TUF Metallurgical Pvt Ltd.
Vs.
Ex Resolution Professional & Ors
CA. No. 1424/ND/2020
FACTS
1) CIRP was initiated against the CD i.e. Albus India Limited. COC in its first meeting appointed a forensic auditor for carrying out an audit & to find out any issue related to financial aspects. Auditor in its reports dated 05.03.2019 points out huge diversion of funds, fabrication of funds & fraudulent transactions.
2) RP filed an application u/s 66 read with sec 43 of the code against respondent 2 ex-director of the CD which is still pending.
3) Resolution Plan submitted by RA was passed unanimously by the COC & subsequently approved by the NCLT vide order dated 15.11.2019 & due to approval RP ceases to exist.
4) Monitoring Committee (MC) was formed for supervising the implementation of the plan. The committee in 1st meeting held on 18.11.2019 resolved that the pending proceeding shall be pursued by the Resolution applicant in consultation with MC.
5) In its 2nd meeting held on 02.01.2021, the MCobserved certain facts & evidence against the allegations so the applicant wishes to intervene in the proceedings.
QUESTION
Whether proceedings u/s 66 rw sec 43 of the code can be pursued by the Resolution Applicant & Monitoring Committee after the approval of the resolution plan?
ARGUMENTS
| For applicants | For Respondents |
| 1) Counsel submitted that although the office of erstwhile having become functus officio, the applications are still sub-judice & it should see the day of light. 2) Applicant submitted that benefit arising out of the proceeding shall accrue to the resolution applicant, corporate debtor & also be shared with the financial creditor. 3) In view of the above proposition, the applicant should be allowed to intervene as it is having a vested interest in the prosecution. 4) Relying on SBI vs. Adhunik steel it was argued that in the order AA recognized the right of FC to say in the matter u/s 66 rw sec 43 of the code. | 1) Respondent (Parties to the PUFE transactions) question the maintainability of the application as the applicant is a monitoring committee & according to sec 60(5), AA can adjudicate on application by or against the CD or corporate person whereas MC is neither of them. 2) It also contended that pursuing an application that was filed by the RP during the CIRP period is not within the scope of the applicant. 3) Relying on Delhi HC judgement in Venus Recruiters Ltd wherein Hon’ble HC held that AA cannot exercise jurisdiction in respect of avoidance application post the approval of the plan. 4) It also submits that the final reports of the auditor did not mention any fraudulent transactions. |
DECISION
The MC & resolution applicant cannot pursue proceeding u/s 66 read with sec 43 post the approval of the Resolution plan.
RATIONALE
Relying on the Delhi HC judgement, AA held that no avoidance application can continue after the approval of the resolution plan.
COMMENTS
We think a long battle is about the start on whether avoidance proceedings can continue after the approval of the resolution plan & it will only rest in the Supreme Court as there is no clarity on the future of proceedings concerned with avoidance transactions post the plan approval that too when it contains significant value.
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