Tribunal mandates refunds from related parties to restore financial position of debt-laden corporate debtor.
In a significant judgment, the National Company Law Tribunal (NCLT) Kochi Bench has directed the reversal of preferential transactions amounting to Rs. 8 crores involving Asten Properties and Developers Private Limited, a corporate debtor currently undergoing Corporate Insolvency Resolution Process (CIRP). The tribunal, presided over by Shri. Vinay Goel, Member (Judicial), found that transactions carried out during the look-back period placed related parties in a beneficial position over other creditors, contravening the principles of the Insolvency and Bankruptcy Code, 2016.
The tribunal's order, dated January 6, 2026, stemmed from an application filed by CA Sreenivasan P R, the Resolution Professional for Asten Properties, seeking to avoid preferential transactions under Sections 43 and 44 of the Insolvency and Bankruptcy Code, 2016. The transactions in question involved Asten Realtors Private Limited, Mr. Siraj Mather, and Moon Day Realtors Private Limited, all identified as related parties of the corporate debtor.
The tribunal meticulously examined the transactions during the two-year look-back period from June 13, 2022, to June 12, 2024, as identified in a Transaction Audit Report. Asten Realtors, the holding company with a 99% shareholding in the corporate debtor, received payments and asset transfers totaling Rs. 15,24,10,709/-. This included repayment of an unsecured loan and transfer of 13 completed apartments, valued at over Rs. 7 crores, to settle liabilities.
The tribunal found that these transactions were preferential, placing Asten Realtors in a more advantageous position than other creditors. However, acknowledging the infusion of additional funds by Asten Realtors during the same period, the tribunal ordered a net refund of Rs. 7,92,35,568.50/-.
Similarly, Mr. Siraj Mather, a director of the corporate debtor, was found to have received preferential payments of Rs. 40,15,000/-, while Moon Day Realtors received Rs. 80,000/-. Both were ordered to refund these amounts to the corporate debtor's account.
The tribunal emphasized that the purpose of reversing preferential transactions is to restore the financial position of the corporate debtor rather than penalize the beneficiaries. The amounts recovered will be included in the corporate debtor's estate, treating the respondents as creditors without voting rights in the Committee of Creditors, given their related-party status.
This ruling highlights the tribunal's commitment to maintaining the integrity of the insolvency process and ensuring equitable treatment of creditors, aligning with the objectives of the Insolvency and Bankruptcy Code.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Avoidance of preferential transactions under Sections 43 and 44 - Transactions involving related parties examined under strict scrutiny - Payments and transfers during look-back period deemed preferential and liable to be reversed.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 43 and 44, Rule 11 of the NCLT Rules, 2016
