TMI Blog2021 (5) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the purported avoidable transactions were made. Without any such date being mentioned, no conclusion can be given on whether such alleged transactions were made within the lookback period of two years, as envisaged under sections 43 and 46 of the Code, or beyond the said period. 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 the RP in placing the transactional auditor's report for discussion at the ninth meeting of the CoC was not proper. The IBC and the regulations envisage no such role for the CoC. The CoC's role is limited to granting approval for the appointment of the auditor and fixing the fee, and not to an analysis of the transactions. The latter, being a creditor of the corporate debtor, will be an interested party. Therefore, any resolution by the CoC will have the effect of influencing the RP in determining whether the transactions fall within the boundaries of avoidance transactions fit enough to file applications before the adjudicating authority for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-group transactions were made in the Corporate Debtor Company and a detailed audit was required to ascertain transactions under sections 43, 45, 49 and 50 of the Code. The RP submitted before the CoC for appointment of a forensic auditor. The CoC approved M/s. R. Dokania Co. as the forensic auditor. 5. The RP received the report from the forensic auditor on 29.10.2020 and placed it before the CoC for discussion in its ninth meeting held on 31.10.2020. Mr. Agarwal submitted that according to the said forensic report, following transactions have been identified as preferential, undervalued and fraudulent: 6. Mr. Agarwal further submitted that as per provisional balance sheet of the Corporate Debtor, the Corporate Debtor owns various motor vehicles worth ₹ 7,93,703/- (Rupees seven lakh ninety-three thousand seven hundred and three only) and a piece of land at Cuttack worth ₹ 6,21,597 (Rupees six lakh twenty-one thousand five hundred ninety-seven only). However, these have not been handed over to the Applicant. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 should be within two preceding years, while in the case of non-related parties it should be within one year. Further, under regulation 35A the RP has to form an opinion whether there has been any avoidable transaction in the Corporate Debtor company on or before seventy-fifth day of the CIRP commencement date. Thereafter, on or before one hundred and fifteenth day of forming such opinion, the RP shall make a determination that the Corporate Debtor has been subjected to avoidable transaction. Upon making such determination the RP shall make an application before the Adjudicating Authority on or before the 135th day. 15. In the case at hand, the Applicant has failed to provide any date on which the purported avoidable transactions were made. Without any such date being mentioned, we cannot come to a conclusion whether such alleged transactions were made within the lookback period of two years, as envisaged under sections 43 and 46 of the Code, or beyond the said period. 16. Further, in regard to regulation 35A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 resolution professional or filing of an application for the purpose of prosecuting an avoidance application as a former RP is beyond the contemplation of the IBC, and that the role of the RP comes to an end after the order approving the resolution plan. In para 81, the Court noted that the RP cannot continue to act on behalf of the company under the title of 'former RP, as the same would be violative of the legislative intention and the statutory prescription. 20. Continuing with the analysis of the various provisions, the Hon'ble High Court took note of section 26 of the Code, 26. Applications for avoidance of transactions not to affect proceedings.- the filing of an avoidance application under clause (j) of sub-section (2) of section 25 by the resolution professional shall not affect the proceedings of the corporate insolvency resolution process and held that the provision can only be taken to mean that the activities in respect of objectionable transactions would run parallel with other steps of the CIRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination 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 the RP in placing the transactional auditor's report for discussion at the ninth meeting of the CoC was not proper. The IBC and the regulations envisage no such role for the CoC. The CoC's role is limited to granting approval for the appointment of the auditor and fixing the fee, and not to an analysis of the transactions. The latter, being a creditor of the corporate debtor, will be an interested party. Therefore, any resolution by the CoC will have the effect of influencing the RP in determining whether the transactions fall within the boundaries of avoidance transactions fit enough to file applications before the adjudicating authority for consideration. The RP cannot be permitted to ride piggyback on the CoC's decision. 25. The facts and circumstances of the present application point only to one inescapable conclusion: that the application has been filed by the RP only to avoid any adverse scrutiny by the IBBI. That reason is not good enough for us to overcome the four major lacunae that the present applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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