Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Avoidance recoveries augment creditor pool per s53/s30(2)(b) IBC, pursued by CoC/creditors post-plan approval; no sharing with SRA as it benefits estate/creditors exclusively, not RA (contrary views in specific plans rejected as non-binding). No, recoveries cannot be distributed between creditors and SRA; solely for creditors ["Mukesh Verma VS - National Company Law Tribunal"] ["Tata Steel BSL Ltd. vs Union of India - Delhi"] ["Dr. Mamta Binani vs Union Bank of India - National Company Law Tribunal"] ["G. Madhusudan Rao VS - National Company Law Tribunal"] ["Stressed Assets Stabilisation Fund vs Terrygold (India) Ltd - National Company Law Tribunal"] ["Kunwer Sachdev VS Su-Kam Power Systems Limited & ORS - National Company Law Appellate Tribunal"].
In the complex world of India's Insolvency and Bankruptcy Code (IBC), 2016, one pressing question often arises for stakeholders: can the recovery made in pursuance to avoidance application be distributed between the creditors and successful resolution applicant (SRA)? This issue touches on creditor rights, resolution plan finality, and the Adjudicating Authority's (AA) discretion, especially post-Corporate Insolvency Resolution Process (CIRP). Understanding this is crucial for financial creditors, operational creditors, resolution professionals (RPs), and prospective SRAs navigating insolvency proceedings. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
This blog post breaks down the legal framework, key judicial insights, and practical implications, drawing from authoritative sources. Note: This is general information based on precedents and not specific legal advice—consult a qualified professional for your case.
Recovery proceeds from avoidance applications—targeting preferential, undervalued, or extortionate transactions under Sections 43, 45, and 50 of the IBC—primarily benefit the creditors of the corporate debtor, not the SRA or the revived corporate debtor. The AA holds discretion to decide distribution based on facts, typically directing proceeds to creditors following the Section 53(1) waterfall priorities, unless circumstances justify otherwise. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
Avoidance applications survive CIRP conclusion, with the RP pursuing them even post-resolution plan approval, as these are distinct proceedings. The RP's role under Section 25(2)(j) persists, distinguishing it from being functus officio solely in CIRP matters. The RP, before passing of the approval order, filed an application for avoidance of certain transactions, discharging the statutory burden laid out under Section 25(2)(j) of the IBC. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
This aligns with IBC objectives: preventing unjust enrichment and ensuring credit availability by clawing back value for creditors. A situation where a beneficiary of suspect transaction is absolved on account of the avoidance application becoming infructuous after conclusion of CIRP, is undesirable. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
Unlike core CIRP functions, avoidance applications are standalone. The RP files and prosecutes them independently, even after the resolution plan is approved under Section 31. Reliance on CIRP-specific sections doesn't limit this duty. This addresses gaps noted in the Insolvency Law Committee (ILC) Report (May 2022) and IBBI Discussion Paper (27.03.2019), ensuring suspect transaction beneficiaries don't escape liability. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
Post-CIRP, the RP remains responsible: RP remains responsible for pursuing pending avoidance applications post-CIRP, as RP is functus officio only regarding CIRP, not avoidance proceedings. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945 Courts reject arguments that RP powers end entirely, emphasizing statutory continuity.
Provisions target creditor benefit, not the corporate debtor's new avatar under the SRA. The provisions pertaining to avoidable transactions is to primarily benefit creditors. While the Corporate Debtor ceases to exist in its erstwhile avatar... the creditors of the corporate debtor can still be the beneficiaries of the sum or properties that may be recovered. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
Single Judge views suggesting benefits to the SRA have been critiqued for enabling unjust enrichment. Section 36(3)(f) bolsters this by including avoidance recoveries in the liquidation estate, prioritizing creditors. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945Cholamandalam Investment and Finance Company Ltd. VS Navrang Roadlines Private Limited - 2022 0 Supreme(Mad) 921
Related precedents reinforce creditor focus in distributions. In liquidation contexts, sale proceeds are distributed per creditor priorities, not assets directly: In liquidation, assets shall be sold and sale proceeds will be distributed to the creditors / members. The assets itself are not required to be distributed amongst creditors / members. ANKIL MEMBERS ASSOCIATION VS VIJAYSINH JADEJA, (LIQUIDATOR) - 2005 Supreme(Guj) 369ANKIL MEMBERS ASSOCIATION vs VIJAYSINH JADEJA, (LIQUIDATOR)
The AA decides if recoveries go to creditors, SRA, or others, guided by facts: The Adjudicating Authority should decide whether the recoveries from actions filed against improper trading or to avoid transactions should be applied for the benefit of the creditors of the corporate debtor, the successful resolution applicant or other stakeholders... they should usually be distributed per the order of priorities provided in Section 53(1) of the Code, unless the Adjudicating Authority deems an alternate manner of distribution appropriate. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
This mirrors IBBI and ILC guidance. In resolution plans, even where SRA payments fall short, analogous CIRP profits distribute pro-rata to creditors: If any amount is found to have been generated as profit during the ‘Corporate Insolvency Resolution Process’... it should be distributed amongst all the ‘Financial Creditors’ and the ‘Operational Creditors’ on pro-rata basis of their claims subject to the fact that it should not exceed the admitted claim. Standard Chartered Bank VS Satish Kumar Gupta, R. P. of Essar Steel Ltd. - 2019 0 Supreme(NCLAT) 889
Resolution plan silence on pending avoidances (due to lack of info) doesn't extinguish creditor claims. CoC commercial wisdom is key in plan approvals, but AA verifies compliance, prioritizing stakeholders without post-approval external claims. Broadband Pacenet (India) Private Limited vs Reliance Commercial Finance Limited - 2023 Supreme(Online)(Barclays Bank PLC VS Piramal Capital and Housing Finance Ltd. - National Company Law Tribunal) 1794 Mr. Gajesh Labhchand vs Reliance Commercial Finance Limited - 2023 Supreme(Online)(Barclays Bank PLC VS Piramal Capital and Housing Finance Ltd. - National Company Law Tribunal) 1795
In revival scenarios, undistributed assets allow creditor resolutions without dissolution, underscoring procedural protections. ANKIL MEMBERS ASSOCIATION VS VIJAYSINH JADEJA, (LIQUIDATOR) - 2005 Supreme(Guj) 369
Avoidance recoveries generally prioritize creditors via Section 53(1), with AA discretion as the pivot. Post-CIRP survival ensures value maximization, preventing enrichment loopholes. While SRAs drive revival, creditor safeguards remain robust. Stay updated on evolving jurisprudence, as IBC balances resolution and recovery. Tata Steel Bsl Limited VS Venus Recruiter Private Limited - 2023 0 Supreme(Del) 1945
For tailored guidance, engage insolvency experts. This analysis draws from core precedents to demystify a vital IBC facet.
#IBCIndia #AvoidanceTransactions #InsolvencyLaw
The pending IA no. 1148/2021 pertaining to Avoidance Transaction u/s 43 & 66 of the Code shall be pursued by the Committee of Creditors in the manner decided by them and the proceeds of recovery from such transactions if any shall be distributed among the Financial Creditors up to the settlement ... Upfront Cash Recovery for Secured Financial Creditors. ... Upfront Cash Recovery for Unsecured Financial Creditors (Ms. ... We note tha....
He submits that the approval of the Plan has no nexus with benefits to creditors as: - (i) S.26 provides for avoidance applications to not have effect on CIRP,(ii) Avoidance applications continue beyond CIRP and the Resolution Applicant may pursue it,(iii) Therefore, benefits can be distributed ... The NCLT is directed to proceed ahead with the hearing of avoidance application. In accordance with S.44 to 51 of the IBC, 2016, the amount which is recovered can be #HL_S....
Resolution Applicant/ Implementing Entity/ Corporate Debtor, the Avoidance Recoveries shall be for the benefit of and shared between the creditors having priority in accordance with Section 53 ; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the Resolution Plan had been distributed in accordance with sub-section (1) of in the event of liquidation of the corporate debtor. ... The representatives of the Creditors....
18.We observe that the amount distributed to the amount claimed by the Financial Creditors is Rs.53,04,15,278/-. ... b) Resolved further that any recoveries from the Avoidance Application(s) specifically IA.NO.455/2021, Recoveries from the Investigation of CBI/ED/RD, etc., will be distributed in accordance with the Sec 53 of the IBC, 2016. ... Counsel submitted that on 02.12.2024, in the meeting held by SCC members unanimously passed the resolutions as hereunder: a) Resolved that all....
The amount shall be distributed amongst the creditors in this class in proportion to their debt. PAYMENT TO CONTINGENT DUES: a. ... (vi) The secured Financial Creditors are directed to pursue IA No. 1215/2023 u/s 66 of IBC, 2016 pending before this Tribunal, as per the plan approved by the COC at their own cost and expenses, recovery if any, through this IA, to be shared amongst the Financial Creditors. ... (v) It is hereby ordered that the deposit amount of Rs.1,50,00,000/- made by ....
It is stated therein that in liquidation, assets shall be sold and sale proceeds will be distributed to the creditors / members. The assets itself are not required to be distributed amongst creditors / members. ... In the meanwhile, the shareholders and the Creditors of the Company unanimously decided by passing Resolutions to revive the Company. The assets of the Company are in fact, not distributed as the final sanction of the Court was awaited. There is no cash tra....
It is stated therein that in liquidation, assets shall be sold and sale proceeds will be distributed to the creditors / members. The assets itself are not required to be distributed amongst creditors / members. ... In the meanwhile, the shareholders and the Creditors of the Company unanimously decided by passing Resolutions to revive the Company. The assets of the Company are in fact, not distributed as the final sanction of the Court was....
proceedings shall be distributed:C C C C lause Reference is made to: Part F at Page No. 40. lause Reference is made to: Part F(III) at page 42. lause Reference is made to: Part F at Page No.40 lause Reference is made to: Part C (5) at Page No.25Y Y Y Y es es es esSection 30 (2)(b), the Respondent has agreed to pay Operational Creditors an amount which shall not be less than liquidation value or the amount that would have been paid to such creditors if the amount to be....
proceedings shall be distributed:C C C C lause Reference is made to: Part F at Page No. 40. lause Reference is made to: Part F(III) at page 42. lause Reference is made to: Part F at Page No.40 lause Reference is made to: Part C (5) at Page No.25Y Y Y Y es es es esSection 30 (2)(b), the Respondent has agreed to pay Operational Creditors an amount which shall not be less than liquidation value or the amount that would have been paid to such creditors if the amount to be....
Provide details of section 66 or avoidance application filed / pending. ... During the course of hearing, the Applicant RP has stated on record that he will pursue all or any such avoidance transaction application(s), and that the SRA will cooperate under the tenets of law. ... Further, the amount released from the avoidance Application filed by the Resolution Professional shall be allocated to the Secured Financial Creditor. ... (Applicant RP in the....
All such allocations to the Financial Creditors will be binding on all Stakeholders. For the avoidance of doubt, such allocation shall be binding on all Financial Creditors, including dissenting Financial Creditors, if any. An amount of INR 10 crores shall be paid to the Resolution Professional out of the Upfront Cash Recovery amount for the legal cost and other charges which may have been incurred in connection with the CIRP Process of the Corporate Debtor and has not been paid as CIRP cost. The Resolution Applicant has agreed that the Committee of Creditors will decide the manner....
The payments proposed to be made by the Resolution Applicant to the unsecured Financial Creditors is also higher than the recoveries that the unsecured Financial Creditors as a class would realize in case of liquidation, since the Liquidation Value realizable by unsecured Financial Creditors is nil. All such allocation to the Financial Creditors will be binding on all stakeholders. Standard Chartered Bank, which was stated to be an unsecured creditor, was to be paid an aggregate amount of 5% of its admitted claims. Thus, this would be beneficial to avoid multiplicity of l....
However, it is contended on behalf of the secured creditors that they have a pari passu charge even on the sale proceeds of the unsecured assets in terms of the statutory provisions and more particularly , in view of the fact that they had given up their security in favour of the workmen to the extent of Rs.8,19,22,371.12. The notice of the O.A. filed by the secured creditors was also issued to the Official Liquidator. Another error in the calculation that appears from the record is that though the total sale proceeds from the secured assets were Rs.108.90 crore, the Court directed the payme....
However, if the creditors are allowed to initiate recovery proceedings against the applicant company the entire endeavour to receive the company and to implement the scheme of compromise will become meaningless. If the compromise arrived at between the company and secured creditors and sanctioned by the Court the applicant company shall be able to receive its operation.
Section 22 of the RDB Act gives sufficiently wide powers to the Tribunal and the Appellate Tribunal to decide such questions of priorities, subject only to the principles of natural justice. The said words are qualified by the words "in accordance with the provision of section 529a". Hence, it is necessary to identify the limited class of secured creditors who have priority over all others in accordance with section 529a. The words in section 19 (19) of the RDB Act, "to be distributed among the secured creditors" do not give priority to all "secured creditors" to share in the sale ....
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