Related Party Loan Repayment Held Preferential

Case Details: Bhavi Shreyansh Shah Liquidator of Greendiamz Biotech Ltd. vs. Champat Singhvi - [2026] 182 taxmann.com 158 (NCLT-Ahd.)

Judiciary and Counsel Details

Shammi Khan, Judicial Member & Sanjeev Sharma, Technical Member
Arjun Sheth, Adv. for the Applicant.

Facts of the Case

In the instant case, the CIRP was initiated against the corporate debtor by the NCLT, and an RP was appointed. The Applicant, being the RP, filed the instant application under Section 66, alleging that the respondent, suspended management, had entered into preferential transactions, unlawful transactions, undervalued and fraudulent transactions, wrongful trading, and had committed misconduct during the CIRP.

The NCLT observed that, considering consistent judicial pronouncements holding that the 130-day timeline under Regulation 35A is directory, the delay in filing the instant application due to completion of the transaction audit was condonable. Accordingly, the instant application was not barred by limitation.

Further, it was observed that the forensic audit report revealed that the suspended management had repaid unsecured loans amounting to Rs. 48.88 lakhs to related parties (directors and their relatives) before the dues of financial creditors. Such transactions constituted preferential transactions under Section 43.

The unexplained bogus capitalisation of alleged R&D expenses aggregating to Rs. 7.06 crores, followed by their complete write-off without any supporting evidence, amounted to carrying on business for a fraudulent purpose.

Book entry adjustments involving crediting unsecured loans to related parties without corresponding actual fund inflows constituted preferential transactions under Section 43. Held: Yes.

NCLT Held

The NCLT held that, since the respondents had failed to discharge the burden cast upon them under Section 43(3) read with Sections 44 and 66 to demonstrate that the impugned transactions were undertaken in the ordinary course of business or financial affairs of the corporate debtor, or that they had provided new value or were otherwise exempt, they were jointly and severally liable to make restitution of the benefits received through the preferential transactions and fraudulent trading, and were required to reverse and restore the said amounts to the corporate debtor.

List of Cases Reviewed

Prasant Chandra Rath v. Surya Kanta Satapathy [2023] 149 taxmann.com 390 (Para 8.4)
Tata Steel BSL Ltd. v. Venus Recruiter Pvt. Ltd. [2023] 146 taxmann.com 300 (Para 8.5)
Anubhav Anilkumar Aggarwal v. Rajendra Kumar Girdhar [2025] 180 taxmann.com 730 (NCLAT- New Delhi)/(2025) (Para 11.7) followed

List of Cases Referred to

Chandresh Jajoo v. Vikas Garg Vikas Garg, Liquidator of Hema Engineering Industries Ltd. [Comp. App. (AT) (Ins) No. 1713 of 2025] (para 6.9)
Aditya Kumar Tibrewal v. Om Prakash Pandey [2022] 138 taxmann.com 433 (NCLAT- New Delhi) (para 6.9)
Shekhar Arvind Parkhi Resolution Professional For Green India Building Systems and Services Private Ltd. v. Arun Shenoy [IA No.4565 of 2024] (para 6.9)
Prasant Chandra Rath v. Surya Kanta Satapathy [2023] 149 taxmann.com 390 (NCLAT- New Delhi) (para 8.4)
Jagdish Kumar Parulkar Jagdish Kumar Parulkar, Resolution Professional of Tayal Foods Ltd. v. Vinod Agarwal [2024] 167 taxmann.com 29 (NCLAT- New Delhi) (para 8.4)
Tenny Jose v. Prathap Pillai, Resolution Professional of Tenny Jose Ltd. [2023] 155 taxmann.com 178 (NCLAT – Chennai) (para 8.4)
Tata Steel BSL Ltd. v. Venus Recruiter Pvt. Ltd. [2023] 146 taxmann.com 300 (Delhi) (para 8.5)
Anuj Jain v. Axis Bank Ltd. [2020] 114 taxmann.com 656 (SC) (para 9.6)
Phoenix Arc Pvt. Ltd. v. Spade Financial Services Ltd. [2021] 124 taxmann.com 24/165 SCL 21 (SC) (para 9.6)
GVR Consulting Services Pvt. Ltd. v. Pooja Bahry (2023) ibclaw.in 261 NCLAT (para 9.6)
Chetan T. Shah v. Jayesh Vinod Valia (2023) ibclaw.in 120 NCLT (para 10.6)
Anubhav Anilkumar Aggarwal v. Rajendra Kumar Girdhar [2025] 180 taxmann.com 730 (NCLAT- New Delhi) (para 11.7)
Renuka Devi Rangaswamy v. Madhusudan Khemka [2023] 153 taxmann.com 118 (NCLAT – Chennai) (para 12.4)
Regen Powetech Pvt. Ltd. v. Wind Construction Ltd. [2022] 145 taxmann.com 383 (NCLAT – Chennai) (para 12.4)
Nalinesh Kumar Paurush v. Arvind Mittal [(CA) (AT) (Ins) No. 346 of 2024] (para 12.5).