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2019 (8) TMI 140 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHIValidity of transactions - transactions entered into by the promoters and Directors of the ‘Corporate Debtor’ creating mortgage of 858 acres of immovable property owned by it and in possession of the ‘Corporate Debtor’, to secure debt of related party - whether fraudulent and wrongful transactions within the meaning of Section 66 of the ‘I&B Code’? - HELD THAT:- From bare perusal of Section 66, it is clear that if during the ‘Corporate Insolvency Resolution Process’ or ‘Liquidation Process’, it is found that any business of the ‘Corporate Debtor’ has been carried on with intent to defraud creditors of the ‘Corporate Debtor’ or for any fraudulent purpose, the Adjudicating Authority is empowered to pass appropriate order under Section 67. In the present case, we have noticed that the transactions in question i.e. mortgage(s) were made in favour of the ‘Banks and Financial Institutions’ by the ‘Corporate Debtor’ (‘Jaypee Infratech Limited’) in the ordinary course of business of the ‘Corporate Debtor’. The Appellants- Banks and Financial Institutions have given loans to the holding Company namely- ‘Jaiprakash Associates Limited’. The ‘Corporate Debtor’ being one of the group company, like a guarantor, executed mortgage deed(s) in favour of the Appellants- ‘Banks and Financial Institutions’. We have seen that none of the transactions were ‘preferential transaction’ or ‘undervalued transaction’ - Further, as we have held that the transactions were made in the ordinary course of business in absence of any contrary evidence to show that they were made to defraud the creditors of the ‘Corporate Debtor’ or for any fraudulent purpose, on mere allegation made by the ‘Resolution Professional’, it was not open to the Adjudicating Authority to hold that mortgage deeds, in question, were made by way of transactions which come within the meaning of ‘fraudulent trading’ or ‘wrongful trading’ under Section 66. It is not in dispute that all the Appellants had granted loan to ‘Jaiprakash Associates Limited’. Majority of Banks (Appellants) functioned as joint venture. For the said reason, the ‘Corporate Debtor’ executed mortgaged deeds in favour of the Appellants. Such transactions having made in ordinary course of business, the allegation against the Banks and Financial Institutions (Appellants) are not justified. The Adjudicating Authority having failed to notice the aforesaid relevant facts and as it misread the provisions of Sections 43, 45 & 66 of the ‘I&B Code’ and on the basis of wrong presumption and error of fact held that transactions in question amount to ‘preferential transactions’ (Section 43); ‘undervalued transactions’ (Section 45) and ‘for fraudulent purpose to defraud the creditors of the ‘Corporate Debtor’ (Section 66), the impugned order cannot be upheld - appeal allowed.
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