2022 (8) TMI 547 - Tri - Insolvency and Bankruptcy

Seeking for direction to the Respondents to pay their dues to the Corporate Debtor, being the benefits received by them from the Corporate Debtor - related parties or not - transactions with related party is hit by Section 43 or not - Section 43 and 45 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The sale of flats at a lower price is explained stating that it is due to the disputes between the builder and the Corporate Debtor, the fact that there are disputes is not countered by the Applicant. Apart from there being no sufficient material to hold that the transactions alleged are preferential transactions. The ground raised by the Corporate Debtor with regard to the maintainability of this application needs to be considered. The contention is that the Resolution Plan is already approved and hence, the Tribunal does not have jurisdiction to entertain this Application. It is submitted that the Resolution Professional (RP) has vacated his office on 25.06.2021 and hence, he cannot pursue the present application. There is no dispute that the Resolution Plan was approved by the NCLT on 25.06.2021 and thereafter corrigendum was also approved on 10.07.2021. The contention with regard to this aspect by the Applicant is that this application as filed even before the Resolution Plan was approved by this Tribunal and hence, the said limitation does not apply to this Application. But the rationale underlying the ruling that an avoidance application cannot be entertained after the approval of the Resolution Plan by the NCLT holds good even if the avoidance application is pending prior to the approval of the Resolution Plan and is not decided till the approval of the Resolution Plan by the Tribunal. The contention that the avoidance applications would be pending at the stage when the RP files the plan was also appreciated and it was held that though at the first blush the said submission may appear attractive a closer analysis reveals that Form-H seeks to achieve what is mandated in Regulations and it is merely a format prescribed to provide the said details. Under the Scheme of IBC in so far as avoidance applications are concerned the RP has to collect the details, form an opinion, make a determination and submit the same to the NCLT within the prescribed timelines. This is independent of the various other steps which are part of the CIRP. The activities in respect of objectionable transactions which the RP has to conduct would run parallel with the other steps of the CIRP - Section 26 of IBC also cannot be read in a manner so as to mean that an Application for avoidance of transactions under Section 25(2)(j) can survive after the CIRP process. Once the CIRP process itself comes to an end an application for avoidance of transactions cannot be adjudicated. Application dismissed.

Summary

Issues Involved:
1. Preferential and undervalued transactions under Section 43 and 45 of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Ordinary course of business exception under Section 43(2) and 43(3) of IBC.
3. Jurisdiction and maintainability of the application post-approval of the Resolution Plan.

Issue-wise Detailed Analysis:

1. Preferential and Undervalued Transactions under Section 43 and 45 of IBC:
The Resolution Professional (RP) filed an application under Section 43 and 45 of the IBC seeking directions for the Respondents to pay dues to the Corporate Debtor, identified as benefits received from the Corporate Debtor. The auditor's report suggested that a sum of Rs. 13,54,55,000/- was receivable from the Respondents under these sections. The Respondents contended that the transactions were conducted in the normal course of business, especially focusing on transportation and inter-company dealings. They argued that the transactions were not preferential but necessary for the Corporate Debtor's operations.

2. Ordinary Course of Business Exception under Section 43(2) and 43(3) of IBC:
Respondents argued that the transactions were made in the ordinary course of business, which should not be considered preferential as per Section 43(2) and 43(3) of IBC. They highlighted that transportation and inter-company transactions were routine and essential for the Corporate Debtor's business. The Tribunal noted that the auditor's report alone could not be considered conclusive proof without supporting material. It emphasized that transactions made in the ordinary course of business are exempt from being classified as preferential.

3. Jurisdiction and Maintainability of the Application Post-Approval of the Resolution Plan:
The Tribunal addressed the maintainability of the application, noting that the Resolution Plan had already been approved by the NCLT on 25.06.2021. The Tribunal referred to Section 23 of IBC, which states that the RP's role is to manage the Corporate Debtor's affairs during the Resolution Process and not thereafter. The Tribunal cited the High Court of Delhi's ruling in the case of M/s. Venus Recruiters Private Limited vs. Union of India and others, which held that the RP's mandate concludes with the approval of the Resolution Plan. The Tribunal concluded that the RP could not pursue the application post-approval of the Resolution Plan, and the application could not be entertained.

Conclusion:
The Tribunal dismissed the application, stating that the RP's role does not extend beyond the approval of the Resolution Plan. It emphasized that transactions made in the ordinary course of business are not deemed preferential and that the auditor's report alone is insufficient without supporting evidence. The application was dismissed on the grounds of maintainability and lack of jurisdiction post-approval of the Resolution Plan.