NCLT Hyderabad Orders Recovery Of ₹1 Crore Paid By Personal Guarantor To Children As Preferential Transactions

The Hyderabad Bench of the National Company Law Tribunal (NCLT) has held that specific payments made by a personal guarantor to his daughter and son during the relevant look-back period constituted preferential transactions under the Insolvency and Bankruptcy Code, 2016, and directed recovery of ₹1 crore into the bankruptcy estate.

The bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri passed the order in applications arising out of the bankruptcy proceedings against Mulpuri Siva Ramakrishna, personal guarantor to Athena Chhattisgarh Power Limited.

The tribunal was dealing with pleas filed by the bankruptcy trustee seeking recovery of amounts transferred by the bankrupt to his daughter and son, arguing that the transactions gave associates preferential treatment over other creditors.

One of the transactions involved payment of ₹45 lakh to the bankrupt's daughter, Spandana Mulpuri. The respondents contended that the amount was repayment of temporary financial assistance extended to arrange a bank guarantee required for release of the guarantor's passport.

Rejecting the defence, the NCLT observed that the payment reduced the bankruptcy estate and placed the daughter in a more advantageous position than other creditors.

The Tribunal noted that the funds “would otherwise have formed part of the estate available for distribution among all creditors.” Holding the transfer to be preferential, the bench directed refund of ₹45 lakh to the bankruptcy estate within 30 days.

In a connected matter concerning payments to the bankrupt's son, Rushyant Mulpuri, the Tribunal similarly held that payments of ₹50 lakh and ₹5 lakh during the relevant period amounted to preferential transactions.

The bench observed, “Here, it is clear that the money was originally a loan from a family member and was subsequently repaid. Repaying an associate in full while the Corporate Debtor's creditors remain unpaid constitutes a clear preference. Therefore, this transaction is deemed preferential and must be reversed.”

However, the Tribunal excluded a separate transfer of ₹52.15 lakh linked to redemption proceeds of NHAI bonds, holding that the bankrupt had received the amount only in a fiduciary capacity as nominee and that it did not form part of the bankruptcy estate.