The NCLAT, Principal Bench New Delhi expounded that even when all the requirements of sub-section (2) of Section 43 of the Code are satisfied, in order to fall within the mischief sought to be remedied by Section 43, the questioned preference ought to have been given at a relevant time. In other words, for a preference to become an avoidable one, it ought to have been given within the period specified in sub-section (4) of Section 43. The extent of ‘relevant time’ is different with reference to the relationship of the beneficiary with the corporate debtor inasmuch as, for the persons falling within the expression ‘related party’ within the meaning of Section 5 (24) of the Code, such period is of two years before the insolvency commencement date whereas it is one year in relation to the person other than a related party.

Brief Facts:

The present appeal is against an impugned order whereby an application filed under Section 43 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) was allowed by the NCLT.

 Contentions of the Appellant:

It was argued that there could not be an extension of look back period beyond two years as is envisaged in sub-section (4) of Section 43 of the IBC.

Observations of the Tribunal:

It was observed that even when all the requirements of sub-section (2) of Section 43 of the Code are satisfied, in order to fall within the mischief sought to be remedied by Section 43, the questioned preference ought to have been given at a relevant time. In other words, for a preference to become an avoidable one, it ought to have been given within the period specified in sub-section (4) of Section 43. The extent of ‘relevant time’ is different with reference to the relationship of the beneficiary with the corporate debtor inasmuch as, for the persons falling within the expression ‘related party’ within the meaning of Section 5 (24) of the Code, such period is of two years before the insolvency commencement date whereas it is one year in relation to the person other than a related party.

The Bench held that in the present case since the outstanding being of more than 2 years prior to CIRP commencement date, the relief under Section 43 of the Code would not be available.

The decision of the Tribunal:

Accordingly, the appeal was disposed of.

Case Title: Sidharth Bharatbhushan Jain v.  State Bank of India

Case No.: COMPANY APPEAL (AT)(INS) NO.242 OF 2024

Coram:  Justice Yogesh Khanna (Judicial Member), Mr. Ajai Das Mehrotra (Technical Member)

Advocate for Appellant: Adv. Mr Keith Varghese

Advocates for Respondent: Advs. Mr. Harshit Khare, Mr Prafful Saini, Mr Nishant Chothani, Mr. Pranjit Bhattacharya, Mr Niyati Shah

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