Related Party Loan Repayment Held Preferential | NCLT

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  • Last Updated on 31 January, 2026

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preferential transaction under IBC

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.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied