Tribunal lacks jurisdiction post-approval of Resolution Plan for avoidance applications

The Tribunal dismissed the application TMA/42/KOB/2019 in CP/689/IB/2017 (C.B) on the grounds that it lacked jurisdiction to entertain avoidance applications post-approval of the Resolution Plan. The Resolution Professional's role does not extend beyond the Corporate Insolvency Resolution Process (CIRP) period. The application was filed before the Committee of Creditors approved the Resolution Plan but was not adjudicated before the plan's approval, leading to the dismissal of the application.

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Issues Involved:
1. Allegations of preferential, undervalued, and fraudulent transactions.
2. Barred by limitation as per IBBI Regulations.
3. Role and jurisdiction of the Resolution Professional (RP) after approval of the Resolution Plan.
4. Whether avoidance applications can survive post-resolution plan approval.

Issue-wise Detailed Analysis:

1. Allegations of Preferential, Undervalued, and Fraudulent Transactions:
The applicant, the Resolution Professional (RP) of the Corporate Debtor, filed an application under Sections 43(1) and 66 of the Insolvency and Bankruptcy Code (IBC), alleging that Respondents 2 to 4 engaged in preferential, undervalued, and fraudulent transactions. The RP identified payments totaling Rs. 9.49 Crores as preferential and fraudulent. These transactions were categorized into four heads:
- Illegal adjustment in favor of a related party.
- Repayment of unsecured loans.
- Payment to related parties over other creditors.
- Sale of assets at a lesser value.

The RP argued that these transactions were not in the ordinary course of business and were intended to defraud other creditors, thus requiring the respondents to contribute to the Corporate Debtor’s assets.

2. Barred by Limitation as per IBBI Regulations:
Respondents contended that the application was barred by limitation under Regulation 35A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which prescribes timelines for determining and filing preferential and other transactions. The application was filed after 255 days from the commencement of CIRP, exceeding the 135 days limit. The respondents argued that the RP had flouted these timelines, rendering the application time-barred.

3. Role and Jurisdiction of the RP after Approval of the Resolution Plan:
The respondents argued that under the IBC, once the CIRP concludes, the RP can no longer file or pursue applications on behalf of the Corporate Debtor. They cited the Supreme Court decision in Interim Resolution Professional V. Axis Bank Ltd. and the Delhi High Court decision in Venus Recruiters Pvt. Ltd. Vs UOI & Ors., which held that the RP’s role is finite and cannot extend beyond the approval of the Resolution Plan. The RP’s mandate ends with the approval of the Resolution Plan, and any avoidance applications should be adjudicated before this approval.

4. Whether Avoidance Applications can Survive Post-Resolution Plan Approval:
The Tribunal examined whether an application under Section 43 for avoidance of preferential transactions can survive beyond the resolution process. It concluded that the benefit of such applications is meant for creditors before the approval of the Resolution Plan and not for the Corporate Debtor in its new form. The Tribunal referenced Section 44 of the IBC, which outlines the orders that can be passed in case of preferential transactions, benefiting the Corporate Debtor prior to the Resolution Plan’s approval. Once the Resolution Plan is approved and new management takes over, no proceedings remain pending except issues related to the Resolution Plan itself.

Findings:
The Tribunal found that the avoidance application was filed before the CoC approved the Resolution Plan but was not adjudicated before the plan’s approval. The Tribunal held that after the approval of the Resolution Plan, it has no jurisdiction to entertain and decide avoidance applications for a Corporate Debtor under new management. The role of the RP is limited to managing the Corporate Debtor during the CIRP and not beyond. The Tribunal dismissed the application, stating that the RP cannot act on behalf of the Corporate Debtor after the Resolution Plan’s approval.

Conclusion:
The application TMA/42/KOB/2019 in CP/689/IB/2017 (C.B) was dismissed on the grounds that the Tribunal lacks jurisdiction to entertain avoidance applications post-approval of the Resolution Plan, and the RP's role does not extend beyond the CIRP period.

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