43 (3)

Repayment of borrowings during look back period, after classification of account of Corporate Debtor as NPA, falls within the exception provided in Section 43(3) of IBC – Mr. Anish Niranjan Nanavaty RP of Reliance Communications Ltd. Vs. RPL Aditya Power Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench held that:

(i) Section 43(3) of the Code provides certain exceptions, whereby even a transaction falling within the mischief of Section 43(2) read with Section 43(4) of the Code are excluded from the scope of section 43 calling for orders u/s 44 of the Code.
(ii) Ordinarily, every borrower makes sure that the amounts borrowed are paid as and when it becomes due or with least delay. The loans taken from Respondents are stated to be paid in multiple tranches of odd amounts and the loan was repayable on demand.
(iii) Hence, such repayment of loan was in Ordinary Course of financial affairs of the Corporate Debtor as well. Since, the impugned transaction was in Ordinary Course of financial affairs of Corporate Debtor and the Respondent, we are of considered view that it squarely falls within the exception provided in Section 43(3) of the Code.

Repayment of borrowings during look back period, after classification of account of Corporate Debtor as NPA, falls within the exception provided in Section 43(3) of IBC – Mr. Anish Niranjan Nanavaty RP of Reliance Communications Ltd. Vs. RPL Aditya Power Ltd. – NCLT Mumbai Bench Read Post »

If the Appellant has not given any clarity or reason as to why transactions were made, the benefit of the exception that is carved out in Section 43(3)(a) of IBC cannot be provided to the Appellant – Ashique Ponnamparambath Vs. Vibin Vincent, Liquidator of Koyenco Autos – NCLAT Chennai

Hon’ble NCLAT held that:
(i) A plain reading of sub-section (2) of section 43 makes it clear that if the transfer of a property or an interest of the corporate debtor is made for the benefit of a creditor or a surety or a guarantor, such transaction would be ‘preferential transaction’, if it puts such creditor or surety or guarantor in a beneficial position and if such transactions are made within the ‘relevant period’.
(ii) In the absence of any reason provided by the Appellant as to why such transfers were made in his favour from the account of the corporate debtor, it would be a safe and logical conclusion that he considers that the corporate debtor owed him these amounts. Therefore, in accordance with clause (a) of sub-section (2) of section 43, such transactions are clearly ‘preferential transactions’.
(iii) Further, the exception that is carved out in clause (a) of sub-section (3) of section 43 that if the transfer is made in the ‘ordinary course of business’ of the corporate debtor, such transactions would be considered outside the ambit of ‘preferential transactions’. The Appellant in his reply before the Adjudicating Authority has not given any clarity or reason as to why such transactions were made and therefore, the benefit of this exception of the transactions having been made in the ‘ordinary course of business’ cannot be provided to the Appellant.

If the Appellant has not given any clarity or reason as to why transactions were made, the benefit of the exception that is carved out in Section 43(3)(a) of IBC cannot be provided to the Appellant – Ashique Ponnamparambath Vs. Vibin Vincent, Liquidator of Koyenco Autos – NCLAT Chennai Read Post »

Interpretation of Preferential & Undervalued Transactions under Section 43 of IBC| Whether the lender of Holding Company could be recognized as Financial Creditors of the Corporate Debtor (Subsidiary Company/Guarantor) on the strength of the mortgage created by the Corporate Debtor, as collateral security of the debt of its Holding Company – Anuj Jain IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ltd. etc. – Supreme Court

This judgment covers:
A.1 PUFE transactions comes into full effect in CIRP too.
A.2 The concept of Preferential Transactions.
A.3 Charging parts of the Section 43 of IBC.
A.4 Section 43 of IBC is deeming provision.
A.5 Look-back period.
A.6 Exclusion Part: Interpretation of Section 43(3) of IBC.
A.6.a. Meaning of “new value” Explanation to Section 43(3).
A.6.b. Transfer made in the ordinary course of the business or financial affairs.
A.6.c. The expression “or”, appearing as disjunctive between the expressions “corporate debtor” and “transferee”, ought to be read as “and”.
A.6.d. The expression ‘ordinary course of business’.
A.7. Net concentrate of Section 43 of IBC.
A.8 Checklist/Test whether a transaction falls squarely within the ambit of Section 43 of the Code.
A.9 To do: Steps follow by a Resolution Professional to find out whether a Transaction falls under Section 43 of IBC.
A.10. Can RP file one composite application under Sections 43, 45 and 66 of the Code and AA decide?
B. Whether transactions in the present case are preferential, falling within the ambit of sub-section (2) of Section 43 IBC.
C. Interpretation of definition of Financial Debt and Financial Creditor.
C.1 The expressions “means and includes” in the definition of Financial Creditor.
C.2 The essentials for financial debt and financial creditor.
C.3 Every secured creditor may not be a financial creditor.
C.4 A person having only security interest over the assets of corporate debtor cannot partake the character of a Financial Debt within the meaning of Section 5(8) of IBC.
C.5 Secured creditors indicated by this Court in Essar Steel and Swiss Ribbons, as being subsumed in financial creditors.
D. Whether Lenders of JAL could be categorised as Financial Creditors of JIL.

Interpretation of Preferential & Undervalued Transactions under Section 43 of IBC| Whether the lender of Holding Company could be recognized as Financial Creditors of the Corporate Debtor (Subsidiary Company/Guarantor) on the strength of the mortgage created by the Corporate Debtor, as collateral security of the debt of its Holding Company – Anuj Jain IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ltd. etc. – Supreme Court Read Post »

Sub-section (3) (a) of Section 43 of the IBC makes it clear that Preferential Transaction does not include transfer made in the ordinary course of the business or financial affairs of the Corporate Debtor or the transferee – ICICI Bank Ltd Vs. Mr. Shailendra Ajmera, the Resolution Professional of Ruchi Soya Industries Limited – NCLAT New Delhi

Login with GoogleOR Username Password Remember Me     Forgot Password In case you’ve already logged in, click here to

Sub-section (3) (a) of Section 43 of the IBC makes it clear that Preferential Transaction does not include transfer made in the ordinary course of the business or financial affairs of the Corporate Debtor or the transferee – ICICI Bank Ltd Vs. Mr. Shailendra Ajmera, the Resolution Professional of Ruchi Soya Industries Limited – NCLAT New Delhi Read Post »

Scroll to Top