Jitendra Kikavat Anr vs Amit Gupta

IN THE MATTER OF: Jitendra Kikavat & Anr. ...Appellants

Versus

Amit Gupta ...Respondent

Present: For Appellants: Mr. Aman Kacheria, Advocate. For Respondent:

With

Company Appeal (AT) (Insolvency) No. 34 of 2025 & I.A. No. 70 of 2025

IN THE MATTER OF: Beena Kikavat & Ors. ...Appellants

Versus

Amit Gupta ...Respondent

Present: For Appellants: Mr. Aman Kacheria, Advocate. For Respondent:

With

Company Appeal (AT) (Insolvency) No. 347 of 2025 & I.A. No. 1255, 1307 of 2025

IN THE MATTER OF: Mahavir Link Associates & Ors. ...Appellants

Versus

Bank of Baroda & Ors. ...Respondents

Cont'd.../ 2

Present: For Appellants: Mr. Aman Kacheria, Advocate. For Respondents:

ORDER

(Hybrid Mode)

07.05.2025: All these appeals have been filed against the same order

dated 22.05.2024 by which order IA No.2020 of 2020 filed by the Resolution

Professional under Section 43 and 44 of the I&B Code has been allowed.

Appellants aggrieved by the said order has come up in this appeal.

2. Learned counsel for the Appellant made two submissions. Firstly, he

submits that order was passed ex-parte to the Appellant. Secondly, he

submits that the payments which were treated to be preferential transactions

were being made to the related parties for last 6-7 years and the said

payments were made in the ordinary course of business, hence, they were not

covered by Section 43.

3. We have considered the submissions of learned counsel for the

Appellant and perused the record.

4. It is not disputed that Appellants are related party of the Corporate

Debtor. The payment which were claimed by the Appellant are payments

towards antecedent debt and the said payments were made during the look

back period.

5. The submission of the Appellant the order is ex-parte cannot be

accepted since notices were issued on the application and the Appellants have

Company Appeal (AT) (Ins.) No.59, 34, 347 of 2025 3

filed their reply, which is captured in Para 3 of the order. Para 3 of the

impugned order is as follows:

"3. The Respondents have filed an affidavit in reply dated 15.09.2021 stating that various adjustment entries were passed by the Corporate Debtor in its normal course of business and the same have been completely overlooked by in the Transaction Audit Report dated 31.05.2020. Thereby no reflecting the true status of the books of accounts of the Corporate Debtor.

3.1. It is submitted that the said Report is solely based on bank transactions which do not explain the purpose of the transactions. Further the same are duly reflected in the notes of accounts of the Corporate Debtor for the year ending 31 March 2020. It is pertinent to note that as per the notes of accounts of the Corporate Debtor for the year ending 31st March 2020, the amounts are is in fact due and payable to Respondents which is also confirmed by the Applicant herein. It is submitted that said Transaction have not caused any prejudice to the lender of the Corporate Debtor and were done in the normal course of business of the Corporate Debtor and therefore will not be covered under Section 43 of the Code. It is further submitted that during the period from 1" April, 2014, the Corporate Debtor was under

financial crunch and the cycle of recovery from trade receivables was completely disturbed. It is during this time, that the Respondents gave

Company Appeal (AT) (Ins.) No.59, 34, 347 of 2025 4

unsecured loans to meet the financial crunch of the Corporate Debtor and the Corporate Debtor returned the said amounts after receiving funds from the debtors, hence the transactions are not covered under section 43 of the Code."

6. Now coming to the submission of the Appellant that the payments were

made to the related party for last 6-7 years, hence, said payments were in

ordinary course of business need to be considered. The payment made to the

Appellant for period earlier to the look back period are not subject matter of

consideration nor nature of said transaction need to be considered.

7. During the look back period payments were made to the Appellant from

the Corporate Debtor when Corporate Debtor was suffering from financial

distress. The Adjudicating Authority after considering the facts and

circumstances has made following observations in Para 4.3 and 4.4:

"4.3. In the present cases, the Corporate Debtor has paid the amount towards the antecedent debt during the look back period to the named Respondents and the said payments have put the Respondents in favourable position than what they would have been in case of distribution of assets in terms of section 53 of the Code. Accordingly, these transactions squarely falls within the deeming fiction provided in section 43(2) of the Code. The Section 43(3) of the Code, inter-alia, provides that the transactions undertaken in ordinary course of business shall remain out of the scope of section 43 of the Code.

Company Appeal (AT) (Ins.) No.59, 34, 347 of 2025 5

Further, the transaction should be in ordinary course of business of both the parties i.e. the Corporate Debtor as well as recipient of the preference. In the present case, it cannot be said that it is in ordinary course of business of the recipient of the preference to realise their debts, particularly when the Corporate Debtor, a related party, is under financial stress. Hence, we do not find the explanation of the Respondent acceptable in the present case. However, we are of considered view that the net amounts received during the look back period shall only be said to be resulting into preference. Further, in relation to Karan J Kikavat Respondent in IA 1402/2020, the Applicant has explained that the amount withdrawn by this person was adjusted against the various Earnest Money Deposit (EMD) and tender fees paid by him on behalf of Corporate Debtor and all the EMD's are still outstanding in the books of accounts of Corporate Debtor, hence, this appropriation was in nature of reimbursements, and do not result into preference having been given to this person.

4.4. In view of the foregoing, the following transactions are held to be preferential in nature, and we consider to direct these parties to refund the money received in preference to the Corporate Debtor within 30 days.

S. No. IA No. Name of Respondent Amount 1. 1402/2020 Beena Kikavat 41,502/- 2. 1402/2020 Akshita Kikavat 1,70,000/-

Company Appeal (AT) (Ins.) No.59, 34, 347 of 2025 6

3. 1402/2020 Vasantlal Kikavat 8,60,200/-

5. 1402/2020 Pawan Kikavat 27,25,857/-

6. 1443/2020 Mahavir Link 1,31,01,406/-

Associates

7. 1443/2020 P. K. Traders 86,51,068/-

8. 1443/2020 Mahavir Stone 3,20,63,845/-

Supplying Company

9. 2020/2020 Jitendra Kikavat 1,39,14,085/-

10. 2020/2020 Pankaj Kikavat 24,366,667/-

8. The Adjudicating Authority has categorically held in Para 4.3 the

transactions were not made in ordinary course of business. It is relevant to

notice that with regard to one transaction where there was explanation, in

Para 3.3, it was held to be not covered under Section 43. The Appellant being

related party and payments were made from the Corporate Debtor's account

to the Appellant during the look back period, we do not find an error in the

finding of the Adjudicating Authority that payments were not in the ordinary

course of business. There is no merit in the Appeals. Appeals are dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) Archana/nn

Company Appeal (AT) (Ins.) No.59, 34, 347 of 2025