Resolution Professional Cannot Prosecute Preferential Transactions After Approval Of Resolution Plan: NCLT Kolkata

The National Company Law Tribunal (NCLT) Kolkata bench comprising of Mr. V K Rajasekhar ( Member, Judicial)and Balraj Joshi (Member Technical)held that an application for preferential transactions cannot be pursued either by the erstwhile Resolution Professional (RP) or the new Management of the Corporate Debtor after the approval of the Resolution Plan by NCLT. NCLT was hearing the application filed under Section 43 of the Insolvency and Bankruptcy Code by the Resolution Professional of Amrit Fresh Pvt. Ltd (Corporate Debtor/Amrit Fresh). Brief Facts The Corporate Insolvency Resolution Process (CIRP) of the corporate debtor was initiated by NCLT Kolkata vide its order dated 10.07.2019 and the interim resolution professional was confirmed as Resolution Professional by the Committee of Creditors (COC) on 08.08.2019. Resolution Professional received the transaction audit report on 26.06.2020 wherein certain preferential transactions were reported by the auditor and accordingly, on 01.08.2020, the Resolution Professional filed the application under Section 43 of the code. An application for approval of resolution plan was also filed by the Resolution Profession on 03.08.2020. Contentions Of Resolution Professional It was submitted by the Resolution Professional that due to non-cooperation of the suspended directors of Amrit Fresh and non-availability of books of accounts of Corporate Debtor, the RP was unable to form an opinion and determination on preferential transactions within 75 days of CIRP. It was further submitted by RP that he was of firm opinion that Corporate Debtor has given preference in some financial transactions however, he only received the transactional audit report on 26.06.2020 due to covid 19 lockdown and therefore was unable to file the application within the stipulated timeframe. Contentions On Behalf Of The Respondent Companies It was contended on behalf of the respondents that the present application is an abuse of process of law as the resolution plan of the corporate debtor has already been approved by NCLT on 24.12.2020 and the applicant ceased to be a Resolution Professional and therefore, the present application is not maintainable. It was further contended that the purpose of avoidance application is to see that the orders passed if any would endure to the Corporate Debtor prior to the approval of the resolution plan by COC and NCLT. Analysis And Findings Of NCLT NCLT held that it is incumbent upon the Resolution Professional to adhere to Section 43 read with Regulation 35A of the IBBI (Insolvency Resolution Process for the Corporate Debtor Persons) Regulations, 2016 which mandates that the RP has to form an opinion whether the Corporate Debtor has been subjected to preferential transaction within or on seventy fifth (75th) day of the CIRP commencement date. Thereafter, the RP has to make a determination and file an application before one hundred and thirty fifth (135th) day. NCLT observed that the RP did not comply with the stipulated timeframe but that delay can be condoned in view of the COVID-19 lockdown. NCLT further relied on the case of Anuj Jain versus Axis Bank, (2020) 8 SCC 401 wherein Supreme Court laid down the detailed approach that a RP is expected to take in matter of avoidance transactions. However, NCLT further noted that the resolution plan of the Amrit Fresh was approved on 24.12.2020 and the company has been handed over to new management and the office of RP become functus officio. NCLT further relied on the case of Venus Recruiters Private Limited versus Union of India, 2020 SCC OnLine Del 1479 wherein Delhi High Court held that RP cannot wear the hat of a former RP. In the light of the above, NCLT dismissed the application filed by the Resolution Professional and held that "35…Hence, the application for preferential transactions cannot be pursued by the erstwhile Resolution Professional nor can the new Management of the Corporate Debtor pursue the application," Case Title: Bank of India Vs Amrit Fresh Pvt. Ltd Counsel for Applicant: Mr. Raj Singhania, Pr.CA Counsel for Respondent: Mr. Nirmalya Dasgupta & Ms. Aryaa Chatterjee. Click Here To Read/Download Order

Resolution Professional Cannot Prosecute Preferential Transactions After Approval Of Resolution Plan: NCLT Kolkata

Akshay Sharma

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