2026 Supreme(Online)(NCLT) 2367

NATIONAL COMPANY LAW TRIBUNAL
Rammurti Kushawaha, Member (Judicial), Yogendra Kumar Singh, Member (Technical)
Peerless Hospitex Hospital and Research Center Limited – Appellant
Versus
Sandeep Khaitan – Respondent
I.A.(IBC).185/GB/2024 | C.P. (IB)/24/GB/2023

The judgment establishes that avoidance proceedings under the IBC survive the conclusion of CIRP and a Successful Resolution Applicant can be substituted for the Resolution Professional to continue them, if the approved plan so provides.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 25(j), 43, 50, 66, 31, 26, 36(3)(f) - National Company Law Tribunal Rules, 2016 - Rule 53 - Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Regulations 38(2)(d), 38(2A) - Substitution of Successful Resolution Applicant in place of Resolution Professional in pending PUFE (Preferential, Undervalued, Fraudulent, Extortionate) transactions application - Avoidance proceedings survive completion of CIRP and are independent of it - Need for continuation of proceedings for avoidance transactions, if provided for in resolution plan, as mandated by Regulation 38(2)(d) - Approved resolution plan has binding effect under Section 31; conferment of locus and substitution of parties remains subject to Code and NCLT Rules, particularly Rule 53 - Rule 53, a procedural provision, is not to be construed restrictively to defeat substantive rights flowing from a court-approved plan; its purposive interpretation permits substitution in appropriate cases - SRA can be permitted to step into proceedings of RP where plan contemplates continuation of such proceedings, to avoid a procedural vacuum. (Paras 4.6, 4.9, 4.14, 4.15, 4.20)

(B) Practice and Procedure - Substitution - Distinction between entitlement to proceeds of a litigation and entitlement to prosecute it must be maintained - Plan provisions and IMC minutes allocating economic benefit do not automatically translate into conferment of prosecutorial locus. (Para 4.19)

Facts of the case:
The Successful Resolution Applicant (SRA) filed an application under Rule 53 of the NCLT Rules, 2016, seeking to be substituted in place of the Resolution Professional (RP) in a pending PUFE application alleging preferential, extortionate, and fraudulent transactions by suspended directors of the corporate debtor. The RP had filed the PUFE application during the CIRP. Subsequently, the SRA’s resolution plan was approved by the Tribunal and implemented, and the CIRP was closed. The resolution plan contained a clause (Clause 12.7) stating that receivables from litigations would accrue to the SRA, and the Implementation & Monitoring Committee (IMC) resolved that the SRA would prosecute the PUFE application. The respondents (suspended directors) objected, arguing that the main company petition had been disposed of, the PUFE application had abated, and that Rule 53 did not apply as the RP had neither died nor become insolvent. They also contended that only the RP could prosecute, and the SRA, being a commercially interested party, lacked the requisite neutrality.

Findings of Court:
The Tribunal held that the closure of the Company Petition does not extinguish pending avoidance proceedings, which are independent statutory remedies. The Tribunal relied on the Supreme Court's decision in Piramal Capital and Housing Finance Ltd. vs. 63 Moons Technologies Ltd. and the NCLAT's decision in Kapil Wadhawan vs. Piramal Capital and Housing Finance Ltd. to hold that avoidance proceedings survive CIRP and can continue post-approval of a resolution plan. The Tribunal further held that while Rule 53 is procedural and does not automatically confer assignee status on an SRA, it cannot be construed restrictively to defeat rights under an approved plan. The plan's provision for continuation of proceedings and the need to avoid a procedural vacuum warranted substitution. The SRA was permitted to be brought on record in substitution of the RP for the limited purpose of prosecuting the application. The erstwhile RP was directed to extend full cooperation. The respondents were at liberty to raise all objections on maintainability and merits.

Issues: The main issues were whether a PUFE application abates upon the completion of the CIRP, and whether a Successful Resolution Applicant can be substituted for the Resolution Professional in a pending avoidance application under Rule 53 of the NCLT Rules, 2016.

Ratio Decidendi: The court ruled that avoidance proceedings are independent of the CIRP and survive its conclusion. Rule 53, read purposively and in light of a court-approved resolution plan that contemplates the continuation of such proceedings, permits the substitution of the SRA in place of the RP to avoid a procedural vacuum and ensure the continuation of the proceedings. Result : Application for substitution allowed; SRA permitted to be brought on record in place of RP for limited purpose of prosecuting the application. RP to cooperate.