44 (1) (d)

When Erstwhile Management indulged into fraudulent trading or unlawful trading which may also include any preferential transactions, order to make contribution by the Erstwhile Directors is very well contemplated under Section 66 of the Code, Section 44(1)(d) of IBC contemplates a direction requiring any person to pay such sums in respect of benefits received by him from the Corporate Debtor – Mr. Saptarshi Nath Vs. Kapil Dev Taneja, RP of Exit 10 Marketing Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) Essential conditions need to be fulfilled for issuing direction under Section 44(1)(d). (i) The Adjudicating Authority may require any person to pay and (ii) Such sums in respect of benefits received by him from the Corporate Debtor. Thus as observed above, the provision of Section 44 is aimed at reversing the effects of preferential transactions when the effects of preferential transaction are, reversed the person who has received benefits from the transactions, can be required to pay the sum which is the power given under Section 44(1)(d) of the Code.
(ii) When Erstwhile Management indulged into fraudulent trading or unlawful trading which may also include any preferential transactions, order to make contribution by the Erstwhile Directors is very well contemplated under Section 66 of the Code.
(iii) Present is not a case where the Adjudicating Authority has returned any finding under Section 66 or exercised power and issued an order under Section 66 of the Code. The Adjudicating Authority has only issued direction under Section 44(1)(d) of the Code.

When Erstwhile Management indulged into fraudulent trading or unlawful trading which may also include any preferential transactions, order to make contribution by the Erstwhile Directors is very well contemplated under Section 66 of the Code, Section 44(1)(d) of IBC contemplates a direction requiring any person to pay such sums in respect of benefits received by him from the Corporate Debtor – Mr. Saptarshi Nath Vs. Kapil Dev Taneja, RP of Exit 10 Marketing Pvt. Ltd. – NCLAT New Delhi 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 »

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