# In the matter of Birla Cotsyn (India) Limited

> NCLT judgment dated 2023-11-20. Citation: TCN-2023-NCLT-00719. This application was filed by the Liquidator of Birla Cotsyn (India) Limited, seeking certain…

- **Court:** NCLT
- **Order date:** 20 Nov 2023
- **Citation:** TCN-2023-NCLT-00719
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/birla-cotsyn-india-limited-b0d52d08

## Summary

### Background

This application was filed by the Liquidator of Birla Cotsyn (India) Limited, seeking certain transactions to be declared as preferential transactions under section 43 of the Insolvency and Bankruptcy Code, 2016. The liquidator initially treated the respondents as related parties, but later dropped this allegation based on legal advice. The application concerns transactions undertaken by the Corporate Debtor during a period when it was allegedly defaulting on loan repayments to banks, but making payments to the Respondents. The liquidator claimed that these payments were preferential as they put the Respondents in a better position than other creditors.

## Facts

Birla Cotsyn (India) Limited was incorporated in 1941 and faced financial difficulties in 2012-13, leading to its accounts being declared non-performing assets. Edelweiss Asset Reconstruction Company Limited filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, leading to the Corporate Debtor's admission into Corporate Insolvency Resolution Process (CIRP) on 20.11.2018. A forensic audit was conducted, but the Resolution Professional (RP) did not form an opinion that the corporate debtor had been subjected to any transaction covered under section 43. Liquidation was initiated on 24.09.2019, and the Applicant was appointed as the Liquidator. The liquidator identified several transactions as potentially preferential, including loans and share

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## Issues and analysis

### Issue 1: Whether the transactions undertaken by the Corporate Debtor with Rohstoffe International Private …

**Ratio:** Section 43 of the IBC defines preferential transactions, but subsection (3) excludes

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**Reasoning:** The court found that the purchase of cotton bales by the Corporate Debtor from R-1 was a

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**Interpretation:** The court interpreted the term 'ordinary course of business' by referring to

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**Application:** The court applied the ratio to the facts of the case, finding that the purchase

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## Parties

- **Judges:** LAKSHMI G…; SH. CHARANJEET…
- **Appellants:** Anil…
- **Respondents:** Birla Cotsyn…; Sona Cotsyn…

## Timeline

- **1941-09-24 — Incorpor…**: M/s Birla Cotsyn (India) Limited was…
- **2012-01-01 — Financial Diff…**: Huge losses were incurred during…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 43 — Preferential transactions and relevant time](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-43)

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