NOTE on Delhi High Court Judgement in M/s Venus Recruiters Pvt Ltd Vs Union of India & Others, Appeal Number : W.P.(C) 8705/2019, Date of Judgement/Order : 26/11/2020

Petition: Seeking issuance of a writ declaration the proceedings pending before the NCLT, New Delhi is void and non-est.

Question: Whether under IBC, 2016, 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

1. On 20.3.2018 CoC approved the Resolution plan of Bhushan Steel Ltd proposed by TATA Steel Ltd and the same was filed by RP to seek approval before NCLT on 28.3.2018.

2. On 9.4.18, RP filed an avoidance application wherein stated that various transaction enumerated as ‘suspect transaction’ with related parties resulting from Forensic Audit Report.

3. Petitioner M/s Venus Recruiters Pvt Ltd is stated to be one of such suspected manpower contractor in Forensic Audit

4. After 5 weeks from filing the said avoidance application, NCLT approved the Resolution Plan proposed by TATA Steel Ltd on 15.5.2018. There was no separate order passed in respect of suspected

5. On 18.5.18, the resolution plan was finally closed and the new management took over the corporate debtor.

6. On 24.7.2018, NCLT passed an order in the avoidance application and ask the entities to file reply by 8.2018.

7. On 8.2018, NCLAT upheld, NCLT’s order dated 15.5.18 approving the Resolution Plan.

8. On 25.10.18 the NCLT impleaded the petitioner as a party and issued notice to it on the basis of a fresh memo of parties filed by the former RP. It is the said order impleading and issuing notice to the Petitioner, which is being challenged in the present

Finding & Order

1. Once the plan is approved and new management takes over, it is completely up to the new management to decide whether to continue a transaction or agreement or not. If CoC or the RP are of the view that there are any transaction which are objectionable in nature, the order in respect thereof would have to be passed prior to the approval of the Resolution

2. The RP cannot wear the hat of “Former RP” and pursue an avoidance application in respect of preferential transactions after the hat of the Corporate Debtor has changed and it no longer remains a Corporate

3. After hearing both parties and finding, the order of the NCLT impleading the petitioner and any consequential orders are liable to be set aside. The proceedings before NCLT under the Avoidance Application are accordingly

4. The present petition is All pending applications are disposed of.

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