IBC Avoidance Provisions Aim To Restore Corporate Debtor's Estate: NCLT Kochi

(MENAFN- KNN India) Thiruvananthapuram, Jan 12 (KNN) The National Company Law Tribunal (NCLT) at Kochi has clarified that the avoidance provisions under the Insolvency and Bankruptcy Code (IBC) are designed to neutralise the preferential effect of certain transactions and restore the corporate debtor's estate, rather than impose punitive liability on the beneficiary.

The observation was made by Judicial Member Vinay Goel while partly allowing an avoidance application filed by the Resolution Professional (RP) of Astern Properties and Developers Pvt Ltd under Sections 43 and 44 of the Code.

Background of the Case

Astern Properties was admitted into the Corporate Insolvency Resolution Process (CIRP) on June 13, 2024. During the statutory look-back period for related-party transactions, the RP identified payments and asset transfers exceeding Rs 15 crore in favour of Astern Realtors Pvt Ltd, the holding company owning 99 per cent of the debtor's shares. Certain withdrawals by director Siraj Mather and payments to Moon Day Realtors Pvt Ltd were also challenged as preferential transactions.

Tribunal's Findings

While the tribunal found that the transactions met the criteria of 'preference' under Section 43 of the IBC, it noted that the holding company had simultaneously infused substantial funds and incurred expenses for the benefit of the corporate debtor.

NCLT observed that ordering a full refund without accounting for these contributions would result in unjust enrichment of the corporate debtor.

Order on Refunds

The NCLT directed Astern Realtors to refund the net preferential amount of approximately Rs 7.92 crore after adjusting for the funds infused. It further ordered the director and the related-party entity to return the amounts received.

The tribunal clarified that the underlying claims would revive and be addressed in accordance with the statutory waterfall mechanism, ensuring proper prioritisation of claims during insolvency resolution.

(KNN Bureau)

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