Successor RP Cannot Revisit Earlier Avoidance Transaction Determination After Failed Resolution Plan: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has ruled that a Resolution Professional appointed after a failed resolution plan cannot reopen an earlier RP's concluded determination on avoidance or fraudulent transactions.

The successor RP can place additional evidence to support the earlier determination, but cannot review or revisit it.

“Accordingly, we are of considered view that IA 4677 of 2025 is not maintainable and cannot be adjudicated by this Tribunal in view of erstwhile RP having made determination of avoidance or fraudulent transaction and the RP, assuming charge of the corporate debtor in the rerun after failed implementation of the approved resolution plan, cannot be permitted to review or revisit the such determination for avoidance or fraudulent transaction already concluded by the erstwhile RP, and the RP, being successor of erstwhile RP, can only be permitted to adduce the additional evidences to support the determination of erstwhile RP,” the tribunal observed.

Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar passed the order in proceedings arising from the insolvency of Sunshine Housing & Infrastructure Pvt. Ltd. The court partly allowed an earlier avoidance application and directed recipients of the payments to restore the amounts to the corporate debtor.

The insolvency proceedings began after ICICI Prudential Real Estate AIF I filed a Section 7 petition against the company. The petition was admitted on May 8, 2019. The corporate debtor had outstanding dues of Rs.40 crore to ICICI as on March 31, 2018, besides interest of Rs.3.83 crore.

The first RP, Rajendra M. Ganatra, had engaged a transaction auditor to examine transactions under Sections 43, 45, 50 and 66 of the Insolvency and Bankruptcy Code. Section 43 deals with preferential transactions, where certain creditors or parties receive an advantage over others during the statutory look-back period. Section 45 concerns undervalued transactions, while Section 66 deals with fraudulent or wrongful trading.

Based on the audit, Ganatra filed IA 893 of 2020 alleging preferential transactions involving about Rs.58.58 crore. These included payments to related and unrelated parties and the conversion of unsecured debentures into preference shares followed by their redemption.

A resolution plan submitted by Nandi Vardhan Infrastructure was approved in February 2022 but was not implemented. The tribunal ordered a rerun of the CIRP on June 24, 2024, following which Gaurav Adukia was appointed as the new RP.

Adukia subsequently filed IA 4677 of 2025, raising wider allegations involving preferential, undervalued and fraudulent transactions.

The court noted that some of these transactions had already been challenged in IA 893 or had figured in the earlier transaction audit.

The court held that the rerun CIRP could not be treated as a fresh CIRP. The erstwhile RP had already examined the transaction audit report and formed an opinion on the transactions to be pursued under the avoidance provisions.

The court also examined the redemption of preference shares created through conversion of compulsorily convertible debentures. The shares were redeemed on the same date as their conversion, although Form SH-7 filings showed a five-year redemption period. It held that the redemption could not be treated as being in the ordinary course of business or financial affairs.

The court rejected reliance on the Doctrine of Indoor Management, observing that Section 43 extends to transfers of property for the benefit of creditors

It further noted that more than Rs.100 crore was outstanding to secured creditors as on March 31, 2018, while the corporate debtor's liquidation value was Rs.63.29 crore.

The payments therefore resulted in preference to parties ranking below the secured lenders.

The recipients were directed to restore the payments within 30 days, failing which the unpaid amounts would carry 12% annual interest. IA 893 of 2020 was partly allowed, while the new IA was dismissed as not maintainable.

For Applicant: Advocate Mily Ghoshal

For Respondents: Advocates Kush Shah, Mulkit Salia, Divya Vaz, Prakruti Joshi