The Mumbai bench of the National Company Law Tribunal (NCLT) observed that Resolution Professional (RP) is not empowered to file an application after the approval of resolution plan and becomes Functus Officio. The Tribunal further held that Insolvency and Bankruptcy Board of India (IBBI) should investigate into the conduct of both the RP and respondent 1 to 3 based on the findings of the forensic auditor.
M/s Chagganlal & Co, the operational creditor filed a petition under section 9 of the Insolvency and Bankruptcy Code (IBC) against Say India Jewellers Pvt. Ltd. , corporate debtor. This petition was admitted by the NCLT on August 1, 2017. A resolution plan was also submitted by Mr. Babulal Motawat and Mr Rohit Motawat. This plan was approved and confirmed by the NCLT on January 29, 2019 and February 7, 2019 respectively. The financial creditors were entitled to all recoveries as per the resolution plan.
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An interlocutory application was filed by the RP under section 43, 66,70,71 and 72 of the IBC. in which recovery of amounts which was transferred through preferential transactions including bogus sales, inflated salaries and transactions to related parties, was sought.
The respondent contended that the application was not maintainable as it had been filed after 135 days, time period prescribed under Regulation 35A of the CIRP Regulations, 2016 for filing an avoidance application. It was further argued that since the RP ceased to have authority, the application was not maintainable.
Per Contra, it was argued by the applicant resolution professional that the application was filed in accordance with the provisions of the IBC and should be heard. It was further contended that forensic audit disclosed fraudulent transactions which justified recovery of funds and penal actions against management of the corporate debtor. It was further submitted that the delay was caused in filing the application by cooperation of erstwhile management of the corporate debtor and in gathering forensic audit reports.
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The NCLT observed that the authority of the RP ceased on February 7, 2019 when the resolution plan was approved and the present application was filed on April 18, 2019 by the resolution professional. It was held that the application was not maintainable because the RP lacked authority to file the application after the resolution plan was approved.
While dismissing the appeal, the bench comprising Justice (Retd) Mr. Virendrasingh Gyansingh Bisht (Judicial Member) and Mr. Prabhat Kumar (Technical Member), directed the IBBI to look into the serious allegations made in the forensic audit report against respondent No. 1 to 3 related to fraudulent transactions. The tribunal also directed to take appropriate action against the RP due to failure in filing the application before the approval of resolution plan.
The NCLT concluded that the resolution professional had become functus officio after the approval of resolution plan therefore the present application could not be filed. The Tribunal further referred the case for further investigation to the IBBI with respect to the fraudulent transactions and conduct of the resolution professional.
