Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M Singh, J.
Venus Recruiters Private Limited - Appellant
Versus
Union Of India & Ors. - Respondent
Writ Petition (Civil) No. 8705 of 2019; Civil Miscellaneous Application No. 36026 of 2019
Decided On : 26-11-2020
INSOLVENCY AND BANKRUPTCY CODE, 2016 - SECTION 43 - PREFERENTIAL TRANSACTIONS - AVOIDANCE APPLICATIONS - JURISDICTION OF NCLT - ROLE OF RESOLUTION PROFESSIONAL (RP) - TIMELINES - INTERPRETATION OF SECTIONS 25(2)(J), 26, 30, 31, 43, 44, 60 AND 61 OF THE CODE - RELEVANCE OF INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2016 - SCOPE AND PURPOSE OF AVOIDANCE APPLICATIONS - DISTINCTION BETWEEN STATUTORY REMEDY AND CIVIL REMEDY - APPLICABILITY OF PRINCIPLES OF NATURAL JUSTICE - WRIT JURISDICTION - MAINTAINABILITY.
Fact of the Case:
The instant petition was filed by the Petitioner, M/s Venus Recruiters Pvt. Ltd. (Venus Recruiters), seeking a declaration that the proceedings pending before the National Company Law Tribunal (NCLT) in C.A.No.284(PB)/2018 in C.P.No. IB(201)(PB)/2017 as void and non-est. The primary issue raised was whether, under the Insolvency and Bankruptcy Code, 2016 (IBC), an application filed under Section 43 for avoidance of preferential transactions can survive beyond the conclusion of the resolution process and the role of the RP in filing/pursuing such applications. The jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan was challenged.
Finding of the Court:
The Court held that an application for avoidance of a preferential transaction, though filed prior to the Resolution Plan being approved, cannot be heard and adjudicated by the NCLT, at the instance of the RP, after the approval of the Resolution Plan. The Court further held that the RP cannot continue to act beyond the approval of the Resolution Plan and that the RP's mandate concludes with the CIRP. The Court also held that the NCLT does not have jurisdiction to entertain and decide avoidance applications, in respect of a Corporate Debtor which is now under a new management unless provision is made in the final Resolution Plan.
Issues: 1. Whether an application for avoidance of a preferential transaction, though filed prior to the Resolution Plan being approved, can be heard and adjudicated by the NCLT, at the instance of the RP, after the approval of the Resolution Plan? 2. Whether the RP can continue to act beyond the approval of the Resolution Plan? 3. Whether the NCLT has jurisdiction to entertain and decide avoidance applications, in respect of a Corporate Debtor which is now under a new management unless provision is made in the final Resolution Plan?
Ratio Decidendi: 1. The Court held that the RP cannot continue to act beyond the approval of the Resolution Plan and that the RP's mandate concludes with the CIRP. The Court relied on the provisions of Sections 23, 25(2)(j), 26, 30, 31, 43, 44, 60 and 61 of the IBC, as well as the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, to arrive at this conclusion. 2. The Court held that the NCLT does not have jurisdiction to entertain and decide avoidance applications, in respect of a Corporate Debtor which is now under a new management unless provision is made in the final Resolution Plan. The Court relied on the provisions of Sections 23, 25(2)(j), 26, 30, 31, 43, 44, 60 and 61 of the IBC, as well as the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, to arrive at this conclusion.
Final Decision: The petition was allowed, and the order of the NCLT impleading the Petitioner and any consequential orders were set aside. The proceedings qua the Petitioner before the NCLT under the Avoidance application were quashed.
JUDGMENT
Prathiba M. Singh, J. - This judgment has been pronounced through video conferencing.
2. The present writ petition has been filed by the Petitioner seeking issuance of a writ declaring the proceedings pending before the National Company Law Tribunal (Principal Bench) New Delhi (hereinafter, ''NCLT'') in C.A.No.284(PB)/2018 in C.P.No. IB(201)PB/2017 as void and non-est.
3. The question that has arisen is whether under the Insolvency and Bankruptcy Code, 2016 (hereinafter, ''IBC''), an application filed under Section 43 for avoidance of preferential transactions can survive beyond the conclusion of the resolution process and the role of the RP in filing/pursuing such applications. The jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan, is thus under challenge.
Brief Background
4. The brief background of this case is that Respondent No. 3 i.e. M/s Bhushan Steel Ltd. (now known as Tata Steel BSL Ltd.) (hereinafter, ''Corporate Debtor'') was the subject of Corporate Insolvency Resolution Process (hereinafter, ''CIRP'') before the NCLT, initiated by the State Bank of India by a petition being C.P. No.(IB) - 201(PB)/2017 titled State Bank of India v. Bhushan Steel Ltd filed on 26th July, 2017.
5. On the same date when the CIRP was initiated, the NCLT appointed Mr. Vijay Kumar Iyer i.e. Respondent No. 4 as an Interim Resolution Professional (hereinafter, ''IRP'') for the Corporate Debtor. A public announcement was made in accordance with Section 15 of the IBC, inviting submissions of claims against the Corporate Debtor. The Committee of Creditors (hereinafter ''CoC'') was thereafter constituted and its first meeting was held on 24th August, 2017, when the IRP was also confirmed as the Resolution Professional (hereinafter, ''RP'') for the Corporate Debtor.
6. On 20th March, 2018, the CoC approved the Resolution Plan proposed by Respondent No. 2 i.e. Tata Steel Ltd. (hereinafter, ''successful Resolution Applicant'') and the said Plan was filed by the RP to seek approval before the NCLT on 28th March, 2018.
7. Thereafter on 9th April, 2018, the RP filed an avoidance application being CA No.284(PB) of 2018 under Section 25(2)(j), Sections 43 to 51 and Section 66 of the IBC. In the said application, various transactions were enumerated as ''suspect transactions'' with related parties. The said avoidance application was a result of a Forensic Audit Report, submitted by a Forensic Consultant, which was attached to the application as well. The prayer in the application was as under:
"In view of the foregoing, it is most humbly prayed that this Hon''ble Tribunal may be pleased to:
a) take on record the Forensic Consultant''s report and pass appropriate directions in accordance with the Code in respect of the suspect transactions; and
b) pass any other order(s) which this Hon''ble Tribunal may deem fit in the facts and circumstances of the case in the interest of equity, justice and good conscience."
8. The following were the suspect transactions allegedly entered into by the Corporate Debtor:
i) Potential excess payment of lease rent to Vistrat Real Estate Pvt. Ltd.
ii) Preferential credit to various international customer sand long outstanding receivables to entities such as Shree Steel Djibouti FZCO and Shree Global Steel FZE;
iii)Excess payments to Manpower companies/ Contractors;
iv) Uncontracted payment of interest on advance to Peak Minerals and Mining Private Ltd. for cancelled sale-and-lease back transactions.
9. The Petitioner - M/s Venus Recruiters Pvt. Ltd. (hereinafter, ''Venus Recruiters'') is stated to be one such manpower contractor, as mentioned in (iii) above.
10. Almost five weeks after filing of the said avoidance application, the NCLT approved the Resolution Plan proposed by Tata Steel Ltd., vide a detailed judgment dated 15th May, 2018. The said Resolution Plan had found favour with the CoC and accordingly, the NCLT passed various orders and directions on the sa
The main legal point established in the judgment is the binding effect of the settlement between the parties, the waiver of the right to seek re-employment by the workmen, and the entitlement of the ....
A lockout is justified if it is declared in response to an illegal strike or a strike that is in breach of a settlement or award.
The combination of eyewitness testimonies, recovery of the weapon used, and forensic examination results can establish guilt in criminal cases, even based on circumstantial evidence.
The conviction of an accused person under Section 27(3) of the Arms Act is not permissible in law if the accused is also charged with committing murder under Section 302 of the Indian Penal Code.
The court can enhance compensation based on the deceased's income and family dependency, and adjust the multiplier used by the Tribunal if found unjustified.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
