NCLT Need Not Separately Examine RP's Opinion On PUFE Transactions While Avoidance Pleas Are Pending: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that the issue of formation and determination of opinion by a resolution professional in respect of preferential, undervalued, extortionate, and fraudulent (PUFE) transactions cannot be examined at the threshold level on a stand-alone basis while the avoidance applications are pending consideration before the adjudicating authority.

A bench comprising  Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed,

“We are of the considered view that the issue of formation of opinion and determination of opinion on PUFE transactions cannot be examined at the threshold level on a stand-alone basis dehors the avoidance applications.”

The appeal was filed by Chandresh Jajoo, suspended director of Hema Engineering Industries Ltd., challenging the October 9, 2025, order passed by the NCLT, New Delhi, dismissing his plea to dismiss multiple avoidance applications filed by RP. By that application, Jajoo had sought dismissal of multiple avoidance applications filed by the resolution professional.

Before the appellate tribunal, senior counsel for the appellant submitted that the ground relating to the belated filing of the avoidance applications would not be pressed, since the timelines prescribed under Regulation 35A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are directory and not mandatory.

It was, however, contended that the NCLT erred in not first satisfying itself that the resolution professional had independently formed and determined his opinion with respect to PUFE transactions before filing the avoidance applications.

The RP opposed the appeal, submitting that the resolution professional had formed and determined his opinion on the basis of available material and had placed the matter before the committee of creditors.

Rejecting the appellant's contention, the tribunal held that the adjudicating authority was not required to first decide whether there was material for the resolution professional to form and determine his opinion before entertaining the avoidance applications. Since the avoidance applications remain pending before the NCLT, the appellate tribunal observed that no substantial purpose would be served in entertaining the appeal at this stage.

The appeal was disposed of with liberty to the appellant to raise all issues, including those relating to the formation and determination of opinion by the resolution professional, in the pending avoidance proceedings before the NCLT.