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(C) Adjudication of avoidance applications after CIRP

10. Ld. Single Judge has observed that the CIRP Regulations, 2016 under Regulation 35A, provide a specific timeline by which the RP has to form an opinion if the corporate debtor has been subjected to any of the objectionable transactions and under Regulation 39, the RP has to submit, along with the Resolution Plans, details of the objectionable transactions including preferential transactions. As is evident from the flowchart provided in Para 72 of the Impugned Judgment, the RP has to commence examination as on the insolvency commencement date, form an opinion by 75th day (post-amendment), make a determination by 115th day and if he comes to the conclusion that the Corporate Debtor has indulged in preferential transactions, apply to the NCLT for appropriate relief on or before the 135th day. As per Ld. Single Judge, the purpose of these timelines is that RP includes these details in Resolution Plans and the same are available before the NCLT before it approves the Plan.

27. Ld. ASG concludes by highlighting that there are two purposes for providing provisions for avoidance of certain transactions, first, for the benefit of the creditors in general and a fair allocation of an insolvent debtor‟s assets to the creditors and second, to create a fair commercial conduct before declaration of insolvency and having deterrent effect to discourage creditors from pursuing individual remedies in the period leading up to insolvency. The implications of these provisions are restricting the right of parties to such transactions to benefit the same by sending the proceeds back to the corporate debtor also incidentally benefitting creditors. In the present case, the avoidance proceedings are subsisting after approval of the resolution plan by the NCLT and conclusion of CIRP. While incidental benefits to the creditors during the CIRP does not exist anymore, such proceedings do not become infructuous as parties to such impermissible preferential transactions are still benefiting out of the same.

34. To conclude his submissions, Mr. Sibal submits that that Sections 43 and 44 of the IBC lay down an exclusive statutory framework wherein, transactions, which cannot be normally avoided by a company under general law, may be avoided to (a) make the Corporate Debtor attractive for the Resolution Applicant to bid; (b) bring back secreted funds to the Committee of Creditors; (c) keep the Corporate Debtor a going concern. He is of the view that in the present case the proceedings achieve neither of the avowed objectives of avoiding a so-called preferential transaction. This is because the Resolution Applicant i.e., Tata Steel Ltd did not make avoidance of the transaction with the Venus the basis of its bid. The Committee of Creditors have already issued a "No dues Certificate" after the receipt of monies from Neutral Citation Number: 2023/DHC/000257 Tata Steel. The Corporate Debtor i.e., Tata Steel BSL Ltd. was always a going concern and the Venus‟ contract did not affect its status.

67. Avoidance of certain transactions such as preferential transactions or undervalued transactions are special remedies envisaged only under the IBC to benefit a special creature of the Code itself, i.e., the Committee of Neutral Citation Number: 2023/DHC/000257 Creditors. In view of the purpose and policy behind enactment of the IBC, it is only befitting that any petition or application arising out of the insolvency resolution or liquidation of a corporate person includes proceedings under Part III of the IBC.