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of <h1>Tribunal allows substitution application for pursuit of pending avoidance applications under Sections 43, 45, and 66.</h1> The Tribunal allowed the substitution application, permitting the Applicant to pursue pending avoidance applications under Sections 43, 45, and 66. ... Preferential/Fraudulent Transactions - Seeking amendment of the memorandum of parties - Substitution of the name of applicant - setting aside/ avoidance of certain preferential transactions carried out on behalf of the Corporate Debtor - Applications under section 43,45 66 would survive beyond conclusion of CIRP or not - maintainability of Applications under Section 66 to seek Order against other entities or organizations with whom any fraudulent business was carried out by the Corporate Debtor - authority to pursue the Applications under Sections 43,45, 66. Whether the Applications under section 43,45 66 would survive beyond conclusion of CIRP? - HELD THAT:- There is no quarrel on the fact that the issue pending before the Hon’ble Supreme Court arising from the challenge to the Order passed by NCLAT concerns only the distribution or appropriation of monetary recoveries if any under the Applications under Sections 43, 45 and or 66 concerning avoidable transactions or fraudulent business which are pending adjudication in the instant case. The said issue pending before the Hon’ble Supreme Court is neither required to be dealt with at this stage, nor does it have any direct bearing for deciding the issues of maintainability and substitution. There is no impediment in deciding the issue of maintainability and substitution. Further, the question as to whether the applications under section 43, 45 or 66 would survive beyond the conclusion of CIRP i.e. post approval of the Resolution Plan is now resolved and the issue is no more res integra. In the recent judgment dated 13.01.2023 of the division bench of Hon’ble Delhi High Court in TATA Steel BSL ltd. vs. Venus Recruiter Private Limited & Ors. [2023 (1) TMI 644 - DELHI HIGH COURT], it has been held that The phrase “arising out of” or “in relation to” as situated under Section 60(5) (c) of the Insolvency and Bankruptcy Code. Is of a wide import and it is only appropriate that such applications are heard and adjudicated by the Adjudicating Authority, i.e. the NCLT or the NCLAT, as the case maybe, notwithstanding that the CIRP has concluded and the resolution applicant has stepped into the shoes of the promoter of the erstwhile corporate debtor. Whether applications under Section 66 seeking Order against other entities or organizations with whom any fraudulent business was carried out by the corporate debtor are maintainable? - HELD THAT:- Section 66 contemplates seeking an Order to make contributions to the assets of the corporate debtor. Section 66(1) allows adjudicating authority to pass an Order against only those persons who were knowingly parties to the carrying on the business of the Corporate Debtor in a fraudulent manner. Ld. Senior Counsel Mr. Sudipto Sarkar and Ld. Counsel Mr. Mukesh Jain representing their respective Applications, while raising the issue of maintainability, submitted that the Adjudicating Authority cannot enlarge the ambit of Section 66 to pass such order also against other entities or organizations with whom such fraudulent business was carried out by the Corporate Debtor and that applications under Section 66 qua such other entities or organizations were not maintainable - There is no quarrel that for avoidance of transactions under Section 43 or 45 such other entities or organizations would be necessary parties. Therefore, the pending applications, which are under Section 66, should be considered only against the persons responsible for carrying on of the business of the Corporate Debtor in a fraudulent manner. Since section 66 can be passed against entities/persons with whom fraudulent business was carried out by the corporate debtor, applications qua them solely under Section 66 would not be maintainable. Therefore, such entities/persons shall stand deleted from the memo of parties in the applications solely under Section 66. Who shall pursue the applications under Sections 43, 45 or 66? - HELD THAT:- It is to be noted that Section 43, 45 and 66 of Insolvency & Bankruptcy Code contemplates filing of applications thereunder only by RP/liquidator as the case may be. However, there is no embargo on who shall pursue any such application filed by RP which has also been accounted for in the approved resolution plan on successful completion of CIRP process and passing of an order under Section 31. Thus, post successful completion of CIRP process and order of adjudicating authority under Section 31, the pending applications under Section 43, 45 and 66 can be pursued by any such person or entity, as may have been agreed by CoC while approving the resolution plan having provision for its effective implementation. In the instant case, the Resolution Plan is approved by the CoC and thereafter by the Adjudicating Authority and thus it contemplates that these pending Applications would be pursued by the successful Resolution Applicant at its own expense. If CoC is now asked to pursue these applications through RP, it would not only amount to foisting them with additional burden of the litigation cost not contemplated in the resolution plan but would also be contrary to the approved Resolution Plan. Hence, the Applications for substitution to pursue the pending applications by the Applicant herein under Section 43, 45 or 66 are hereby allowed. Application allowed. Issues Involved:1. Whether the Applications under Sections 43, 45, and 66 of the Insolvency and Bankruptcy Code (IBC) would survive beyond the conclusion of the Corporate Insolvency Resolution Process (CIRP).2. Whether Applications under Section 66 to seek orders against other entities or organizations with whom any fraudulent business was carried out by the Corporate Debtor are maintainable.3. Who shall pursue the Applications under Sections 43, 45, and 66.Issue-wise Detailed Analysis:1. Survival of Applications Beyond CIRP Conclusion:The Tribunal examined whether applications under Sections 43, 45, and 66 of the IBC would survive beyond the conclusion of the CIRP. It was observed that the issue is no longer res integra following the judgment by the Delhi High Court in Tata Steel BSL Ltd. vs. Venus Recruiter Private Limited & Ors. The judgment clarified that avoidance applications can survive the successful resolution of the Corporate Debtor. The Tribunal noted that the IBC and its regulations envisage that avoidance applications can be pending even beyond the submission of the Resolution Plan. The amended regulations mandate that all Resolution Plans submitted for approval must provide for the treatment of avoidance applications. Therefore, the objections on the maintainability of pending avoidance applications post-CIRP have no merit, especially when the approved Resolution Plan provides that these applications would be pursued by the successful Resolution Applicant.2. Maintainability of Applications under Section 66 Against Other Entities:The Tribunal considered whether applications under Section 66 seeking orders against other entities or organizations with whom fraudulent business was carried out by the Corporate Debtor are maintainable. It was observed that Section 66 allows the adjudicating authority to pass orders against persons who were knowingly parties to carrying on the business of the Corporate Debtor in a fraudulent manner. The Tribunal referred to the Supreme Court judgment in Usha Ananthasubramanian vs. Union of India, which clarified that powers under Section 66 cannot be utilized to rope in persons who may be the head of other organizations. Therefore, applications under Section 66 should be considered only against persons responsible for carrying on the business of the Corporate Debtor in a fraudulent manner, and applications solely under Section 66 against other entities or organizations are not maintainable. Such entities or persons shall be deleted from the memo of parties in applications solely under Section 66.3. Pursuance of Applications under Sections 43, 45, and 66:The Tribunal noted that Sections 43, 45, and 66 of the IBC contemplate the filing of applications by the Resolution Professional (RP) or liquidator. However, there is no restriction on who shall pursue such applications post-CIRP if accounted for in the approved Resolution Plan. The pending applications can be pursued by any person or entity agreed upon by the Committee of Creditors (CoC) while approving the Resolution Plan. In this case, the Resolution Plan approved by the CoC and the Adjudicating Authority contemplates that these pending applications would be pursued by the successful Resolution Applicant at its own expense. The Tribunal allowed the substitution applications, permitting the Applicant to pursue the pending applications under Sections 43, 45, and 66.Conclusion:The Tribunal allowed the substitution application I.A. No. 2852 of 2021, permitting the Applicant to pursue the pending avoidance applications under Sections 43, 45, and 66. The objections raised in I.A. No. 532 of 2022 were rejected. The Tribunal emphasized that the approved Resolution Plan provides for the effective implementation and pursuit of these applications by the successful Resolution Applicant.
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