Bank’s Unilateral Transfer Does Not Constitute Preferential Transaction

Bank’s Unilateral Transfer of Corporate Debtor’s Funds Does Not Constitute Preferential Transaction under IBC

The NCLT determined that a bank's unilateral transfer of a corporate debtor's funds cannot be avoided under Section 43 of the IBC, indicating that there must be an affirmative act of preference by the debtor for any transaction to be classified as preferential.

This ruling reinforces the principle that the mere appropriation of funds by creditors, without evidence of preference from the debtor, does not constitute grounds for avoidance claims. It delineates the responsibilities and rights of both parties during insolvency proceedings.

The implications of this decision for practitioners are significant as it affirms that the burden lies with claimants to substantiate claims of preference, requiring strong evidence that a debtor engaged in preferential acts.