TaxTMI 
TaxTMI 
2023 (2) TMI 1140
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....Mr. Sudipto Sarkar ORDER Per: Coram 1. The present Application is filed by the Applicant, Piramal Capital & Housing Finance Limited (Formerly known as Dewan Housing Finance Corporation Limited, hereinafter called DHFL for the sake of brevity), seeking amendment of the memorandum of parties in I.A. No. 721 of 2021 such that the Applicant is substituted in the place of Mr. R. Subramaniakumar, who originally filed the I.A. No. 721 of 2021 filed under Sections 25(2)(j), 43, 44 of the Insolvency and Bankruptcy Code, 2016 ("the Code") in his capacity as the Administrator of the Corporate Debtor which sought setting aside/ avoidance of certain preferential transactions carried out on behalf of the Corporate Debtor. 2. A brief account of the case is as follows. The Reserve Bank of India (RBI) superseded the Board of Directors of the Corporate Debtor on 20th November 2019 owing to governance concerns and defaults by the Corporate Debtor in meeting various payment obligations and appointed Mr. R. Subramaniakumar as the Administrator of the Corporate Debtor. Subsequently, RBI filed Company Petition being C.P. (IB) No. 4258/MB/2019 for initiating Corporate Insolvency Resolution Process (CI....
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....ers passed in relation to the Avoidance Transactions shall be distributed, net of costs and expenses (including taxes), to the Financial Creditors pro rata to the extent the Financial Debt for Financial Creditors, provided that, the CoC may in its discretion adopt a different manner of distribution (which may take into account the order of priority amongst Financial Creditors as laid down in Section 53(1) of the Code) and such decision of the CoC shall be accepted by the Successful Resolution Applicant, subject to there being no change in the Total Resolution Amount;" ii. Under Section 2.13.3 of Part A of the Resolution Plan, the Successful Resolution Applicant ascribes value of INR 1 in respect of any transactions that may be avoided/set aside by this Hon'ble Tribunal in terms of Section 66 of the Code. Accordingly, any positive recovery as a result of reversal of transactions avoided or set aside by this Hon'ble Tribunal in terms of Section 66 of the Code would accrue to the sole benefit of the Successful Resolution Applicant. All the costs and expenses incurred or to be incurred towards litigation pertaining to Section 66 of the Code shall be to the account of the Successful R....
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....Respondent No. 6 themselves, who did not file proof of claim with the Administrator (since no cause of action existed against the Corporate Debtor as on the date of CIRP) and is not a member of the CoC, but which involuntarily became a contingent financial creditor of the Corporate Debtor upon the filing of the Avoidance application vis-à-vis the other Conflicted Respondent Financial Creditors whose rights as the members of the CoC are already protected and safeguarded under the Resolution Plan. The Respondent No. 6 imputes that there is an adverse disparity between the Respondent No. 6 and the Conflicted Respondent Financial Creditors as if the Avoidance Application is allowed and the impugned transaction with the Respondent No. 6 is reversed, the Conflicted Respondent Financial Creditors stand to receive a pro rata distribution whereas, the Respondent No. 6 having become an actual creditor by virtue of reversal of the impugned transaction, would apparently be left without remedy since no new claims may be recognised after the approval of the Plan. This would have the effect of depriving the Respondent No. 6 of its right to recover its legitimate dues and the Resolution Pla....
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.... 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. 13. 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. - LPAs 37 & 43 both of 2021, it has been held that- " 51. The IBC being a special statute endeavouring to ensure that the resolution process is time bound and efficient, Regulation 35A is in line with this object in attempting to make sure that an avoidance application is determined and filed at the earliest to facilitate resolution of the Corporate Debtor. The insertion of clause 3A to Regulation 35A requires tha....
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.... of the CIRP. The role of the RP vis-s-vis the resolution plan ends, and rightly so, with the successful resolution of the corporate debtor. However, the Scheme of IBC makes it clear that avoidance applications and CIRP are a separate set of proceedings. The avoidance of a transaction requires discovery of dubious transactions which are complex in nature and adjudication of these by the adjudicating authority takes time and the resolution process need not await the outcome of the exercise. Therefore, a distinction can be drawn between the role of the RP vis-s-vis CIRP on one hand and avoidance applications on the other. 84. Accordingly, reliance placed upon sections applicable in the context of CIRP cannot be extended to the RP for the purposes of pursuing avoidance applications. The RP, before passing of the approval order, filed an application for avoidance of certain transactions, discharging the statutory burden laid out under Section 25(2)(j) of the Insolvency and Bankruptcy Code. 89. Conclusion a) 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 ....
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....d by the successful Resolution Applicant and an Order under Section 31 has been passed, inter alia, after being satisfied that the resolution plan has provisions for its effective implementation. 14. Further, 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. We hereby observe 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. The....
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....hich mis-management has taken place. Likewise, Section 339 refers to any business of the company which has been carried on with intent to defraud creditors of that company. Obviously, the persons referred to in Section 339(1) as persons who are other than the parties "to the carrying on of the business in the manner aforesaid" which again refers to the business of the company which is being mismanaged and not to the business of another company or other persons. 8. This being the case, it is clear that powers under these Sections cannot possibly be utilized in order that a person who may be the head of some other organization be roped in, and his or her assets be attached. This being the case, we set aside the Impugned order passed by the NCLAT and well as the NCLT. The appeal is allowed in the aforesaid terms. 9. We may clarify that nothing stated in this judgment will have any effect insofar as the investigation conducted by CBI or the investigation by SFIO is concerned." 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. Sinc....