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TMI Blog2023 (8) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjudicating Authority vide its Order dated 21.09.2019 initiated 'Corporate Insolvency Resolution Process' (CIRP in short) against the Corporate Debtor-M/s. AVJ Developers (India) Pvt. Ltd. on an Application filed by the Financial Creditor-Mr.Vishal Fabrics & Ors. (ii) Corporate Debtor was involved in the real estate project of project namely AVJ Heights by the AVJ Group. Although construction of 10 towers were made but construction of one tower being incomplete, several home-buyers filed First Information Reports (FIR in short) against the Appellant alleging various offences in the State of NCT of Delhi and Uttar Pradesh. (iii) The Appellant was arrested on 24.12.2019. Bail Application of the Appellant was rejected by Allahabad High Court against which the Appellant filed SLP (Crl.) No. 175/2021 titled as "Vinay Jain Vs. State & Anr.". In the SLP (Crl) filed by the Appellant, Hon'ble Supreme Court issued notices and asked the Petitioner to file Affidavit stating the complete list of his movable and immovable assets. Hon'ble Supreme Court on 08.02.2021 after considering the Affidavit filed in response to the Court order noted the submission of the Appellant that the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work/maintenance/CC/OC/registration of all 11 towers of project including tower B as per Resolution Plan. Erstwhile RP was removed by the IBBI and by Order dated 04.10.2022, Mr. Vivek Kumar new Resolution Professional was appointed. On 06.02.2023, the Adjudicating Authority noticing the fact that erstwhile Resolution Professional has filed I.A. No. 5385 of 2021 seeking approval of the plan on the basis of MSME Certificate, an I.A. No. 1690 of 2021 is pending where application was filed under Section 43, 44, 45 and 66 of the Code. Resolution Professional was given time to get instruction from the CoC on the Application of the avoidance PUFE in relation to plan approval application. The CoC after the Order of the Hon'ble Adjudicating Authority dated 06.02.2023 considered the PUFE Transaction Application as well as Resolution Plan approval application and in 17th Meeting of CoC held on 27.02.2023 resolved that Application for approval of Resolution Plan be first considered by the Adjudicating Authority. (x) The Resolution Professional filed a compliance affidavit before the Adjudicating Authority. The Adjudicating Authority on 12th April, 2023 passed the Impugned Order directing PU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dulent transactions which need to be decided first. It is submitted that Appellant has siphoned huge fund. It is submitted that Applicant ought to have been impleaded by the Appellant. It is submitted that Appellant is not eligible to submit a Resolution Plan. MSME Certificate was obtained after commencement of the CIRP. Applicant has filed an Application before the Adjudicating Authority. Erstwhile Resolution Professional Mr. Anil Tayal was suspended by IBBI on 28th July, 2022 because of his illegal activities contrary to the provisions of IBC. It is submitted that the Adjudicating Authority has also issued notice on the PUFE Transaction Application filed by the RP. The RP on 14th April, 2023 has filed separate PUFE/Avoidance Applications bearing I.A. No. 2521/2023, I.A. No. 2386/2023, I.A. No. 2388/2023 & I.A. No. 2390/2023. 6. We have considered the submissions of parties and perused the record. 7. The question to be answered in this Appeal is as to whether the Adjudicating Authority by the Impugned Order committed error in directing for consideration of PUFE Transaction Applications first and adjourning the Application for approval of Resolution Plan to be heard later. 8. Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt observations to be noticed: "We may notice that since a Resolution Professional had been appointed, the said Resolution Professional was joined in in the present proceedings. We have perused the comprehensive affidavit of compliance filed by the appellant. The various facets are as under. Greater Noida Industrial Development Authority (GNIDA) claims certain amounts in relation to the project. It is the say of the appellant that out of the total amount towards lease rent of Rs.51.5 crores, the company had already deposited a sum of Rs.44 crores leaving a balance of Rs.7.5 crores. However, that amount is stated to have escalated into a figure of over Rs.50 crores on account of compound interest etc. and that claim was rejected by the Resolution Professional but the Greater Noida Industrial Development Authority (GNIDA) has filed an appeal before the National Company Law Tribunal (NCLT) which is pending consideration. Thus, that aspect has to be determined in those proceedings. The appellant has also stated that he is exploring the possibility of an OTS settlement with the various Banks from which loan has been availed off even though his status is of a suspended Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terim bail order dated 26.02.2021 absolute subject to the condition that the appellant will continue to abide by the undertaking/assurances given to this Court in the various proceedings and will continue to cooperate with the investigation in respect of the FIRs registered against him and on other terms and conditions as may be specified by the trial Court. The appeal accordingly stands disposed of." 11. Hon'ble Supreme Court in the aforesaid order observed that it is not possible for the Court to resolve all the issues in the present proceedings which really arose only out of grant of interim bail and by making the interim bail absolute with the condition that Appellant shall continue to abide by the undertaking given to the court in the various proceedings and shall continue to cooperate with the investigation in respect of the FIRs. 12. We are conscious that Order passed by the Hon'ble Supreme Court relates to grant of the Bail of the Appellant and Hon'ble Supreme Court has clearly observed that it is not possible to resolve all the issues raised and it is the Adjudicating Authority where Insolvency Resolution Process is pending which has to be considered and decided on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok decision to take up PUFE Transaction Application first. Following observations were made by the Adjudicating Authority in this regard: "Today, she submitted before us that the CoC resolution is that the Resolution Plan application should go ahead and the PUFE transaction applications will be taken up at the subsequent stage. We find it untenable as of now because if the PUFE transaction is taken up later and a case of the preferential transaction is established against the SRA, then the fate of this project will be in jeopardy. Therefore, we are inclined to take up the PUFE transaction application first." 15. What appears to be reason which persuaded the Adjudicating Authority to decide the PUFE Transaction Application first is that if the preferential transaction are established against the Appellant, the fate of the project will be in jeopardy. 16. Learned counsel for the Intervener i.e. IIFL Finance Limited has contended that decision of the Application of PUFE Transaction has to be first decided in event the Application is allowed the Appellant shall be ineligible under Section 29A (g) to submit a Resolution Plan, it is necessary to consider the Application PUFE firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication to await the decision of PUFE Application. PUFE Applications are a different scheme of proceedings which has to be concluded to its logical act which shall have its consequences as contemplated in the statute. When the CoC approved the Resolution Plan and has also reiterated that Application for Resolution Plan be considered by tis 17th CoC Meeting dated 27.02.2023, we do not find any reason not to consider the said application merely on the ground that PUFE Applications are pending. The Adjudicating Authority is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but the Adjudicating Authority erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided. 20. Learned Counsel for the Intervener IIFL Finance Limited has especially contended that PUFE Application has to be decided first which will dispose eligibility of the Appellant to submit a resolution plan. There can be no doubt that while considering the Plan Approval Application, it is always open for the Adjudicating Authority to consider the question of ineligibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have submitted their resolution plans in the absence of such a provision, responsibility is also being entrusted on the committee of creditors to give a reasonable period to repay overdue amounts and become eligible." (emphasis supplied) Parliament was evidently concerned over the fact that persons whose misconduct has contributed to defaults on the part of bidder companies misuse the absence of a bar on their participation in the resolution process to gain an entry. Parliament was of the view that to allow such persons to participate in the resolution process would undermine the salutary object and purpose of the Act. It was in this background that Section 29 A has now specified a list of persons who are not eligible to be resolution applicants. 39. 32 Clauses (c) and (g) of Section 29 A would operate as a bar to the promoters of JAL/JIL participating in the resolution process. Under clause (c), a person who at the time of the submission of the resolution plan has an account which has been classified a Non-Performing Asset under the guidelines of the RBI or of a financial regulator is subject to a bar on participation for a stipulated period. Under clause (g), a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Hon'ble Supreme Court in Arun Kumar Jagatramka had occasion to notice the object and purpose of amendment by which Section 29A was sought to be introduced in IBC. In paragraph 44, 45 and 46, following has been stated: "44. The Statement of Objects and Reasons accompanying the introduction of the Bill proposing the amendment dated 23 November 2017, elucidates the purpose of introducing the new provisions: "2. The provisions for insolvency resolution and liquidation of a corporate person in the Code did not restrict or bar any person from submitting a resolution plan or participating in the acquisition process of the assets of a company at the time of liquidation. Concerns have been raised that persons who, with their misconduct contributed to defaults of companies or are otherwise undesirable, may misuse this situation due to lack of prohibition or restrictions to participate in the resolution or liquidation process, and gain or regain control of the corporate debtor. This may undermine the processes laid down in the Code as the unscrupulous person would be seen to be rewarded at the expense of creditors. In addition, in order to check that the undesirable persons who may ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who by their misconduct contributed to the defaults of the corporate debtor or are otherwise undesirable, are prevented from gaining or regaining control of the corporate debtor. This provision protects creditors of the company by preventing unscrupulous persons from rewarding themselves at the expense of creditors and undermining the processes laid down in the Code." 24. Taking into consideration the overall facts and circumstances of the present case, ends of justice will be served in disposing of this Appeal with following directions: i. The Adjudicating Authority shall proceed to consider the Resolution Plan Application being I.A. No. 5385 of 2021 and not to await the decision in PUFE Applications. ii. The Adjudicating Authority shall decide the Plan Approval Application and shall also consider the eligibility of the Resolution Applicant which is an issue raised by the Intervener (IIFL Finance Limited). iii. It is open for the Adjudicating Authority to hear and decide Plan Approval Application i.e. 5385 of 2021 and PUFE Application 1690 of 2021 (I.A. No. 2521/2023, I.A. No. 2386/2023, I.A. No. 2388/2023 & I.A. No. 2390/2023), simultaneously. iv. In event, the Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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