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2023 (12) TMI 254 - AT - Insolvency and BankruptcyApproval of resolution plan - Challenge to Constitution of the Committee of Creditors (CoC) for the purposes of initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - HELD THAT - The statutory construct of IBC clearly puts the onerous responsibility of pursuing avoidance applications on the RP. In terms of Section 25(2)(j) of the IBC, it is the duty of the RP to file appropriate applications for avoidance of transactions which fall under the ambit of preferential, fraudulent, undervalued or extortionate transactions. When the statutory scheme clearly states that it is the duty of Resolution Professional to determine the nature of such transactions and file an appropriate application before the Adjudicating Authority, neither the Appellants-1 being home buyers themselves nor the GSC as unsuccessful resolution applicant are entitled on their own to file applications seeking avoidance of transactions. The ratio of the Jayanta case 2022 (2) TMI 305 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI cannot come to the aid of the Appellant-1 since in that case the RP without verifying the claims submitted by the Financial Creditors had allotted voting share. Further, the RP had not prepared the Information Memorandum and the CIRP proceedings were conducted without any valuation of the Corporate Debtor. Neither was there any publication of Form G inviting Expression of Interest. Moreover, in that case the CoC had rushed into liquidation of the Corporate Debtor - It cannot be commended that such unilateral addition of names in the list of suspect home buyers by the Appellants-1. Simply because the Appellants have raised the issue of avoidance application, it does not stand to reason that the approval of the resolution plan needs to be put on hold or kept in abeyance. We also find that the present resolution plan also provides that recovery under Section 43 , 45 , 50 and 66 of the IBC would be the exclusive rights of the CoC of the Corporate Debtor. Thus, no cogent grounds have been raised in either of the two appeals which would warrant any interference with the impugned orders passed by the Adjudicating Authority - appeal dismissed.
Issues Involved:
1. Constitution of the Committee of Creditors (CoC). 2. Approval of the resolution plan by the Adjudicating Authority. 3. Pendency of avoidance applications and their impact on the resolution plan. Summary: 1. Constitution of the Committee of Creditors (CoC): The appellants challenged the constitution of the CoC, alleging that certain home buyers involved in fraudulent transactions were illegitimately included. The Adjudicating Authority dismissed these challenges, noting that the appellants had not impleaded the alleged fraudulent home buyers or the Resolution Professional (RP) in their application, thereby failing to provide an opportunity for these parties to be heard. The Tribunal upheld this decision, emphasizing that any decision to remove home buyers from the CoC without hearing them would be prejudicial and violate principles of natural justice. The Tribunal also noted that the appellants had not raised objections to the CoC's constitution before the 8th CoC meeting, indicating their challenge was an afterthought following the rejection of their preferred resolution plan. 2. Approval of the resolution plan by the Adjudicating Authority: The appellants contended that the resolution plan approved by the CoC was invalid as the CoC was allegedly tainted by the inclusion of fraudulent home buyers. The Adjudicating Authority, however, found that the resolution plan met all statutory requirements and was approved by the requisite majority of home buyers. The Tribunal supported this view, citing the Supreme Court's ruling in the Jaypee case, which held that individual home buyers cannot challenge a resolution plan approved by the majority of their class. The Tribunal concluded that the resolution plan's approval was in line with the IBC's democratic principles and statutory requirements. 3. Pendency of avoidance applications and their impact on the resolution plan: The appellants argued that the resolution plan should not have been approved while avoidance applications under Sections 43, 44, and 66 of the IBC were pending. The Tribunal disagreed, stating that the IBC allows for the continuation of avoidance applications independently of the resolution process. Section 26 of the IBC explicitly provides that the pendency of avoidance applications does not affect the approval of the resolution plan. The Tribunal cited the Delhi High Court's decision in Tata Steel BSL Limited v. Venus Recruiter Private Limited and Others, which affirmed that avoidance applications can proceed irrespective of the resolution plan's finalization. Conclusion: The Tribunal dismissed both appeals, affirming the Adjudicating Authority's orders. It held that the appellants failed to present cogent grounds for interfering with the CoC's constitution or the resolution plan's approval and reiterated that avoidance applications do not impede the resolution process.
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