Bank Transfer Not a Preferential Transaction as Corporate Debtor Did Not Authorise It

Bank Transfer Ruled Not Preferential

The NCLT ruled that a bank’s unilateral transfer of funds does not qualify as a preferential transaction within the ambit of the Insolvency and Bankruptcy Code (IBC) because the corporate debtor did not authorize the transaction. The Tribunal highlighted the importance of consent in establishing the nature of transactions leading up to insolvency.

The decision underscores that only transactions which demonstrate a clear preferential intent from the corporate debtor fall under the scrutiny of preferential transaction provisions. The Tribunal emphasized that authorization is a critical factor in determining the nature of transactions leading to insolvency claims.

This ruling is notable for legal practitioners as it delineates the boundaries of what may be considered a preferential transaction, thereby guiding future handling of similar cases in insolvency matters.