The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar, Judicial Member and Alok Srivastava, Technical Member was hearing an appeal on Wednesday and held that discounts and adjustments given to the appellant during the look-back period before the initiation of CIRP were 'avoidable transactions' as per the IBC and were not in the ordinary course of business.
In the present case, an appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order dated 07.06.2022 passed by the Adjudicating Authority (NCLT, New Delhi) in Company Application C.A. No. 1682/2019 filed by Shri Debashis Nanda, the Liquidator of J.V. Strips Limited. The appellant challenged the Impugned Order, which held certain transactions between the Appellant and the Corporate Debtor as undervalued. As a result, the Appellant was directed to make a payment of Rs. 31,00,475.00.
The Appellant contended that it had supplied raw materials to J.V. Strips Limited starting from September 2017, and there was a running account of payments made for these supplies. According to the Appellant, an amount of Rs. 31,00,474.60 was the balance remaining to be paid to J.V. Strips Limited as of 31.03.2018 after an RTGS payment of Rs. 16,36,223.40 on 29.01.2018. The Appellant claimed that certain discounts and adjustments were agreed upon during a meeting on 03.04.2018, reducing the amount payable to J.V. Strips Limited to Rs. 7,764.60.
The Liquidator argued that the deductions made during the meetings held on 03.04.2018 were 'avoidable transactions' as per Section 46(1)(i) of the IBC, and they were hugely undervalued and not in the ordinary course of business of J.V. Strips Limited. The Liquidator presented ledger accounts of both parties to support their argument.
The NCLAT observed that the ledger account submitted by the Liquidator accurately reflected the discounts given to the Appellant and the amount due to J.V. Strips Limited. The Appellant failed to provide any other relevant document to justify the discounts or prove they were given in the ordinary course of business. Since the discounts fell within the one-year look-back period before the initiation of the Corporate Insolvency Resolution Process (CIRP), the NCLAT held that they were 'avoidable transactions' as per the IBC. Consequently, the Appellant's appeal was dismissed as lacking merit, and no costs were awarded.
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