Survival Beyond RP Tenure: NCLT Authority in Avoidance Proceedings



The Insolvency and Bankruptcy legislation is a comprehensive legislation that contains all of the required provisions for providing a haven for business debtors in difficulty. The prohibition of fraudulent transactions performed by the corporate debtor’s management in the hands of some chosen creditors is critical to the effectiveness of an insolvency regime. The Insolvency and Bankruptcy Code has always assumed that avoidance procedures will take place independently of CIRP proceedings.

This may be concluded from Section 26[9], which states that the RP’s filing of an avoidance application has no bearing on the CIRP proceedings. However, the Venus Recruiters decision has connected the two processes, which may result in I&B Code inconsistencies. Similarly, Regulation 44 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016[11] (Liquidation Regulations) states that the liquidator must liquidate the corporate debtor within one year of the liquidation commencement date, regardless of the status of any avoidance application filed under Chapter III of Part II of the I&B Code.

IBBI Recommendations: Continuation of Avoidance Proceedings Post-CIRP

  • Nature of Avoidance Proceedings: The speaker asserts that proceedings related to avoidable transactions are naturally prone to resistance. They reference a Discussion Paper by the Insolvency and Bankruptcy Board of India (IBBI) from April 27, 2019, to support the idea that such proceedings may face challenges.


  • Section 26 Clarification: It is argued that Section 26 of the Insolvency and Bankruptcy Code (Code) makes it clear that filing an avoidance application under Section 25 by the Resolution Professional (RP) does not impact the Corporate Insolvency Resolution Process (CIRP). This interpretation suggests that avoidance proceedings are independent of the CIRP and can continue simultaneously and even beyond its conclusion.

Section 26 of the IBC states as follows: –

―26. Application for avoidance of transactions not to affect proceedings.“The filing of an avoidance application under clause (j) of sub-section (2) of section 25 by the resolution professional shall not affect the proceedings of the corporate insolvency resolution process.”

In simple terms, Section 26 of the Insolvency and Bankruptcy Code (IBC) clarifies that filing avoidance applications during the corporate insolvency resolution process (CIRP) won’t impact the ongoing proceedings. The goal is to resolve the corporate debtor quickly, balancing timeliness and asset value maximization. Even after CIRP, avoidance applications can continue, and Section 26 ensures a separation between resolution proceedings and the adjudication of avoidance cases.

The IBBI’s Discussion Paper on the Corporate Liquidation Process further supports this perspective, emphasizing that avoidance applications shouldn’t delay the dissolution of the corporate debtor.


  • IBBI Recommendations: IBBI document from March 27, 2019, which recommends allowing the Resolution Applicant to pursue avoidance matters even after the CIRP has ended with the approval of a resolution plan. This supports the idea that avoidance proceedings can extend beyond the resolution or liquidation of the Corporate Debtor.


  • Separation of Proceedings: Reference is made to a Draft statement on Best Practices, emphasizing that avoidance applications target promoters, directors, and related parties separately from the resolution or liquidation of the Corporate Debtor. The suggestion is that even if the Corporate Debtor is resolved or liquidated, avoidance applications can still proceed. The Draft statement also contemplates the Resolution Professional continuing with the Avoidance application, subject to the decision of the National Company Law Tribunal (NCLT) or IBBI on the professional’s rights, duties, and remuneration.


  • Survival of Avoidance Proceedings: Even if it is assumed that the RP becomes functus officio (no longer in office) after the Corporate Insolvency Resolution Process (CIRP), the NCLT can still decide on avoidance applications. It is a statutory duty imposed on the RP to file avoidance applications, and once this duty is fulfilled, the avoidance proceedings survive the CIRP.


  • Delinking CIRP and Avoidance Transactions: Section 26 of the IBC effectively delinks the CIRP and avoidance transactions, emphasizing that the resolution plan’s approval does not necessarily conclude avoidance proceedings, as these are covered under Chapter III of the Code.


In simple terms, the text discusses the role of the Resolution Professional (RP) in avoidance proceedings under the Insolvency and Bankruptcy Code (IBC). It argues that even after the Corporate Insolvency Resolution Process (CIRP) concludes, the RP’s office doesn’t cease to function, especially in matters related to avoiding certain transactions. The opinion presented suggests that the resolution plan and avoidance transactions are separate, with the statutory duty of the RP extending beyond the CIRP time frame.

Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us


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