NCLAT | Goods Returned at Loss to CD Held Undervalued u/s 45 IBC

Case Details: Greenfield Overseas v. Anil Goel - [2025] 176 taxmann.com 919 (NCL-AT) 

Judiciary and Counsel Details

• Rakesh  Kumar Jain and Mohammad Faiz Alam Khan, Judicial Member
• Shivam Kukreja, Adv. for the Appellant.

  Ms. Shalya Agarwal and Sandeep Vij, Advs. for the Respondent.
  Fact of the Case

  In the instant case, CIRP was initiated against the corporate debtor. The appellant, engaged in the trading of steel products, purchased scraps of mild steel and trimming by-products from the corporate debtor, generated as scrap during the steel manufacturing process, at a gross value.
  On examination of tally books, balance sheets and other records, the liquidator found that the corporate debtor had purchased the same items from the appellants and later returned them to the appellants at heavy discounts, causing a loss to the corporate debtor.
  The liquidator thus, filed an application under section 45 of the IBC to declare such transactions as void. The Adjudicating Authority, by the impugned order, held that purchase returns at heavily discounted prices constituted undervalued transactions.
  It was noted that CIRP commenced on 28-4-2017; thus, the relevant look-back period had to be between 28-4-2016 and 28-4-2017. Further, since the impugned transactions, which occurred between 1-4-2016 and 27-4-2017, fell outside the ambit of the look-back period stipulated under the Code, the same could not be considered as undervalued transactions.
  The NCLAT observed that since appellants had failed to substantiate their claims of fresh purchases, and forensic auditor clearly brought out that same material was purchased by corporate debtor from appellants at much higher prices and were returned at substantial reduced prices, causing losses to the corporate debtor, transactions were not genuine and were not conducted in ordinary course of business.

  NCLAT Held

  The NCLAT held that the intention of section 45 of the IBC is to reverse effect of such transfers and bring back assets or their value back to the corporate debtor’s estate for benefit of all creditors and, thus, third parties, like appellants in instant case, became beneficiary of undervalued transactions and same could be proceeded against under section 45 of the IBC.
  Thus, on all accounts, except impugned transactions beyond the stipulated look-back period as per the Code, appeals failed and stood dismissed.

  List Of Cases Reviewed

• Order of NCLT- Mumbai in MA 1265 of 2018 in C. P. (IB) NO. 724/MB/2017, dated 30.04.2024 (para 53) Modified

List Of Cases Referred To

• Sahyog Infrastructure Pvt. Ltd. v. Mrs. Anju Agarwal [Company Appeal (AT)(Ins) No.1367 of 2022, dated 9-5-2023] (para 15),
• Usha Ananthasubramanian v. Union of India [2020] 117 taxmann.com 158/160 SCL 693 (SC) (para 16),
• Gluckrich Capital Pvt. Ltd. v State of West Bengal (2023) ibclaw.in 75 SC (para 16),
• Anuj Jain v. Axis Bank Ltd. [2020] 114 taxmann.com 656 (SC) (para 18),
• K.K. Verma v. Union of India AIR 1954 SC 476 (para 24),
• State of Uttar Pradesh v. Naresh (1981) 3 SCC 309 (para 25),
• Deepak Tandon v. Rajesh Kumar Gupta [Civil Appeal Nos. 1537-1538 of 2019, dated 7-2-2019] (para 25),
• Swiss Ribbons Pvt. Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 36),
•  Gopal Krishna Shetty v. State Bank of India [Civil Appeal No.1499 of 2020] (para 39),
• Sreevatsa Industries Ltd. v. Bank of India [Company Appeal (AT) (Ins) No. 363 of 2020] (para 39),
•  Crisll Ltd. v. Venkatesh & Co. [Company Appeal (AT) (Ins) No. 34 of 2020] (para 39) and
• International Assets Reconstruction Company Ltd. v. Shriram Transport Finance Co. Ltd. [Company Appeal (AT) (Ins) No. 662 of 2020] (para 39).