The NCLAT, New Delhi Bench  that the avoidance application has to be decided by the NCLT which shall not affect the proceedings of the CIRP. Further, the PUFE Applications are different proceedings. It was ruled that the NCLT is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but it erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided. 

Brief Facts: 

Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) was initiated against the Corporate Debtor on an application filed by a Financial Creditor. 

The Corporate Debtor was involved in a real estate project. Since, the construction was incomplete, a FIR was filed by the homebuyers. The Appellant was arrested and the bail application was initially rejected, however later the Hon’ble Supreme Court granted interim bail and then regular bail  so that construction could be completed. 

Thereafter, an interim application was filed by the Resolution Professional stating that fraudulent transactions were undertaken by the Appellant. 

The resolution plan of the Appellant was approved by the Committee of Creditors (CoC). 

Thereafter, Appellant applied to the NCLT for starting construction of the remaining towers. However, it was observed that another application was pending for avoidance of PUFE in relation to the plan. 

The CoC on one hand recommended that the approval of resolution plan should be decided first, but the NCLT directed that the order directing PUFE transaction will be heard first and then approval for resolution plan. 

Hence, the present appeal. 

Contentions of the Appellant: 

It was argued that the pendency of PUFE Application does not prohibit the insolvency resolution process to proceed and that the NCLT committed error in directing the consideration of PUFE Application first.

Contentions of the Respondent: 

It was argued that the NCLT was free to decide in which manner the proceedings would be conducted. It was urged that the Appellant only wanted to delay the adjudication of avoidance application. 

It was further submitted that the Appellant could not have submitted a resolution plan on grounds of undertaking of fraudulent transactions. 

Observations of the Tribunal:

The main issue was whether the NCLT  committed error in directing for consideration of PUFE Transaction Applications first and adjourning the Application for approval of Resolution Plan to be heard later.

It was observed that the NCLT decided to adjudicate on PUFE Transaction application first as if preferential transaction are established against the Appellant, the project would be in jeopardy. 

It was opined that the avoidance application has to be decided by the NCLT which shall not affect the proceedings of the CIRP. Further, the PUFE Applications are different proceedings. 

It was ruled that the NCLT is well within jurisdiction to consider both the Resolution Plan Approval Application as well as PUFE Application but it erred in observing that the consideration of Plan Approval Application has to be deferred and can be taken only after PUFE Applications are decided. 

The decision of the Court: 

The NCLAT directed the NCLT to not await decision of the PUFE Applications and adjudicate on application for approval of resolution plan. Accordingly, the appeal was disposed of. 

Case Title: Vinay Jain v. ACJ Developers (India) Pvt. Ltd. 

Case No.: Company Appeal (AT) Insolvency No. 846 of 2023

Coram: Justice Ashok Bhushan (Judicial Member), Barun Mitra (Technical Member)

Advocate for Appellant: Adv. Ambuj Tiwari 

Advocates for Respondents: Advs. Mr. Amit Chdha, Suresh Dobhal, Shikhar Kumar, Abhishek Anand, Karan Kohli, Vaibhav Mendiratta, Lubanshi Rai, Mani Gupta, Sonali Jain, Sreemantini Mukherjee, Mr. Shashank Agarwal

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