PQR Manufacturing Limited, a company engaged in the production of industrial equipment, defaulted on its financial obligations and insolvency proceedings were initiated against it before the National Company Law Tribunal

Yes, the resolution professional can challenge such a transaction before the NCLT as an undervalued transaction under Sections 45 to 49 of IBC. From the given case, it can be understood that the transfer of warehouse property to a promoter connected entity at a price substantially lower than its market value was made to divert the assets from corporate debtor prior to insolvency. Section 45(1) of the IBC provides that if the liquidator or the resolution professional, as the case may be, on an examination of the transactions of the corporate debtor referred to in sub-section (2) determines that certain transactions were made during the relevant period under section 46, which were undervalued, he shall make an application to the Adjudicating Authority to declare such transactions as void and reverse the effect of such transaction. Section 45(2) of the IBC provides that a transaction shall be considered undervalued where the corporate debtor (a) makes a gift to a person; or (b) enters into a transaction with a person which involves the transfer of one or more assets by the corporate debtor for a consideration the value of which is significantly less than the value of the consideration provided by the corporate debtor, and such transaction has not taken place in the ordinary course of business of the corporate debtor. As specified in Section 46 of the IBC, in an application to NCLT for avoiding undervalue transaction, the resolution professional, shall demonstrate that – such transaction was made with any person within the period of one year preceding the insolvency commencement date; or such transaction was made with a related party within the period of two years preceding the insolvency commencement date; Since the transferee is a promoter-connected entity (related party), the Resolution Professional can challenge the transaction if it was entered into within two years prior to the insolvency commencement date. The Adjudicating Authority may require an independent expert to assess evidence relating to the value of the said transactions. Section 48 of IBC empowers the adjudicating authority to issue order in case of undervalued transactions as under- require any property transferred as part of the transaction, to be vested in the corporate debtor; release or discharge (in whole or in part) any security interest granted by the corporate debtor; require any person to pay such sums, in respect of benefits received by such person, to the liquidator or the resolution professional as the case may be, as the Adjudicating Authority may direct; or require the payment of such consideration for the transaction as may be determined by an independent expert. Section 49 of the IBC further provides where the corporate debtor has entered into an undervalued transaction as referred to in section 45(2) and the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such corporate debtor for keeping assets of the corporate debtor beyond the reach of any person who is entitled to make a claim against the corporate debtor; or in order to adversely affect the interests of such a person in relation to the claim, the Adjudicating Authority shall make an order- restoring the position as it existed before such transaction as if the transaction had not been entered into; and protecting the interests of persons who are victims of such transactions: However, an order under this section- shall not affect any interest in property which was acquired from a person other than the corporate debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or affect any interest deriving from such an interest, and shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.