NCLAT opines that merely on the ground of denying documents to the Liquidator, the clause concerning the 2-year relevant period cannot be invoked

 

The NCLAT, New Delhi, opined that even though Sections 43, 45, and 46 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) provide for a relevant period unless the Liquidator has the material to scrutinize and ascertain whether the preferential transactions took place or not, the Liquidator cannot conclude whether the transactions took place during the relevant time. Regarding Section 66 of the IBC, the Tribunal held that there is no period defined, and hence, if any fraud is committed by the Corporate Debtor, the Liquidator can approach the NCLT to seek necessary directions. It was further propounded that IBC does not provide for any clause concerning the relevant period of 2 years wherein documents/information can be denied to be given to the Liquidator.

Brief Facts:

The present Appeal is filed to challenge the order passed by the Adjudicating Authority (NCLT) vide which an application was allowed to permit the investigation of transactions beyond 2 years.

Contentions of the Appellant:

It was argued that Section 43 of IBC lays down that the preference has to be given to a ‘Related Party’ during the period of 2 years preceding the Insolvency Commencement Date (hereinafter referred to as “ICD”)and in case of a person other than ‘Related Party’ than during the period of 1 year preceding the ICD. It was contended that conjoint reading of Sections 43 and 46 of IBC provides for 2 years as a relevant time for a ‘Related Party’ and 1 year for any party other than a ‘Related Party. It was further argued that any type of  transaction, including Fraudulent Transactions before 2 years of the ICD could not be investigated by the liquidator. 

 

Contentions of the Respondent/Liquidator:

It was contended that the Liquidator or Resolution Professional can apply to the NCLT if the Corporate Debtor has at any relevant time given preference in such transactions so that transactions can be declared void and reverse the effect of such transactions.  It was argued that the Liquidator could approach NCLT as per Section 50 as this section presupposes that the Liquidator had possession of all material transactions dehors the two-year look-back period.  It is further argued that there is no look-back period of 2 years, and the Liquidator can approach NCLT at any time under Section 66(2) of IBC if there is fraud committed by the Corporate Debtor.

Observations of the Tribunal: 

The Tribunal noted that even though Section 43, 45, and 46 of the IBC provides for a relevant period unless the Liquidator has the material to scrutinize and ascertain whether the preferential transactions took place or not, the Liquidator cannot conclude whether the transactions took place during the relevant time. It was held that unless Liquidator has all the material documents, the existence of undervalued or preferential transactions during the relevant time cannot be ascertained.

For Section 66 of the IBC, the Tribunal held that there is no period defined, and hence, if any fraud is committed by the Corporate Debtor, the Liquidator can approach the NCLT to seek necessary directions. 

It was further observed that the IBC does not provide for any clause concerning the relevant period of 2 years wherein documents/information can be denied to be given to the Liquidator.

The decision of the Tribunal:

Based on the above-mentioned reasons, the Appellate Tribunal upheld the order passed by NCLT and accordingly dismissed the Appeal. 

Case Title: Amardeep Singh Bhatia v. Abhishek Nagori & Ors.

Coram: Shreesha Merla (Technical Member), Justice Anant Bijay Singh (Judicial Member)

Case no.: Company Appeal (AT) (Insolvency) No. 671 of 2020 

Advocates for Appellant: Advs. Mr. Arvind Kr. Gupta, Ms. Henna George & Ms. Shivani Sharma

Advocates for Respondents: Advs. Mr. Ratnanko Banerjee, Mr. Arvind Kumar Gupta, Mr. Aditya Krishnamurthy, Mr.  Ashutosh Tiwari 

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