Tribunal allows substitution application for pursuit of pending avoidance applications under Sections 43, 45, and 66.

The Tribunal allowed the substitution application, permitting the Applicant to pursue pending avoidance applications under Sections 43, 45, and 66. Objections raised were rejected, emphasizing the approved Resolution Plan's provision for effective implementation and pursuit of these applications by the successful Resolution Applicant.

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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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