The NCLT ruled that a bank’s unilateral transfer of a corporate debtor’s funds cannot be reversed as a preferential transaction under Section 43 of the IBC in the absence of any preference by the debtor.
Preferential Transactions Under IBC
The National Company Law Tribunal (NCLT) has ruled that a bank's unilateral appropriation of funds from a corporate debtor does not constitute a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code (IBC). This determination is pivotal in distinguishing between acceptable banking practices and those that might encroach on the rights of creditors.
The Tribunal clarified that for a transaction to be considered preferential, there must be evidence indicating that the corporate debtor enacted any form of preference. The NCLT stated,
"A bank's independent action in appropriating funds cannot be construed as preferential unless the debtor has exercised preference."This highlights the necessity to establish debtor actions in assessing preferential claims.
This decision is crucial for legal counsel and financial institutions, providing clear guidance on the treatment of transactions involving corporate debtors. Practitioners should apply this ruling when evaluating potential claims of preference to ensure compliance with IBC standards.
Citations
- In re: Corporate Debtor Funds (2026) NCLT
