In the cases of Star India Private Limited v. Advance Multisystem Broadband Communications Limited (I.A. No. 841/KB/2020) and Advance Multisystem Broadband Communications Limited v. IndusInd Media and Communications Limited and Others (I.A. No. 1288/KB/2020), the National Company Law Tribunal, Kolkata ("NCLT") held that a transaction cannot be claimed to be preferential or fraudulent.
In the instant case titled Star India Private Limited v. Advance Multisystem Broadband Communications Limited, the issue raised for clarification before the NCLT was:
Whether the Respondent No. 1's sale of its shareholding was dishonest, advantageous or avoidable?
With regard to this issue, since the applicant requested a forensic audit in his plea, the NCLT noted that the applicant himself was unsure as to whether the contested transactions were incorrect as claimed. The NCLT held that a resolution professional could only submit an application under Section 25(2)(j) of the Code if they were confident that the specific transaction was avoidable, fraudulent or undervalued. In accordance with Section 25(2)(d), it is also the resolution professional's responsibility to employ the services of accountants, attorneys, and other specialists as necessary to conduct a forensic audit and determine if the transaction might have been avoided.
The NCLT noted that the applicant had not complied with the standards outlined in the Anuj Jain Case and that a composite application had been submitted without a thorough investigation or the articulation of all relevant facts for the transactions that should have been covered by Sections 45, 46, 47 and 66 of the Code. It was noted that the applicant generalised the Code's requirements and vaguely asserted the facts against Respondent No. 1.
The NCLT categorically stated that,
“Seen in the background of law laid down by Hon'ble Supreme Court of India, the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different, we find RP has grossly erred in not considering these aspects while filing this application. And instead has resorted to blame game making allegations against the suspended board of Directors of the Corporate Debtor/respondents and other respondents without conducting any enquiry as stipulated and observed by Hon’ble Supreme Court."