferred against the order dated 28.08.2024

passed by the Learned National Company Law Tribunal (Adjudicating

Authority), New Delhi Bench (Court-II), in I.A. No. 937/2023, whereby the

Adjudicating Authority allowed an application filed by the Respondent under

Section 43 of the Insolvency and Bankruptcy Code, 2016 and directed the

Appellant to contribute a sum of Rs. 19,66,689.77 to the assets of the

Corporate Debtor, after proceeding against the Appellant ex-parte and

without granting him an effective opportunity of hearing.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -3-

2. Subsequent thereto, the Appellant, filed I.A. No. 4681/2024 before the

Adjudicating Authority seeking to set aside order dated 04.06.2024 vide

which appellant was proceeded as ex-parte and recall of the consequential

order dated 28.08.2024 in I.A. No. 937/2023. The aforesaid recall application

came to be dismissed by a speaking order dated 01.04.2025, leading the

Appellant to file the connected appeal assailing the said dismissal.

3. Both appeals, though directed against separate orders dated

28.08.2024 and 01.04.2025 respectively, involve identical parties and are

founded on the same factual matrix. While the first appeal challenges the ex-

parte adjudication on merits under Section 43 of the Code, the connected

appeal challenges the refusal of the Adjudicating Authority to recall and

correct the procedural illegality arising from denial of hearing. The two

appeals, therefore, are connected and warrant consideration together.

Brief facts of the case

4. The brief facts of the case are as given below:

i. The Corporate Debtor, M/s M.K. Printech Pvt. Ltd., was engaged in the

business of manufacturing paper and paper products, including

publishing and printing activities, and was operating its business prior

to the initiation of insolvency proceedings.

ii. A petition under Section 9 of the Insolvency and Bankruptcy Code,

2016, being C.P. (IB) No. 550/ND/2020, was filed by Mr. Dalip

Narendra Gupta, Sole Proprietor of M/s Gem International, seeking

initiation of the Corporate Insolvency Resolution Process against the

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -4-

Corporate Debtor. The Adjudicating Authority, by an order passed on

20.09.2022, admitted the application, commenced the CIRP of the

Corporate Debtor, and appointed the Respondent herein as the Interim

Resolution Professional.

iii. In the first meeting of the Committee of Creditors held on 19.10.2022,

the Respondent was confirmed as the Resolution Professional, and

during this period, the Appellant was functioning as a member of the

suspended Board of Directors of the Corporate Debtor.

iv. After the lapse of nearly five months from the commencement of the

CIRP, the Respondent, in his capacity as Resolution Professional, filed

an application bearing I.A. No. 937/2023 under Section 43 of the Code

on 06.02.2023, alleging preferential transactions against the Appellant

and his father, arrayed as non-applicants therein.

v. In the meantime, the RP filed an application for liquidation of

Corporate Debtor which was allowed by the Adjudicating Authority on

06.06.2023 and the Respondent/RP was appointed as Liquidator of

the CD.

vi. The I.A. No. 937/2023 was listed for the first time before the

Adjudicating Authority on 31.05.2023, on which date the Appellant

appeared on advance service and formally accepted notice issued by

the Tribunal.

vii. Even prior to the first listing of the application, the Appellant had

already filed his detailed reply on 30.05.2023, contesting the

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -5-

allegations raised in I.A. No. 937/2023, and the filing details of the

reply were duly reflected on the DMS portal.

viii. After completion of pleadings, the application remained pending and

was repeatedly listed on several dates including 25.07.2023,

31.08.2023, 10.10.2023, 07.11.2023, 19.12.2023, 05.02.2024,

20.03.2024 and 02.05.2024, during which period the Appellant

consistently appeared before the Adjudicating Authority, though the

matter could not be taken up on merits due to paucity of time.

ix. When the matter was taken up on 04.06.2024, the main counsel

representing the Appellant was engaged before the Hon'ble National

Consumer Disputes Redressal Commission, and accordingly, a junior

counsel appeared before the Adjudicating Authority and requested a

pass over, which request was declined. Despite the presence of counsel

for the Appellant being recorded, the Adjudicating Authority proceeded

to treat the Appellant as ex-parte on the same date, recording that

there was no representation on his behalf, and further directed the

Respondent to file his reply within one week.

x. The appellant submits that junior counsel appearing on behalf of the

Appellant noted that the next date of hearing was 28.09.2024, and the

Appellant acted on the said understanding regarding the next listing

of the matter.

xi. Subsequently, while checking the case status on the NCLT website on

05.09.2024, the Appellant discovered, to his surprise, that the

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -6-

application had actually been listed and decided on 28.08.2024, and

that the Adjudicating Authority had allowed I.A. No. 937/2023 in his

absence.

xii. By the impugned order dated 28.08.2024, the Adjudicating Authority

allowed the application under Section 43 of the Code and directed the

Appellant to contribute an amount of Rs. 19,66,689.77 to the assets

of the Corporate Debtor.

xiii. The Appellant asserts that the impugned order was passed without

affording him an opportunity of hearing, after wrongly proceeding him

ex-parte, and on the basis of alleged incorrect submissions and

misrepresentation of material facts by the Respondent. Aggrieved by

the manner in which the proceedings were conducted and by the

adverse directions issued against him, the Appellant has preferred the

present appeals.

Submissions of the Appellant

5. In his opening remarks, Ld. Counsel submits that the Application filed

by the Respondent proceeds on an incorrect factual premise, misreading of

bank transactions, and a fabricated ledger, and fails to satisfy the statutory

ingredients required to invoke Section 43 of the IBC. Each of his subsequent

submissions independently and collectively establishes that the impugned

transactions do not constitute preferential transactions and that the

Application deserves dismissal.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -7-

6. Ld. Counsel submitted that the amounts credited into the common

loan account were infused by the Appellant from his own financial resources,

routed through G.K. Sales, which is a proprietorship concern of Mrs.

Gurmeet Kaur, the mother of the Appellant. The ledger and bank statements

clearly demonstrate that the deposits were made prior to the automatic

deduction of EMIs by Canara Bank, thereby establishing that the source of

funds was entirely independent of the Corporate Debtor.

7. It is further submitted that Canara Bank, acting in its capacity as the

Financial Creditor and in accordance with standard banking procedures,

automatically deducted EMIs from the common loan account towards

servicing the Appellant's loan. The deductions were system-driven and not

at the instance of the Corporate Debtor, thereby negating any allegation of a

transfer initiated by the Corporate Debtor.

8. It is his submission that merely because the Appellant's own funds

were routed through a common loan account does not convert such routing

into a transfer of assets by the Corporate Debtor. At no point did the

Corporate Debtor part with its funds, nor did it confer any benefit upon the

Appellant through its own assets.

9. He submitted that the foundational requirement under Section 43 of

the IBC, namely, a transfer of property of the Corporate Debtor, is wholly

absent in the present case. Since the EMIs were discharged entirely from the

Appellant's own funds, the question of a preferential transaction does not

arise.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -8-

10. Ld. Counsel submits that during the period alleged by the Respondent

as the relevant look-back period, deposits exceeding Rs.72,00,000/- were

infused into the common loan account through G.K. Sales. These deposits

are clearly reflected in the ledger and bank statements and were

subsequently appropriated by Canara Bank towards automatic EMI

deductions.

11. It is submitted that the ledger entries unmistakably establish that

these funds originated from the Appellant's own resources, channelled

through his family business, and were not amounts transferred or paid by

the Corporate Debtor. Consequently, the utilisation of these funds by the

Financial Creditor for loan repayment cannot, by any stretch, be

characterised as a preferential transfer under Section 43 of the IBC.

12. Ld. Counsel further submitted that all transactions reflected in the

common loan account were conducted strictly in the ordinary course of

business and in consonance with standard banking practices. The automatic

deduction of EMIs by Canara Bank was a routine loan-servicing mechanism

and formed part of the sanctioned loan terms.

13. It is his submission that the inflow of funds into the account, including

deposits made by G.K. Sales, was entirely consistent with normal commercial

conduct. There was no extraordinary arrangement, special instruction, or

preferential structuring intended to benefit the Appellant at the cost of the

Corporate Debtor or its creditors.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -9-

14. Ld. Counsel submitted that the entire Application under Section 43 is

founded on a ledger prepared by the Respondent after the initiation of the

Corporate Insolvency Resolution Process. The ledger bears the date

30.09.2022, whereas the CIRP commenced on 20.09.2022, which clearly

establishes that the ledger is a post-facto document and not a

contemporaneous business record.

15. It is submitted that the ledger falsely alleges that cash amounting to

INR 9,00,000 was paid by the Corporate Debtor to the Appellant. The

Appellant categorically denies receipt of any such cash amount, and there is

no documentary evidence, bank record, or corroborative material to support

this allegation.

16. It is his submission that the ledger relied upon by the Respondent is

fabricated, unreliable, and devoid of evidentiary value. Any claim premised

on such a document is factually unsustainable and legally incapable of

forming the basis of proceedings under Section 43 of the IBC.

17. Ld. Counsel submits without prejudice, that if the Respondent's

contentions are accepted, then every third-party payment reflected in any

ledger could be misconstrued as a preferential transaction. Such an

interpretation would lead to indiscriminate invocation of Section 43 for

routine commercial transactions. It is his submission that in the present

case, the alleged payments were nothing but automatic EMI deductions from

a common account funded by the Appellant's own resources. Treating such

transactions as preferential would penalise standard banking operations and

defeat the legislative intent underlying Section 43 of the IBC.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -10-

18. Ld. Counsel submitted that the automatic EMI deduction mechanism

adopted by Canara Bank was the only practical and feasible method

available for repayment of the loan availed by the Appellant. This mechanism

ensured regular servicing of the loan in accordance with the sanctioned

terms and further the Appellant had no alternative repayment arrangement.

Therefore, the use of the common loan account, funded by his own resources

including deposits through G.K. Sales, was both necessary and unavoidable

for timely repayment.

19. Ld. Counsel submitted that none of the transactions undertaken

satisfy the statutory requirements of Section 43 of the IBC. The allegation

that payments aggregating to INR 19,66,698.77 were made to the Appellant

within two years is factually incorrect and misrepresents the true nature of

the transactions.

20. It is submitted that Canara Bank was the sole Financial Creditor for

both the Corporate Debtor and its Directors, including the Appellant. Loans

were sanctioned through a common loan account, and EMIs corresponding

to the Appellant's loan were automatically deducted by the bank itself. These

deductions were appropriations by the Financial Creditor and not transfers

by the Corporate Debtor in favour of the Appellant. No creditor was preferred,

nor was any undue benefit conferred upon the Appellant, thereby placing the

transactions outside the scope of Section 43 of the IBC.

21. Ld. Counsel submitted that the Application under Section 43 is devoid

of merit, based on incorrect facts and fabricated documents, and seeks to

treat routine banking transactions as preferential transfers.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -11-

22. In his final submission Ld. Counsel strongly argued that the ledger

relied upon by the Respondent is not sacrosanct, having been prepared after

the commencement of CIRP, and there exists no independent evidence to

substantiate the alleged cash payments. The Application is thus liable to be

dismissed in entirety.

Submissions of Respondent / Liquidator of the Corporate Debtor

23. Ld. Counsel submits that his submissions are intended to assist this

Hon'ble Tribunal by placing on record the complete factual background,

procedural history, and the legal basis supporting the impugned order,

which has been rightly passed by the Ld. Adjudicating Authority after due

consideration of the pleadings and material on record.

24. It is submitted that the present appeal is wholly misconceived, devoid

of merit, and liable to be dismissed at the threshold. The Respondent, upon

examination of the books of accounts furnished by the Appellant himself,

noticed that the Corporate Debtor had availed unsecured loans from the

Appellant, who was a director and therefore a related party. The ledger

maintained in the books of the Corporate Debtor clearly reflects that as on

21.09.2020, an outstanding amount of Rs. 1,55,51,434/- was due to the

Appellant.

25. Ld. Counsel submits that in the books of account of CD, there existed

substantial secured financial debt owed to Canara Bank, whose admitted

claim stands at Rs. 11,96,64,262.95. In spite of existence of such a large

debt from Financial Creditor, the Corporate Debtor repaid an aggregate

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -12-

amount of Rs. 19,66,698.77 to the Appellant within the look-back period,

thereby conferring undue preference upon a related party. These repayments

were neither in the ordinary course of business nor commercially justified,

and directly resulted in placing the Appellant in a more beneficial position

vis-à-vis other creditors, particularly the secured financial creditor.

26. Ld. Counsel submitted that such transactions squarely fall within the

ambit of Section 43 of the Code. Section 43(4)(a) explicitly deems a

transaction to be preferential, if it is made in favour of a related party within

two years preceding the insolvency commencement date. The impugned

transactions satisfy every statutory ingredient of a preferential transaction.

27. Ld. Counsel further submitted that the Appellant's contention that the

application under Section 43 was barred by limitation on account of alleged

non-compliance with Regulation 35A of the CIRP Regulations is legally

untenable. The Ld. Adjudicating Authority correctly held that Regulation 35A

is directory in nature.

28. He further submitted that the Code itself, under Section 35(1)(l) and

Section 43(1), empowers both the Resolution Professional as well as the

Liquidator to identify and seek avoidance of preferential transactions. The

statutory scheme clearly contemplates that such applications may be filed

even after commencement of liquidation. This legal position stands

conclusively settled by the judgment of this Hon'ble Appellate Tribunal in

'Aditya Kumar Tibrewal, RP v. Om Prakash Pandey & Ors.' [Company Appeal

(AT) (Ins.) No. 583/2021], following the law laid down by the Hon'ble

Supreme Court in 'Surendra Trading Company v. Juggilal Kamlapat Jute Mills

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -13-

Company Ltd.' [(2017) 16SCC143], wherein timelines prescribed under

procedural regulations were held to be directory and not mandatory.

29. Ld. Counsel submits that the other plea raised by the Appellant that

Canara Bank itself deducted EMIs from the Corporate Debtor's account qua

the loan sanctioned to the appellant from the bank account maintained by

the Corporate Debtor and since the amount was realised by the Financial

Creditor itself and therefore the transactions cannot be termed preferential,

is wholly misconceived. It is also the case of the appellant that the Corporate

Debtor has paid more than Rs. 2.5 crores between 2020-22 to Canara Bank

and as such it is not a case that the Financial Creditor was not paid any

amount. Ld. Counsel submits that the plea of the appellant was duly

considered by the Ld. Adjudicating Authority which rightly held that under

Section 43 (4) of the Code, a preference shall be deemed to be given at a

relevant time if it is given to a related party within two years preceding

insolvency commencement date. The source or mode of repayment is

immaterial once it is established that the repayment resulted in conferring

preference upon a related party within the look-back period.

30. The fact that the Corporate Debtor may have paid amounts to Canara

Bank during the relevant period does not negate the preferential nature of

the impugned transactions. Section 43 does not require total exclusion of

payments to other creditors; it only requires that the impugned transaction

places the related party in a more advantageous position than it would

otherwise have occupied in liquidation, which is clearly the case herein.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -14-

31. Ld. Counsel submits that after the impugned order was passed, the

Appellant sought recall of both the ex-parte order and the final order by filing

I.A. No. 4681/2024. The said application was filed belatedly, without any

plausible or sufficient explanation for repeated non-appearance, and without

seeking condonation of delay.

32. Ld. Counsel further submits that the submission of appellant

regarding miscommunication on behalf of a junior counsel who wrongly

noted the next date of hearing in I.A. No. 937/2023 as 28.09.2024, which

incidentally was a Saturday is neither legally acceptable nor factually

convincing. On Saturday, the Tribunal does not function, and a diligent

litigant or counsel could not have reasonably made such an error.

33. It is his submission that Rule 49(2) of the NCLT Rules mandates

demonstration of sufficient cause for non-appearance. Prior professional

engagement before another forum does not constitute an unavoidable

circumstance. Accepting such excuses would render judicial discipline

nugatory.

34. In this regard, Ld. Counsel places reliance upon the judgment of this

Hon'ble Appellate Tribunal in 'Srigopal Chaudhary v. SREI Equipment

Finance Ltd.' [Comp. App. (AT) (Ins.) No. 1690 of 2023], wherein it was

categorically held that mistaken noting of dates or absence of counsel does

not automatically constitute sufficient cause, and that discretionary orders

refusing recall do not warrant appellate interference. The relevant paras 15,

16, 18 and 20 of the Judgment are extracted below:

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -15-

"15.... The relevant fact to be noticed is that the Appellant was well aware of the date 12.05.2023. On 12.05.2023, according to the Appellant himself, the case could not be taken up due to paucity of time and next date was fixed. The Appellant's case is that his Counsel wrongly noted the date as 08.06.2023 instead of 07.06.2023, hence, on 07.06.2023, he could not appear and the order was passed ex-parte against him.

16. When a party appears on a date which is fixed before the Court, it is presumed that the party is well aware of the proceedings, which was taken up by the Court on the said date.

On 12.05.2023, the next date fixed was 07.06.2023

18. The observation of the Adjudicating Authority that no sufficient cause to exercise the jurisdiction under Rule 49, is a decision taken by the Adjudicating Authority, which is based on relevant materials and facts brought before it, which does not suffer from any error warranting interference by this Appellate Tribunal in this Appeal

20. We do not find any good ground or reasons to interfere with the impugned order in this Appeal. The appeal is dismissed. No order as to costs."

35. Ld. Counsel further submitted that the grievance of the Appellant that

the application under Section 43 was decided without hearing is factually

incorrect. The Ld. Adjudicating Authority explicitly considered the common

reply filed by the Respondents and decided the application on merits. The

order dated 01.04.2025 clearly records that the impugned order dated

28.08.2024 was passed after considering the pleadings of all parties.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -16-

36. Regarding the recall application, the counsel for respondents submits

that the Ld. Adjudicating Authority in their order dated 01.04.2025 recorded

that impugned order dated 28.08.2024 passed in I.A. No. 937 of 2023 was

passed on merit after taking into account the common reply filed by the

respondents. Therefore, the grievance of the appellant that the said

application was decided without hearing them does not hold good.

37. Ld. Counsel submits that it can be seen from the last para of the order

that recall application was also rightly dismissed as being in the nature of a

review, which is impermissible under the NCLT Rules. There exists no

provision empowering the Tribunal to review its own orders.

38. Summing up his arguments, Ld. Counsel states that in view of the

foregoing facts, statutory provisions, and binding precedents, it is submitted

that the impugned order dated 28.08.2024 suffers from no illegality,

perversity, or jurisdictional error. The present appeal is nothing but an

attempt to delay the liquidation process and defeat the object of the

Insolvency and Bankruptcy Code. He prays for dismissal of the present

appeal and award cost in favour of respondent.

Analysis and findings

39. We have heard both the parties in detail, gone through the records of

the case and written submissions of the parties. After considering the facts of

the case and submissions of the parties we frame the following two issues for

determination:

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -17-

i. Whether the transactions amounting to Rs. 19,66,698.77 made in

favour of the Appellant during the look-back period constitute

preferential transactions under Section 43 of the Insolvency and

Bankruptcy Code, 2016.

ii. Whether the impugned order dated 28.08.2024 suffers from any

procedural illegality, violation of principles of natural justice, or

jurisdictional error so as to warrant interference by this Appellate

Tribunal under Section 61 of the Insolvency and Bankruptcy Code,

2016.

40. Issue No. (i) relating to nature of the transaction i.e. whether it is a

preferential transaction or a transaction in the natural course of the

business is the core issue. In the impugned order Ld. Adjudicating Authority

has decided that the transaction of Rs. 19.66 lakhs is a preferential

transaction and falls within the scope of Section 43 of the Code. If the

payments made in favour of the Appellant during the relevant period satisfy

the requirements of Section 43, the direction issued by the Adjudicating

Authority for contribution to the assets of the Corporate Debtor would be

legally justified. It is therefore necessary to first examine the nature and

effect of the impugned transactions in the light of the statutory scheme and

the facts on record.

41. The case of the Appellant is that the payments relied upon by the

Respondent do not amount to preferential transactions. According to the

Appellant, no funds of the Corporate Debtor were used for making the alleged

repayments. It is contended that the amounts were deposited by a third

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party, namely G.K. Sales, into a common loan account, from which Canara

Bank automatically deducted EMIs. The Appellant submits that these

deductions were part of normal banking practice, were made in the ordinary

course of business, and did not place the Appellant in any better position

than other creditors. On this basis, it is argued that the essential

requirement of "transfer of property of the Corporate Debtor" under Section

43 is not satisfied.

42. Per-contra, the Respondent submits that the Appellant is an admitted

related party of the Corporate Debtor, being a director who had advanced

unsecured loans to the Corporate Debtor. It is stated that during the two-

year look-back period preceding the insolvency commencement date,

payments totaling Rs. 19,66,698.77 were made towards repayment of these

unsecured loans. According to the Respondent, these payments were

reflected in the books and bank accounts of the Corporate Debtor and had

the effect of giving preference to the Appellant over other creditors,

particularly the secured financial creditor. It is further contended that such

repayments to a related party were not made in the ordinary course of

business and squarely fall within the ambit of Section 43 of the Code.

43. We now have a look at Section 43 of the Code, which is extracted below:

"43. Preferential transactions and relevant time.- (1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -19-

preferential transactions and for, one or more of the orders referred to in section 44.

(2) A corporate debtor shall be deemed to have given a preference, if-

(a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and

(b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53.

(3) For the purposes of sub-section (2), a preference shall not include the following transfers-

(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;

(b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that-

(i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property, and

(ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property:

Provided that any transfer made in pursuance of the order of a Court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor.

Explanation. For the purpose of sub-section (3) of this section, "new value" means money or its worth in goods, services, or new credit,

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -20-

or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt.

(4) A preference shall be deemed to be given at a relevant time, if-

(a) 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

(b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date."

44. We note that at the time of initiation of CIRP there was substantial

secured financial debt in the books of the Corporate Debtor. The claim of

secured Financial Creditor Canara Bank was for an amount of Rs. 11.96 Cr.

It is also on record that the appellant, who was a Director of the Corporate

Debtor had also extended unsecured loan to the Corporate Debtor and the

balance amount of said loan as on 21.09.2020 was Rs. 1.55 Cr. It is also

undisputed that the insolvency commencement date is 20.09.2022 and that

the payments of Rs. 19.66 lakhs, which are treated as preferential

transaction, were made to the appellant within two years prior to this date

i.e. in the period between 21.09.2020 and 20.09.2022. It is also an admitted

fact the appellant is a related party.

45. The main defence of the appellant is that the transaction of Rs. 19.66

lakhs is a transaction under the Section 43 (3) (a) of the Code, which relates

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -21-

to transactions which are made in ordinary course of business. Such

transactions cannot be treated as preferential transactions under Section 43

(2) in view of exemptions given by Section 43 (3) (a) of the Code. The

respondent on the other hand has argued that the aforesaid transactions are

covered by Section 43 (4) (a) of the code which provides that a preference

shall be deemed to be given at a relevant time to a party, if it is a related

party (other than by reason only of being an employee), during the period of

two years preceding the insolvency commencement date.

46. It is the submission of the appellant that the funds for such payments

were obtained from a family company GK Sales, which had deposited nearly

Rs. 77 lakhs during the look back period. He further submits that during

this period the Corporate Debtor has also paid Rs. 2.5 Cr. to the secured

Financial Creditor Canara Bank. These payments from GK Sales to

Corporate Debtor, repayment to secured Financial Creditor Canara Bank

and repayment of loan of appellant which is done by direct debit from the

CD's account are transactions in the nature of business transactions which

are covered by exemption under Section 43 (3) (a) of the Code. As the

appellant was a partner in GK Sales, his funds therein were transferred to

the Corporate Debtor's account in Canara Bank and the EMI of appellant

was directly debited by Canara Bank from that account. The appellant did

not have access to any other suitable mechanism for such funds transfer.

47. We are unable to accept this contention of appellant. Firstly, he could

have directly transferred such funds from the account of GK Sales to Canara

Bank by opening a suitable loan account there or he could have got the funds

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -22-

transferred to his individual account from G.K Sales account and thereafter

based on standing instructions the EMI could have been deducted by the

bank. The appellant has also not been able to present any document which

shows that these transactions were in the nature of ordinary business

transactions, which would have required the nature of underlined business

and documents showing invoices/ bills for products/services. Repayment of

unsecured loans to a director at a time, when the Corporate Debtor was

facing financial difficulty, and when a secured financial creditor had

substantial outstanding dues, cannot be regarded as a routine business

transaction. By receiving these payments, the Appellant clearly obtained a

benefit which he would not have received in the same manner in the event

of liquidation under Section 53 of the Code. We therefore are of the view that

such transactions cannot be classified as ordinary business transaction.

48. Secondly, we note from the records that the amounts were debited

from the accounts of the Corporate Debtor towards repayment of the

Appellant's loan. Once the amounts are credited to and routed through the

accounts of the Corporate Debtor and used to discharge its liability towards

a related party, the transaction cannot be taken outside the scope of Section

43(4) merely by pointing to the alleged source of those funds. What is relevant

is the effect of the transaction, namely that the Corporate Debtor's liability

towards the Appellant stood reduced by that amount which is contrary to

the provisions of Section 43 (2) which has been extracted above.

49. In these circumstances, we are of the view that the Adjudicating

Authority was correct in holding that the payments amounting to Rs.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -23-

19,66,698.77 satisfy the requirements of a preferential transaction under

Section 43 of the Insolvency and Bankruptcy Code, 2016. Issue No. (i) is

accordingly decided against the Appellant and in favour of the Respondent.

50. Issue No. (ii) concerns the procedural validity of the proceedings

leading to the impugned order dated 28.08.2024. While the substantive

legality of the transactions has already been examined under Issue No. (i),

this issue requires us to consider whether the impugned order is vitiated on

account of any procedural illegality, denial of reasonable opportunity, or lack

of jurisdiction, so as to justify interference in appeal. We will take up the

issues raised by the appellant one by one.

51. In his oral submissions before this Tribunal, the initial submission

made by the appellant was that the appellant is neither a creditor, guarantor

or surety of the Corporate Debtor and there is no Financial Debt, on the basis

of which proceedings have been initiated against him. The basis for

application is a ledger which has been fraudulently created by the

respondent.

52. The respondent in this regard had invited our attention to the claim

filed by Canara Bank in Form-C which has been placed at Page no. 82 of the

appeal paper book. The banks claimed against CD as on 20.09.2022

amounted to Rs. 10.87 Cr. (Approx.). It is further seen from the same Form-

C on Page no. 84 of appeal paper book that the appellant was the guarantor

of the secured loan of Canara Bank to the CD to the extent of Rs. 6.85 crores

and for this he had signed a guarantee agreement dated 21.07.2014. It is an

admitted position of the appellant that he was an unsecured creditor of the

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -24-

Corporate Debtor to the tune of Rs. 1.55 Cr. After going through the

documents, we note that the contention of appellant is not based on facts.

53. Another major contention of the Appellant is that the ledger relied

upon by the respondent is false, fabricated and the same cannot form the

basis on any allegation under Section 43 of the Code. The respondent has

prepared the list of transactions based on ledger created fraudulently created

by the respondent and it has no legal sanctity. The ledger in question bears

the date 30.09.2022, whereas the CIRP of the Corporate Debtor was initiated

on 20.09.2022. This clearly reflects that the ledger was not contemporary

with the alleged transactions and was created post facto by the respondent,

thereby casting serious doubt about its authenticity. The entry of Rs. 9 lakhs,

which was allegedly given to the appellant by the Corporate Debtor in two

tranches, Rs. 4 lakhs on 15.05.2022 and Rs. 5 lakhs on 10.06.2022 is wholly

incorrect and misrepresented and no such amount was received by the

appellant.

54. The respondent on the contrary submits that the said ledger was

prepared by Tally data system and it was shared by the appellant himself on

28.11.2022. In this regard, he has invited our attention to his contention in

I.A. No. 937 of 2023 para 6 which is extracted below:

"6. That on lot of perusal, Non-Applicants shared books of accounts (in tally data) on 28.11.2022, however, other relevant documents like details of assets, inventories, fixed assets register, supporting vouchers, statutory records, login credential of GST/ Income Tax are still pending from them."

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -25-

55. We have gone through the reply of the appellant to the said I.A. and

this contention of the respondent has not been disputed by the appellant in

his reply to the said I.A. It is therefore clear from the above that the ledger

prepared to reflect the transactions between 21.09.2020 to 20.09.2022 has

been prepared by using the Tally accounting system, based on the data

inputs during the time the appellant was in control of the CD. Such

documents are created based on the historical data available in the system

and a ledger for any specified period can be prepared using Tally. There is

no illegality, if the aforesaid ledger for the look back period was prepared on

30.09.2022 through Tally. Since the reports from Tally are prepared based

on historical data available in the system, irrespective of date of printing,

such ledger for CD would always show the same result. Similarly, the claim

about entry of Rs. 9 lakh payment in cash to the appellant is also based on

historical data input in Tally system, which would have been done in the

period when appellant was in control and such entry could not have been

created post facto in Tally. We further note that no concrete evidence in this

regard has been furnished by the appellant. Accordingly, we are of the view

that the claim of the appellant about the aforesaid ledger showing payments

to appellant is fraudulent and has been falsely created has no merit in view

of admitted position that the books of accounts in Tally were shared by the

appellant on a later date i.e. 28.11.2022.

56. The Appellant has also contended that the impugned order was

passed in violation of principles of natural justice, as he was proceeded ex

parte and was allegedly unaware of the date on which the matter was finally

heard. It is also contended that the application under Section 43 was not

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -26-

maintainable due to non-compliance with the timelines prescribed under

Regulation 35A of the CIRP Regulations. The Respondent, on the other hand,

submits that the Appellant had already filed a detailed reply which was

considered on merits, that the absence of counsel on the date of hearing was

due to internal reasons attributable to the Appellant, and that Regulation

35A is directory in nature.

57. Ld. Adjudicating Authority vide order dated 04.06.2024 had set the

respondent No.2 (appellant herein) ex-parte on account of non-appearance

of the counsel. It is the submission of the appellant that thereafter the Junior

Counsel who was present in the court noted the date of next hearing as

28.09.2024 instead of 28.08.2024 and the appellant acted based on this

information by his counsel.

58. The fact that appellant was set ex-parte on 04.06.2024 and this was

in the knowledge of counsel for the appellant as his proxy counsel was

present in the court. The right course of action should have been to file an

application for setting aside the said ex-parte order. However, no such action

was taken by the appellant and its only after the impugned order was passed

on 28.08.2024 that the appellant filed I.A. No. 4681 of 2024 for setting aside

of ex-parte order dated 04.06.2024 and further recall order dated 28.08.2024

in I.A. No. 937 of 2023 on 09.09.2024. The need for filing an I.A in a disposed

of matter would not have arisen if the appellant has filed the application

immediately after the order dated 04.06.2024.

59. It is an admitted position that the Appellant had filed a reply to the

application under Section 43, setting out all his factual and legal objections.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -27-

The impugned order shows that the Adjudicating Authority has taken note

of these submissions and has decided the matter on merits. Therefore, this

is not a case where the Appellant was condemned unheard or denied a

reasonable opportunity of being heard.

60. The Adjudicating Authority has, while dismissing the subsequent

recall application, clearly recorded that the order dated 28.08.2024 was

passed after considering the replies filed by the Appellant. The explanation

of incorrect noting of dates or internal miscommunication within the office

of counsel cannot, by itself, invalidate a reasoned order passed on merits,

particularly when no specific prejudice is demonstrated. The relevant extract

of order dated 01.04.2025 in recall application filed vide I.A. No. 4681 of

2024 are extracted below:

"....It cannot be gainsaid that it is our regular experience in proceedings before us that counsels often choose to represent one respondent on one day and the other respondent on a different day. In PUFE applications, such practices are quite common. In the present case, it may be so that the reply filed on behalf of Respondent No. 2 is identical to that of Respondent No. 1 and is already on record. However, there was no disclosure or representation by the counsel appearing for Respondent No. 1, on 04.06.2024 that he was also appearing for Respondent No. 2.

In any case, without going into the submissions made at the Bar, we note that in terms of the order dated 28.08.2024, the IA- 937/2023 could be finally disposed of. On said date, there was no appearance on behalf of either of the Respondents. Nevertheless, we could take into account the common reply filed on behalf of Respondent Nos. 1 and 2, in order dated 28.08.2024.

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -28-

In the wake of the order dated 28.08.2024, the present IA has become infructuous, as it seeks recall of the order dated 04.06.2024 which has already lost its relevance by now. As far as the order dated 28.08.2024 is concerned, the same was passed on merits after taking into account the reply filed by Respondent Nos. 1 and 2.

The present application is in the nature of a review application and there is no provision under the NCLT Rules which enables this Tribunal to review its orders. Thus, the IA is dismissed."

61. Ld. AA has also clearly recorded in the said order that the application

filed vide I.A. No. 4681 of 2024 is in the nature of a review application and

NCLT Rules has no provision for review of its orders.

62. In this regard we take note of Judgment of this Appellate Tribunal in

'Srigopal Chaudhary vs. SREI Equipment Finance Ltd.', [Company Appeal (AT)

(Ins) No. 1690 of 2023], wherein it considered a challenge to an order passed

ex parte on the ground that the appellant's counsel had wrongly noted the

next date of hearing. The Tribunal took note of the fact that the party was

present before the Adjudicating Authority when the next date was fixed and

held that, in such circumstances, it must be presumed that the party was

aware of the proceedings. The Tribunal observed that an internal mistake,

miscommunication, or incorrect noting of dates by counsel cannot be treated

as a sufficient cause for non-appearance. It was further held that the

decision of the Adjudicating Authority refusing to recall an ex parte order,

when taken on the basis of the material on record, does not call for

interference by the Appellate Tribunal. The appeal in that case was

accordingly dismissed. In the present case as well, the Appellant had

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -29-

participated in the proceedings and had filed a reply on merits, and the

explanation offered for non-appearance is based on alleged

miscommunication or incorrect noting of dates. In light of the above

judgment, such a plea cannot invalidate the impugned order on the ground

of violation of natural justice.

63. The objection of the appellant regarding the violation of mandatory

timelines for determining a preferential transaction and for filing an

application before the Adjudicating Authority in accordance with Regulation

35A of the CIRP Regulations is equally untenable. It is settled law that the

timelines prescribed under Regulation 35A are directory and not mandatory.

We further note that under Section 35(1) (l) of the Code, the Liquidator is

expressly empowered to investigate the financial affairs of the Corporate

Debtor to determine undervalued or preferential transactions during

liquidation, which was initiated by the Adjudicating Authority on

06.06.2023. The Adjudicating Authority, therefore, acted well within its

jurisdiction in entertaining and deciding the application under Section 43.

64. This Appellate Tribunal in 'Aditya Kumar Tibrewal, Resolution

Professional vs. Om Prakash Pandey, Suspended Director & Ors.', [Company

Appeal (AT) (Ins) No. 583 of 2021], examined the effect of the timelines

prescribed under Regulation 35A of the CIRP Regulations for forming an

opinion and filing an application relating to preferential transactions. While

doing so, the Tribunal followed the law laid down by the Hon'ble Supreme

Court in 'Surendra Trading Company vs. Juggilal Kamlapat Jute Mills

Company Ltd. & Ors.', [(2017) 16 SCC 143], wherein it was held that

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025 -30-

procedural timelines are generally directory in nature unless the statute

expressly provides otherwise. This Appellate Tribunal observed that

Regulation 35A only prescribes a time schedule to guide the Resolution

Professional and does not take away the substantive power to pursue

avoidance transactions under the Code. It was further noted that avoidance

proceedings are meant to protect the interests of the creditors and the asset

pool of the Corporate Debtor and therefore cannot be defeated on technical

or procedural grounds. In view of this legal position, the Tribunal held that

an application under Section 43 of the Code is not rendered non-

maintainable, merely because the opinion was not formed or the application

was filed within the indicative timelines mentioned in Regulation 35A.

Applying this principle to the present case, the Appellant's objection that the

application under Section 43 was time-barred cannot be accepted, and the

Adjudicating Authority was justified in entertaining and deciding the

application, which clearly supports the case of the Respondent.

65. In view of the above findings, we find no illegality or infirmity in the

impugned order dated 28.08.2024 & 01.04.2025 passed by Ld. Adjudicating

Authority in C.P. (IB) No. 550/ND/2020. Both the appeals are dismissed.

Pending I.As, if any, are closed. There shall be no order as to costs.

[Justice N Seshasayee] Member (Judicial)

[Mr. Arun Baroka] Member (Technical)

[Mr. Indevar Pandey] Member (Technical) SA/Pragya (LRA)

Company Appeal (AT) (Ins.) Nos. 2025 of 2024 & 735 of 2025