Successful Auction Purchaser can pursue avoidance application, rules NCLAT, Read Judgement

The NCLAT, New Delhi Bench opined that Resolution Applicant can pursue the avoidance application. It was unequivocally held that the Successful Resolution Applicant can be allowed to prosecute the avoidance application, the same analogy shall be applicable with regard to prosecution by the Successful Auction Purchaser in liquidation estate when the asset of the corporate debtor has been sold as a going concern and acquisition plan submitted by Successful Auction Purchaser has been approved by the Tribunal.

Brief Facts:

The present appeal has been filed by the Suspender Director of the Corporate Debtor against the order vide which the application of the Respondent No. 1 (Successful Auction Purchaser)

was allowed and his name was substituted in place of Applicant (Resolution Professional).

Brief Background:

The Appellant submitted a resolution plan however was informed that he was ineligible under Section 29A(h) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”).

Further, the Tribunal ordered for liquidation of the Corporate Debtor. An acquisition plan was submitted by Respondent No. 2 to 5 which was approved.

Contentions of the Appellant:

It was contended that the Successful Auction Purchaser cannot be allowed to pursue the avoidance application and further no benefit can be given to a Successful Auction Purchaser.

Contentions of the Respondent:

It was urged that it was provided in the Acquisition Plan itself that the Successful Auction Purchaser shall pursue the avoidance application.

Observations of the Tribunal:

It was observed that it was the case of the Appellant himself that it was the successful auction purchaser who was to get the benefit of avoidance application.

It was ruled that at this stage the Appellant could not challenge the application.

Further, the Tribunal observed that Section 36(1)(f) of the IBC makes it clear that the proceeds of the avoidance application are part of the liquidation estate.

In relation to the issue whether Successful Auction Purchaser can pursue the avoidance application, the Bench opined that Resolution Applicant can pursue the avoidance application. It was unequivocally held that the Successful Resolution Applicant can be allowed to prosecute the avoidance application, the same analogy shall be applicable with regard to prosecution by the Successful Auction Purchaser in liquidation estate when the asset of the corporate debtor has been sold as a going concern and acquisition plan submitted by Successful Auction Purchaser has been approved by the Tribunal.

The decision of the Tribunal:

Based on the aforementioned reasons, the Appeal was dismissed accordingly.

Case Title: Kumer Sachdev v. Su-Kam Power Systems Ltd. & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 1177/2023

Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), Arun Baroka, (Technical Member)

Advocates for Appellant: Advs. Mr. Siddharth Yadav, Sr. Advocate with Mr. Apoorv Agarwal, Mr. Abhay Singla and Mr. Maitreya Sahu,

Advocates for Respondent: Advs Mr. Krishnendu Datta, Ms. Bani

Brar Rustomkhan, Mr. Rajat Sinha, Mr. Siddhant Kant and Mr. Nikhil Mathur