2022 (9) TMI 1009 - AT - Insolvency and Bankruptcy

Maintainability of application - Resolution plan approved - Fraudulent Trading / Wrongful Trading - Section 66 of the Insolvency Bankruptcy Code, 2016 - HELD THAT - It must be borne in mind that CIRP in the instant case had attained finality and that the Resolution Professional became functus officio and he cannot file / prefer / pursue any Application on behalf of the Company. It is only be to the new Management of the Corporate Debtor, which is responsible to file such an Application - It cannot be brushed aside that Section 23 of the Insolvency Bankruptcy Code, 2016 clearly envisages the Role of a Resolution Professional in managing the affairs of the Corporate Debtor, during the Resolution Process and not, thereafter. It is an established fact that the Interim Resolution Professionals / Resolution Professionals are required to play their part, as per the ingredients of the Insolvency Bankruptcy Code, 2016. They are to provide for a mechanism in aid to benefit of the Corporate Debtor not only during the interregnum period of Insolvency but also till the Resolution Process is completed - Suffice it for this Tribunal to make a pertinent mention that the Role of a Resolution Professional, much less of the Erstwhile Resolution Professional is that he cannot proceed any further, after the Resolution Pla is approved by the Adjudicating Authority. This Tribunal comes to an inevitable, inescapable, and irresistible conclusion that the view arrived at by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai) in dismissing the application on the basis of the Appellant / Applicant lacking locus standi to prefer the said Interlocutory Application, does not suffer from material irregularity or patent illegality in the eye of Law. Application dismissed.

Summary

Issues:
- Dismissal of the application by the Adjudicating Authority based on lack of locus standi.
- Interpretation of the Resolution Plan and its clauses regarding the right to maintain applications post-approval.
- Role and limitations of the Resolution Professional post-approval of the Resolution Plan.

Analysis:
1. The Adjudicating Authority dismissed the application under Section 66 (1) of the Insolvency and Bankruptcy Code, 2016, citing lack of locus standi post-approval of the Resolution Plan. The Authority noted that the Resolution Professional becomes functus officio after the plan's approval and cannot pursue the application further.

2. The Appellant challenged the dismissal, arguing that the Adjudicating Authority erred in upholding objections raised by a third party vendor, contending that the Resolution Plan clause allows the Applicant to maintain Section 66 applications even after plan approval. The Applicant relied on Clause 5.2.10 of the Resolution Plan to support this argument.

3. The Tribunal referred to the Insolvency Law Committee Report and Regulation 38 of the Insolvency and Bankruptcy Board of India Regulations to analyze the Resolution Plan's provisions. It highlighted that the Resolution Professional's role ceases post-approval, and any applications post-approval should be pursued by the new management of the Corporate Debtor.

4. Emphasizing Section 23 of the Insolvency and Bankruptcy Code, the Tribunal underscored the Resolution Professional's limited role during the Resolution Process and the need for the new management to handle legal proceedings post-approval.

5. The Tribunal scrutinized the Resolution Plan's clause regarding litigations and applications, concluding that the Committee of Creditors or Financial Creditors should take applications to their logical conclusion post-approval. Therefore, the Resolution Professional lacks locus standi to maintain the application after the Resolution Plan's approval.

6. In light of the above analysis, the Tribunal found no material irregularity or patent illegality in the Adjudicating Authority's decision to dismiss the application based on lack of locus standi. Consequently, the appeal was dismissed without costs.