Anish Niranjan Nanavaty Vs China Development Bank & Anr (NCLT Mumbai)
Transfer by Corporate Debtor resulting into value enhancement outside ambit of section 43 of IBC: NCLT Mumbai
NCLT Mumbai held that any transfer made by the Corporate Debtor which results in value enhancement would be excluded from the ambit of Section 43 of the Insolvency and Bankruptcy Code, 2016.
Facts- The Corporate Debtor, Reliance Communications Limited, had availed certain facilities in the form of a Term Loan advanced by the Respondents, China Development Bank & Anr. In view of the defaults thereunder, the Respondent No.1 filed company petition u/s. 7 of the Code against the Corporate Debtor.
The present application is filed by the Resolution Professional after observing that the Respondents have collectively received payments from the Corporate Debtor, amounting to Rs. 117 Crores, prior to commencement of CIRP, which amounts as a preferential payment u/s. 43 of the Insolvency and Bankruptcy Code, 2016.
Conclusion- The Apex Court in Anuj Jain observed that any transfer made by the Corporate Debtor which results in acquiring any enhancement in its value or worth would be excluded from the ambit of Section 43 of the Code. In the present case, the replacement of a secured debt by an unsecured debt happening on account of transaction of borrowing and paying to CDB led Chinese Consortium, was in ordinary course of financial affairs of the Corporate Debtor as it resulted into retirement of a secured debt by unsecured debt, thus releasing the security over the assets of the Corporate Debtor resulting into enhancement of its capacity to offer more security.
