The National Company Law Appellate Tribunal, Principal Bench, New Delhi has held that section 43 of the Insolvency and Bankruptcy Code (IBC) does not allow the extension of the look-back period beyond 2 years for related-party transactions.
Sidharth Bharatbhushan Jain & Ors, the appellant challenged the impugned order whereby an application filed under Section 43 of the Code was allowed by the NCLT. The counsel for the appellant submitted the Corporate Debtor had supplied certain goods to M/s Pratap Associates, an HUF firm of Appellant No.3 herein and hence a related party. M/s Sysco Industries Ltd, the Corporate Debtor, went into CIRP and thus the look back period under Section 43 of Code commenced w.e.f. 8th September, 2019.
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The application under Section 43 of the Code was filed per minutes of 4th COC Meeting. To file an application under Section 43 and Section 65 separately. RP informed the COC Members that presently there is procedure of filing the application under Section 43 and Section 65 separately. Also increasing the lookup period is required as the company was not operating since 2079 i.e., more than 2 years before the CIRP commencement date. After a detailed discussion, it was decided and COC approved to file the application under section 43 and section 66 of IBC Finally, it was decided for adding prayer in the application for extension in look-up period of 5 years than only 2 years. COC also agreed the fees for the advocate.
Section 43 of the Code states that (4)A preference shall be deemed to be given at a relevant time} if- (a)it is given to a related party (other than by reason only of being an employee)} during the period of two years preceding the insolvency commencement date; or (b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.
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The bench comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) held that 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 respondent, however, shall be at liberty to take alternative action(s) as may be allowed under the Law (inclusive of Section 66 of the Code). The tribunal set aside the impugned order.
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