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The Supreme Court in its recent judgment in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Limited Etc. [Judgment dated 26.02.2020 in Civil Appeal No. 8512-8527 OF 2019] has clarified several issues including the scope and ambit for adjudication of preferential transactions, and the nature of financial debt particularly in relation to third-party mortgages amongst others. The present article seeks to encapsulate the crux of the judgment in a brief manner. The major highlights of the judgment are as follows:
I. Ambit and Scope of Preferential Transactions
In the instant case, the Supreme Court was called upon to decide whether several mortgages of parcels of land made by the corporate debtor/Jaypee Infratech Limited (JIL) to raise funds/serve as collateral security for the debt of the parent company/Jaiprakash Associates Limited (JAL) of the corporate debtor would fall within the category of preferential transactions.
Dealing with the rival submissions raised by the parties, the Supreme Court elucidated the principles governing the adjudication and determination of preferential transactions under the Insolvency and Bankruptcy Code, 2016 (Code).