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2023 (8) TMI 1268 - AT - Insolvency and BankruptcyApproval of Resolution plan - Validity of order of NCLT issuing direction for consideration of PUFE Transaction Applications first and adjourning the Application for approval of Resolution Plan to be heard later HELD THAT - What appears to be reason which persuaded the Adjudicating Authority to decide the PUFE Transaction Application first is that if the preferential transaction are established against the Appellant, the fate of the project will be in jeopardy. PUFE Applications are a different scheme of proceedings which has to be concluded to its logical act which shall have its consequences as contemplated in the statute. When the CoC approved the Resolution Plan and has also reiterated that Application for Resolution Plan be considered by tis 17th CoC Meeting dated 27.02.2023, there are no reason not to consider the said application merely on the ground that PUFE Applications are pending. The Adjudicating Authority is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but the Adjudicating Authority erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided. Hon ble Supreme Court in Arun Kumar Jagatramka 2021 (3) TMI 611 - SUPREME COURT had occasion to notice the object and purpose of amendment by which Section 29A was sought to be introduced in IBC and held that Section 29A was added to the Code by the Amendment Act. Owing to this provision, persons, who by their misconduct contributed to the defaults of the corporate debtor or are otherwise undesirable, are prevented from gaining or regaining control of the corporate debtor. This provision protects creditors of the company by preventing unscrupulous persons from rewarding themselves at the expense of creditors and undermining the processes laid down in the Code. The Adjudicating Authority shall proceed to consider the Resolution Plan Application and not to await the decision in PUFE Applications - Adjudicating Authority shall decide the Plan Approval Application and shall also consider the eligibility of the Resolution Applicant which is an issue raised by the Intervener (IIFL Finance Limited) - appeal disposed off.
Issues Involved:
1. Whether the Adjudicating Authority committed an error in directing for consideration of PUFE Transaction Applications first and adjourning the Application for approval of the Resolution Plan to be heard later. 2. The eligibility of the Resolution Applicant under Section 29A of IBC. 3. The procedural conduct of the Adjudicating Authority in handling the CIRP and related applications. Summary: Issue 1: Consideration of PUFE Transaction Applications First The Appellant challenged the Order dated 12th April 2023, which directed that the PUFE Transaction Application (I.A. No. 1960 of 2021) be heard first before the Plan Approval Application (I.A. No. 5385 of 2021). The Appellant contended that the Plan Approval Application, pending for over a year and a half, should be prioritized. The Adjudicating Authority reasoned that if preferential transactions are established against the Appellant, the project's fate would be in jeopardy. The Tribunal found that the legislative intent under Section 26 of the Code is clear that avoidance applications should not affect the CIRP proceedings. The Tribunal directed that the Plan Approval Application should not be deferred and can be considered simultaneously with the PUFE Applications. Issue 2: Eligibility of the Resolution Applicant The Intervener, IIFL Finance Limited, argued that the Appellant indulged in preferential, undervalued, and fraudulent transactions, making him ineligible under Section 29A(g) of IBC. The Tribunal noted that while considering the Plan Approval Application, the Adjudicating Authority could also consider the eligibility of the Resolution Applicant. The Tribunal emphasized that the Resolution Plan contemplates that the SRA would pursue the PUFE Transactions' Application and that the pendency of such applications does not prohibit the insolvency resolution process from proceeding. Issue 3: Procedural Conduct The Tribunal observed that the Adjudicating Authority had the jurisdiction to consider both the Plan Approval Application and PUFE Applications together. The Tribunal found that the Adjudicating Authority erred in observing that the consideration of the Plan Approval Application had to be deferred until after the PUFE Applications were decided. The Tribunal directed the Adjudicating Authority to proceed with the Plan Approval Application and consider the eligibility of the Resolution Applicant as raised by the Intervener. Conclusion: The Tribunal disposed of the Appeal with the following directions: 1. The Adjudicating Authority shall proceed to consider the Resolution Plan Application (I.A. No. 5385 of 2021) without awaiting the decision in PUFE Applications. 2. The Adjudicating Authority shall decide the Plan Approval Application and consider the eligibility of the Resolution Applicant. 3. The Adjudicating Authority may hear and decide the Plan Approval Application and PUFE Applications simultaneously. 4. If the Resolution Plan Application is decided, the RP may seek liberty from the Adjudicating Authority to prosecute the PUFE Applications instead of the SRA. 5. The Adjudicating Authority shall endeavor to decide the Applications at an early date.
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