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2021 (1) TMI 313 - HC - Insolvency and BankruptcyDirection to Respondent No.1 to pass directions, guidelines or regulations under Section 196 of the Code - petitioner submits that in the present case applications having been filed against the promoters of the respondent nos. 5 and 6 under Section 25(2)(j) of the Code further CIRP proceedings of such companies must not be proceeded with - HELD THAT - The provisions, especially Section 26 of the Code would clearly show that it is for the learned NCLT to consider the effect of the applications under Section 25(2)(j) and Section 29A of the Code at an appropriate stage of consideration of the Resolution Plan, if not earlier. The Resolution Professional shall, at the time of submitting the Resolution Plan for approval of the learned NCLT, disclose details of applications filed under Section 25(2)(j) of the Act to the learned NCLT, for the learned NCLT to take an informed decision on the Resolution Plan. It is thus clear that it would be for the learned NCLT to consider the applications under Section 25(2)(j), if pending, and the effect thereof, especially in light of Section 29A of the Act, on the Resolution Plan submitted for its approval under Section 30 of the Code - as admittedly the proceedings with respect to respondent nos.5 and 6 are still pending before the learned National Company Law Tribunal, the present petition at this stage cannot be entertained. Petition dismissed.
Issues:
Prayer for writ of mandamus directing Respondent No.1 to pass directions regarding Avoidance Applications, Resolution Plans, and Committee of Creditors under the Insolvency and Bankruptcy Code. Premature petition challenging CIRP proceedings of Respondent Nos. 5 and 6. Interpretation of Section 26 of the Code in relation to applications under Section 25(2)(j) and Section 29A. Analysis: The petitioner sought relief through a writ of mandamus directing Respondent No.1 to pass guidelines under Section 196 of the Code. The petitioner argued that Avoidance Applications should be addressed before allowing Promoters to file Resolution Plans under Section 29A(g) of the Code. The court considered the judgment in Venus Recruiters Pvt. Ltd. vs. Union of India, highlighting that Resolution Professionals must disclose applications under Section 25(2)(j) of the Code when submitting Resolution Plans for approval. The court emphasized that the National Company Law Tribunal (NCLT) should assess such applications and their impact on Resolution Plans, especially concerning Section 29A of the Code. The respondent contended that the NCLT should determine the procedure for considering applications under Section 25(2)(j) and implementing Section 29A. The court noted that the CIRP proceedings for Respondent Nos. 5 and 6 were stayed separately. It was held that Section 26 of the Code empowers the NCLT to evaluate applications under Section 25(2)(j) and Section 29A during the Resolution Plan assessment or earlier. The court cited the purpose of timely disclosure of objectionable transactions in Resolution Plans and emphasized that such applications should not extend beyond the CIRP process. The court dismissed the petition as premature due to ongoing proceedings before the NCLT for Respondent Nos. 5 and 6. It was ruled that the NCLT should assess applications under Section 25(2)(j) and their impact on Resolution Plans in accordance with Section 29A. The petitioner was granted the liberty to pursue appropriate legal action at the suitable stage. No costs were awarded in the matter.
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