TaxTMI 
TaxTMI 
2021 (5) TMI 322
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.... 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. Submissions made by Mr. Pranay Agarwal, learned Counsel appearing on behalf of the Applicant 3. Mr. Pranay Agarwal, learned Counsel appearing for the applicant submitted that the underlying CP (IB) No. 180/KB/2019 was filed by ATO (I) Ltd., the Financial Creditor, under section 7 of the Code against Gandhamardhan Sponge Industries Private, the Corporate Debtor. The Corporate Debtor was admitted into CIRP on 04.10.2019 by this Adjudicating Authority. The Applicant herein was appointed as the Interim Resolution Professional of the said Corporate Debtor vide the said order; he was confirmed as the Resolution Professional (RP) in the first Committee of Creditors (CoC) meeting held on 01.11.2019. 4. On 23.12.2019, during the fourth adjourned CoC meeting, the RP informed the CoC that it has been observed that certain inter-gro....
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....n filed after the application under section 31 of the Code for approval of the Resolution plan had been filed and the same has been reserved for orders by this Adjudicating Authority. It has been done only to avoid adverse scrutiny against the RP by the IBBI, Mr. Mitra submitted. 11. Mr. Mitra further submitted that no grounds to challenge the transactions or affairs of the company under sections 43-46, 48 and 49 have been made out in the application. The allegations are speculative and the application is essentially in the 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 s....
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....in respect of the corporate debtor had been approved. The Hon'ble High Court analysed the Code and the Regulations framed thereunder. 19. It noted the specific timeframe given in regulation 35A of the CIRP Regulations and also that regulation 39 required the RP to place before the CoC all resolution plans along with the details of preferential transactions under section 43, undervalued transactions under section 45, extortionate credit transactions under section 50 and fraudulent transactions under section 66, along with orders, if any, of the adjudicating authority in respect of such transactions (para 74 of the judgment). In para 76, the Court noted that details of avoidance transactions ought to be available before the Adjudicating Authority at the time of approval of the Resolution Plan. In para 77, the Court specifically noted that an RP cannot continue to file applications in an indefinite manner even after the approval of a resolution plan. In para 80, the Court noted that there is a start line and a finish line to the resolution process, and it cannot extend beyond the order passed under section 31. It further noted in the same para that the continuation of a resolut....
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....ase of an application under section 66 in respect of a fraudulent transaction, no lookback period has been 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 Adjudicating Authority. 24. While on the subject, we also hold that the determination to be made by the RP in terms of regulation 35A(2) is an independent determination to be made on the basis of the transactional auditor's report, and the CoC has no role to play in this. Therefore, to that extent, the act of t....