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TMI Blog2021 (3) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... sought several adjournments and which is beyond the approval of Resolution Plan approval on 28.12.2018. A perusal of the chronology of events would show that the avoidance application in this case was filed before the CoC had approved the Resolution Plan and almost end of the submissions on the Resolution Plan being heard by the NCLT. The NCLT did not pass any orders on the avoidance application before or at the time of approval of the Resolution Plan - This Tribunal is of an opinion that an avoidance application for any preferential transaction is meant to give some benefit to the creditors of the Corporate Debtor. The benefit is not meant for the Corporate Debtor in its new form, after the approval of the Resolution Plan. This is clear from a perusal of Section 44 of the IBC, which sets out the kind of orders which can be passed by the NCLT in case of preferential transactions. The benefit of these orders would be for the Corporate Debtor, prior to approval of the Resolution Plan. Any property transferred or sum acquired in an order passed in respect of a preferential transaction would have to form part of the final Resolution Plan. The Resolution Plan would have to take into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radeep before the NCLT, Chennai Bench filing C.P. No.(IB) No. 689 of 2017 (C.B). On 5.01.2018 and appointed Mr. C Ramasubramaniam as the Interim Resolution Professional. A public announcement was made in accordance with Section 15 of the IBC, inviting claims against the Corporate Debtor. The Committee of Creditors (hereinafter CoC ) was thereafter constituted. By order dated 03.04.2018 in CA/157/IB/2018, NCLT Chennai Bench appointed Mr. Ravindra Belayur i.e., the applicant herein as the Resolution Professional (hereinafter, RP ) for the Corporate Debtor. 3. In the 7th meeting of the Committee of Creditors held on 12.9.2018 a Resolution plan submitted by M/s Acme Chem Limited has been approved. Accordingly, the Resolution Professional has filed an application MA No. 515 of 2018 under Section 30 (6) of the Insolvency Bankruptcy Code, 2016 for approval of Resolution Plan before the NCLT Bench which was approved vide order dated 23.01.2019. Pursuant to the approval of the Resolution Plan the applicant had handed over the assets belonging to the Corporate Debtor. 4. The applicant submitted that the payment aggregating to ₹ 9.49 Crores have been determined to be preferent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the 1st Respondent. The Applicant, during the course of inspection of the books of accounts of the Corporate Debtor found that a sum of ₹ 2.13 Crores had been paid towards unsecured loans received from Shri. Thomas, the 2nd Respondent during the period 31.3.2016 to 10.3.2017. The payments made to related party amounts to preferential transaction and these payments have put the secured creditor and workmen in a disadvantageous position in terms of non-payment of this large amount to them. 8. Regarding point no. (iii), the applicant stated that the 3rd Respondent is a company incorporated under the Companies Act and is a related party to the Corporate Debtor under the Insolvency and Bankruptcy Code. An examination of the books of accounts of the Corporate Debtor by the Applicant revealed that a sum of ₹ 6.11 crores between 31.01.2016 and 31.3.2017 had been made to the 3rd Respondent-Merchem India Pvt. Ltd., towards repayment of unsecured loans This amounts to preferential transaction. The payments made to related party amounts to preferential transaction and these payments have put the secured creditor and workmen in a disadvantageous position in terms of non-paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 15.01.2018. The applicant issued a notice on 13.06.2018 for the first time questioning the transactions and thereafter filed the present application dated 11.09.2018 during the end of September. Neither the Sub-Regulations of Regulation 35A have been complied with nor that the application is barred by limitation. Regulation 35A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as substituted by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018 (w.e.f. 04.07.2018), provides the timelines within which preferential and other transactions are to be determined and filed by the RP. The said Regulation is also reiterated in Regulation 40A that deals with the model time-line for Corporate Insolvency Resolution Process. The Applicant has severely flouted the timelines prescribed under the Regulation. The Application has been filed after 255 days from the Commencement of CIRP which ought to have been filed within 135 days from the date of commencement of CIRP. In the light of the above the application is per se barred by limitation as per the Regulation. 14. During the course of argument, the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution of the proceeds of assets of the Corporate Debtor occurs in Liquidation as per Section 53 and hence, the proceeds of any avoidance transactions ought to benefit only the creditors of the Corporate Debtor, and no one else. Since the creditors have been fully and finally settled by the Resolution Applicant and Corporate Debtor taken over with a clean slate, the present Applicant is not maintainable 17. With regards to the allegation raised by the applicant in the application, the learned counsel for the Respondents submitted that the transactions of the Corporate Debtor with Respondents are in the undistinguished common flow of business/ ordinary course of business as elucidated in Section 43 (3) of IB Code. All the transactions had taken place during the CDR and were monitored by the banks. The Applicant Resolution Professional cannot now take a contrary stand and plead that those transactions relating to repayment to Respondents in the ordinary course of business are preferential. 18. The learned counsel further stated that the Applicant in prayer 'b' to the Application has pleaded to set off the preferential payments as against the amounts due to the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a distribution of assets being made in accordance with Section 53. (3) For the purposes of sub-section (2), a preference shall not include the following transfers- (a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee; (b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that- (i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property: Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor. Explanation. - For the purpose of sub-section (3) of this section, new value means money or its worth in goods, services, or new credit, or release by the transferee of property previously transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meant for the Corporate Debtor in its new form, after the approval of the Resolution Plan. This is clear from a perusal of Section 44 of the IBC, which sets out the kind of orders which can be passed by the NCLT in case of preferential transactions. The benefit of these orders would be for the Corporate Debtor, prior to approval of the Resolution Plan. Any property transferred or sum acquired in an order passed in respect of a preferential transaction would have to form part of the final Resolution Plan. The Resolution Plan would have to take into consideration such amounts and benefits which can be given to the Corporate Debtor for the benefit of the CoC. The benefit of an avoidance application is not meant for the company, after the Resolution Plan is considered by the CoC and approved by the NCLT. After the approval of the Resolution Plan and the new management taking over the Corporate Debtor, no proceedings remain pending before the NCLT, except issues relating to the Resolution Plan itself, as permitted under Section 60. 26. The Hon ble Supreme Court of India in Committee of Creditors of Essar Steel India Ltd. through Authorised Signatory v. Satish Kumar Gupta [Civil Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under section 34 is passed by the Adjudicating Authority.] (2) The resolution professional shall exercise powers and perform duties as are vested or conferred on the interim resolution professional under this Chapter. (3) In case of any appointment of a resolution professional under sub-sections (4) of section 22, the interim resolution professional shall provide all the information, documents and records pertaining to the corporate debtor in his possession and knowledge to the resolution professional. 28. Reliance was further placed on the judgement of Hon bleDelhi High Court, New Delhi in the matter of M/S Venus Recruiters Private Limited V. Union Of India And Ors. passed on 26.03.2020, submitted by the Respondents herein. The relevant portion of the judgement are extracted below: 77. There is a START line and FINISH line for the Resolution process. Section 23 clearly stipulates that the role of the RP is to `manage the affairs of the Corporate Debtor `during the resolution process and NOT thereafter. In fact, until the enactment of the proviso to Section 23, which was introduced with effect from 28th December, 2019, the RP s mandate concluded with the CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC. They are meant to provide a smooth transition for the Corporate Debtor during an insolvency period till the resolution process is over. Their continuation beyond the closure of the resolution process would in effect mean an interference in the conduct and management of the company, which is now having its own independent Board, managerial personnel, etc. The RP s role cannot continue once the Resolution Plan is approved and the successful Resolution Applicant takes charge of the Corporate Debtor. xxxxxxxxxxxxxxxx 88. Moreover, if an avoidance application for preferential transactions is permitted to be adjudicated beyond the period after the Resolution Plan is approved, in effect, the NCLT would be stepping into the shoes of the new management to decide what is good or bad for the Company. Once the Plan is approved and the new management takes over, it is completely up to the new management to decide whether to continue a transaction or agreement or not. Thus, if the CoC or the RP are of the view that there are any transactions which are objectionable in nature, the order in respect thereof would have to be passed prior to the approval of the Resolution Plan. 89. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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