High Court rules NCLT lacks jurisdiction for avoidance applications post-IBC plan approval

The High Court held that NCLT lacks jurisdiction to entertain avoidance applications under Section 43 of the IBC post-approval of the Resolution Plan. It clarified the RP's limited role post-approval and emphasized timely filing of avoidance applications before plan approval. The court highlighted that benefits of avoidance applications are for creditors pre-approval and cannot be claimed by the new management. The writ petition was deemed maintainable due to jurisdictional concerns, leading to the quashing of proceedings against the Petitioner and disposal of pending applications.

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Issues Involved:
1. Jurisdiction of NCLT to hear applications under Section 43 of the IBC after the approval of the Resolution Plan.
2. Role and authority of the Resolution Professional (RP) post-approval of the Resolution Plan.
3. Timeliness and procedural requirements for filing avoidance applications.
4. Beneficiary of adjudicated avoidance applications post-approval of the Resolution Plan.
5. Availability of alternative remedies and maintainability of the writ petition.

Detailed Analysis:

1. Jurisdiction of NCLT to Hear Applications Under Section 43 of the IBC After the Approval of the Resolution Plan:
The primary issue addressed is whether the NCLT has jurisdiction to entertain and adjudicate avoidance applications after the approval of the Resolution Plan. The judgment concludes that the NCLT's jurisdiction is limited to insolvency resolution and liquidation. Once the Resolution Plan is approved and the new management takes over, the NCLT cannot entertain applications related to avoidance of preferential transactions. The court emphasizes that the benefit of such applications is meant for the creditors of the Corporate Debtor before the approval of the Resolution Plan, not for the Corporate Debtor under its new management.

2. Role and Authority of the Resolution Professional (RP) Post-Approval of the Resolution Plan:
The court clarifies that the role of the RP is finite and administrative, ending with the approval of the Resolution Plan under Section 31 of the IBC. The RP cannot continue to act on behalf of the Corporate Debtor or file applications once the Resolution Plan is approved. The RP's mandate is to manage the affairs of the Corporate Debtor during the CIRP period, and this role ceases once the new management takes over. The court rejects the notion of a "Former RP" continuing to prosecute avoidance applications post-approval of the Resolution Plan.

3. Timeliness and Procedural Requirements for Filing Avoidance Applications:
The judgment highlights the strict timelines prescribed under the IBC and the 2016 CIRP Regulations for the RP to form an opinion, determine, and file applications regarding objectionable transactions. The RP must submit these details within the CIRP period, and such applications should be resolved before the approval of the Resolution Plan. The court notes that the avoidance application in this case was filed after the CoC had approved the Resolution Plan, and the NCLT did not pass any orders on it at the time of approval.

4. Beneficiary of Adjudicated Avoidance Applications Post-Approval of the Resolution Plan:
The court asserts that the benefit of any avoidance application is intended for the creditors of the Corporate Debtor and should be factored into the Resolution Plan. Once the Resolution Plan is approved, the benefit of such applications cannot be claimed by the new management or the Corporate Debtor in its new avatar. The court refers to the ILC Report, which states that the successful Resolution Applicant should not be permitted to file avoidance applications as it was not factored into their bid.

5. Availability of Alternative Remedies and Maintainability of the Writ Petition:
The court addresses the preliminary objection regarding the availability of an alternative remedy under Section 60 and Section 61 of the IBC. It concludes that since the issue involves the fundamental question of jurisdiction, the writ petition is maintainable. The court emphasizes that the NCLT's jurisdiction is confined to the insolvency resolution process, and any continuation beyond the approval of the Resolution Plan would be contrary to the IBC's objectives.

Conclusion:
The High Court quashes the proceedings against the Petitioner before the NCLT under the avoidance application, stating that the NCLT lacks jurisdiction to entertain such applications post-approval of the Resolution Plan. The court underscores the finite role of the RP and the necessity for certainty and timeliness in the insolvency resolution process. The writ petition is allowed, and all pending applications are disposed of accordingly.

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