2023 (5) TMI 663 - AT - Insolvency & Bankruptcy

Appointment of Administrator of DHFL to perform all functions of the Resolution Professional (RP) under the Code and to conduct the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor – Dewan Housing Finance Corporation Limited - Supersession of Board of Directors of Dewan Housing Finance Corporation Limited (DHFL) - avoidance of different transactions undertaken by the Corporate Debtor in the CIRP of the Corporate Debtor - section 25(2)(j), 43, 44 and 66 of IBC.

The first submission raised by the learned Counsel for the Appellant is that after completion of the CIRP, avoidance applications, which are not decided by that time, becomes infructuous and cannot be proceeded any further - HELD THAT:- The above submission of the learned Counsel for the Appellant is not acceptable on account of the statutory scheme delineated by the Code and the Regulations. Section 26 itself gives clear legislative intent that avoidance applications are different stream than the stream of insolvency resolution process - Admittedly, the liquidation process begins when no Resolution Plan is approved in CIRP. Continuance of the avoidance application is implicit by provision of Section 36, sub-section (3), sub-clause (f). What is contemplated in Section 36(3)(f) is also clear from CIRP process, which is reflected by Regulation 38(2)(d) of CIRP Regulations. Regulation 38 provides for Mandatory contents of the resolution plan.

Regulation 38(2)(d) has been inserted by Notification dated 14.06.2022. The insertion of Regulation 38(2)(d) by the above amendment clearly makes the legislative intent clear that Resolution Plan shall provide manner in which proceedings in respect of avoidance transactions will be pursued after approval of Resolution Plan - The Division Bench in Venus Recruiter Pvt. Ltd. vs. Union of India [2020 (11) TMI 850 - DELHI HIGH COURT] has clearly held that avoidance application is independent of the resolution of the Corporate Debtor and can survive the CIRP. We, thus, are of the view that argument of the Appellant that after conclusion of the CIRP by approval of the Resolution Plan, avoidance application becomes infructuous, cannot be accepted.

Another submission which has been pressed by the learned Counsel for the Appellant is that Successful Resolution Applicant cannot pursue the avoidance applications and if at all, the avoidance applications can be pursued, it could have been only by the RP and that in the present case the Administrator - HELD THAT:- The present is not a case where Successful Resolution Applicant is exercising any delegated powers of RP/ Administrator. In the present case, Resolution Plan envisages and specifically provides for pursuing of the applications by the Successful Resolution Applicant. The Successful Resolution Applicant is not exercising any delegated powers of RP, hence, the argument that RP being persona designate, has no relevance in the present case - Although, the proviso to Regulation 38(2)(d) provides that this clause shall not be applicable to Resolution Plan, which was submitted before the commencement of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022, that is prior to 14.06.2022, however, in the present case, the Resolution Plan, which was submitted prior to the date, contained specific provision for continuance of avoidance applications by Successful Resolution Applicant, which provision in the Resolution Plan cannot be said to be contrary to any provisions of the Code or the Regulations.

When Resolution Plan specifically empowers the Successful Resolution Applicant to pursue the avoidance applications, the said provisions of the Plan shall bind everyone including the erstwhile Administrator. The submission of the learned Counsel for the Appellant cannot be accepted that it is the erstwhile Administrator/ RP, who could alone, if at all, pursue the avoidance application. This argument has to be rejected in view of the specific clause, permitting the Successful Resolution Applicant to pursue the application.

Another argument advanced by the learned Counsel for the Appellant is that two applications filed by the Administrator were after Resolution Plan was voted on 15.01.2021 - submission of the Appellant is that any avoidance application, which has been filed subsequent to approval of the Plan cannot be pursued and the order of the Adjudicating Authority substituting the Piramal in those application deserves to be set aside - HELD THAT:- The timeline for filing avoidance application under Regulation 35A have been held to be not mandatory, however, the applications have to be filed in a reasonable time and any avoidance application, which is filed with inordinate delay can be refused to be entertained by the Adjudicating Authority. The submission which has been pressed by the learned Counsel for the Appellant is that avoidance applications, which were filed after approval of the Resolution Plan by the CoC, could not have been entertained. In the Code and the Regulations, there are no such provisions, which indicate that avoidance application filed after approval of the Plan by the CoC is to be rejected or not. It depends on the facts of each case and circumstances as to whether any application filed after approval of the Resolution Plan by the CoC can be considered or not. In the present case, the Resolution Plan has noted the pending avoidance applications.

The present Appeals have been filed by the Ex-Promoter of the Dewan Housing Finance Corporation Finance Limited and allegation regarding fraudulent transactions were against the Ex-Promoters including the Appellant. The object of continuing the avoidance applications, even after the CIRP is the discovery of dubious transactions and permitting such preferential undervalued and fraudulent transactions to continue, will be depriving the benefit of such transactions to the creditors, which is not the intent of the statutory scheme.

The impugned order has rightly permitted the Piramal – Successful Resolution Applicant to pursue the avoidance applications, which were filed by the erstwhile Administrator and were pending before the Adjudicating Authority - there are no error in the impugned orders passed by the Adjudicating Authority permitting the Piramal to pursue the applications and rejecting the applications filed by the Appellant and other Applicants to reject such applications - appeal dismissed.