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TMI Blog2021 (5) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... han Sponge Industries Private Limited (CIN: U27102WB1977PTC030909) under sections 43-46, 48 and 49 of the Insolvency and Bankruptcy Code, 2016 (the Code) praying as follows:- a. Issue necessary order(s)/direction(s) on the erstwhile Directors of the Corporate Debtor, jointly or severally, a sum of Rs. 8,34,55,337/- or any other amount as may be considered relevant by this Tribunal on account of above specified preferential, undervalued and fraudulent transactions. b. Issue necessary order(s)/direction(s) on the erstwhile Directors of the Corporate Debtor, jointly or severally, to pay an amount as may be considered relevant by this Tribunal on account of loss of interest on loans and advances to various parties including related parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal balance sheet of the Corporate Debtor, the Corporate Debtor owns various motor vehicles worth Rs. 7,93,703/- (Rupees seven lakh ninety-three thousand seven hundred and three only) and a piece of land at Cuttack worth Rs. 6,21,597 (Rupees six lakh twenty-one thousand five hundred ninety-seven only). However, these have not been handed over to the Applicant. The members of suspended board of directors/officers of the Corporate Debtor have informed the applicant that these are not available with them or traceable by them. 7. Mr. Agarwal also submitted that at least an amount to the tune of Rs. 8,34,55,337/- seems to have been lost by the Corporate Debtor on account of preferential, undervalued and fraudulent transaction in addition to los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of a roving enquiry without any concrete basis. 12. Mr. Mitra asserted that the applicant has filed the application without any application of mind and without forming an independent opinion as to the nature of transactions. Analysis and findings 13. We have heard the learned Counsel appearing for the Applicant as well as the Respondents and perused the records. 14. To file an application alleging preferential, undervalued and fraudulent transactions, the RP has to adhere to sections 43 and 46 of the Code read with regulation 35A of the CIRP Regulations. Section 43 and 46 envisage that the alleged transactions in favour of related parties should be within two preceding years, while in the case of non-related parties it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RP has not made any opinion nor a determination that the said transactions are avoidable transactions and, therefore, are hit by the sections cited. The RP cannot substitute the transactional auditor's view as his own. 17. Moreover, the present application has been filed only after the order for approval of resolution plan had been reserved. The resolution plan had passed muster and the same had been approved by this Adjudicating Authority vide order dated 25.03.2021. Vide the same order, the underlying CP (IB) No. 180/KB/2019 has also been disposed of. 18. In Venus Recruiters Private Limited v. Union of India & others, dated 26.11.2020 the Hon'ble Delhi High Court had occasion to consider whether such avoidance applications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 81, the Court noted that the RP cannot continue to act on behalf of the company under the title of 'former RP, as the same would be violative of the legislative intention and the statutory prescription. 20. Continuing with the analysis of the various provisions, the Hon'ble High Court took note of section 26 of the Code, 26. Applications for avoidance of transactions not to affect proceedings.- the filing of an avoidance application under clause (j) of sub-section (2) of section 25 by the resolution professional shall not affect the proceedings of the corporate insolvency resolution process and held that the provision can only be taken to mean that the activities in respect of objectionable transactions would run parallel wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en fixed for obvious reasons, it is settled law that the details of fraud have to be specifically pleaded in the application, and merely calling it by the appellation "fraudulent" will not do. 23. To summarise, the present application suffers from four major inherent errors:- (a) Firstly, sections 43 and 46 of the Code have not been adhered to; (b) Second, timelines under regulation 35A of the CIRP Regulations have not been complied with; (c) Third, the formation of opinion and making a determination under regulation 35A of the CIRP Regulations have not been made by the RP; and (d) Fourth, the application has been filed only after the approval of Resolution Plan by the CoC and order for its approval having been reserved by this Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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