NCLAT (27.01.2022) in 63 Moons Technologies Ltd. Vs. The Administrator of Dewan Housing Finance Corporation Ltd. [Company Appeals (AT) (Insolvency) No. 454, 455 and 750 of 2021] held that;
Thus, the RP cannot continue beyond an order under Section 31 of the IBC, as the CIRP comes to an end with a successful Resolution Plan having been approved.
This is however subject to any clause in the Resolution Plan to the contrary, permitting the RP to function for any specific purpose beyond the approval of the Resolution Plan.
The benefit of an avoidance application is not meant for the Company, after the Resolution Plan is considered by the CoC and approved by the NCLT.
Section 66 of the insolvency and Bankruptcy Code 2016 does not impede the resolution applicant’s rights to avail the proceeds from the avoidance applications. Indeed, this Code does not have any provision restricting the resolution applicant to avail the benefits of avoidance proceedings initiated under Section 66. However, if there is no restriction, it can’t be presumed that the code authorises the resolution applicant for the same.
Sub-section 2 of Section 67 of the Insolvency and Bankruptcy Code indicate that recoveries from avoidance transaction should be distributed among the creditors in order of priority given under Section 53 of the Code. Therefore, it cannot be the discretion of the Committee of Creditors to negotiate the terms against the statutory provision of the Code. However, language erred in Section 67 indicates that recoveries made under Section 66 could go only to the creditors of the Corporate Debtor.
Any decision taken by the committee of creditors which strikes at the very heart of the Code cannot simply be upheld under the garb of commercial wisdom.
Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016 (the “Liquidation Process Regulations”), which empowers a Liquidator to assign or transfer a not readily realizable asset during the liquidation of a Corporate Debtor. The conspicuous absence of a similar provision in the CIRP Regulations, which permits assignment or transfer of recoveries from avoidance transactions to a resolution applicant, supports the case of the Appellant that such recoveries cannot be transferred to a resolution applicant in the CIRP process, which is qualitatively different and distinct from the liquidation process.
This Tribunal is under a legal & statutory duty to enquire whether a Resolution Plan suffers from any illegality or otherwise contains unlawful terms. The said duty is not eclipsed by the manner of voting by a particular creditor or a class of creditors. Even in the absence of any person pointing out any illegality in a resolution plan, this Hon’ble Tribunal is expected to exercise its powers to enquire whether the requirements of Section 30(2) of the Code have been met to perform the said duty.
The CoC cannot countenance incorporating any term in the resolution plan which is contrary to the law or which otherwise makes the resolution plan illegal.
Under Section 30 (2) of the Adjudicating Authority is given powers about approval of Resolution Plan. Section 30 (2) (e) of the Code imposes a duty on the Adjudicating Authority to ensure that the Resolution Plan presented for approval does not contravene any of the provisions of law for the time being in force.
Insolvency Law Committee Report, 2020, specifically provides that the key aim of providing certain transactions is to avoid unjust enrichment of some parties in the insolvency at the cost of all creditors. . . . Thus it was recommended that instead of providing anything prescriptive in this regard, the decision on the treatment of recoveries might be left to the adjudicating authority.
The outcome of the avoidance transaction cannot be given to the successful resolution applicant and it must go to the company’s creditors.
Excerpts of the order;
# 4.1 The present Appeal raises an important legal issue viz. whether Successful Resolution Applicant can appropriate recoveries from avoidance applications filed u/s 66 of the Insolvency and Bankruptcy Code, 2016?
# 4.2 The Appellant’s case is that the said issue is covered in favour of the Appellant by the judgement dated November 26, 2020, passed by the Hon’ble Delhi High Court in the case of Venus Recruiters Private Limited versus Union of India. However, despite the same, the learned NCLT has dismissed the said, IA 623 of 2021 filed in IA 449/MB/C-II/2019 in CP 4258/MB/C-II/2019 without giving any reasons and by misreading and miss applying the order dated March 15 2021, passed by this Tribunal in the case of Interrups Inc versus Kuldeep Kumar Bassi.
# 4.3 On March 2, 2020, Respondent No. 1 issued the request for a Resolution Plan (“RFRP”) providing that the benefit of recoveries from Avoidance application filed under Sections 43, 45, 47, 49, 50 or 66 of the Code shall enure to the benefit of the creditors of the Corporate Debtor and shall be a pass-through amount to them.
# 4.4 However, in the COC meeting held on September 10 2020, modification of this stipulation was discussed purportedly “in the mutual interest of COC members and the Resolution Applicant”, and it was decided that the prospective Resolution Applicants may ascribe a value “as best as the Resolution Applicant’s could” to the transactions under Section 66 of the Code and purpose the manner of the dealing with recoveries therefrom.
# 4.5 Following this decision of the COC, an RFRP dated September 16, 2020, was issued requiring the Resolution Applicant’s inter alia ascribed a realistic value to the Section 66 transactions.
# 4.6 However, the Resolution Plan of the Successful Resolution Applicant viz. Respondent No. 2 values the recoveries from Section 66 transactions, in respect of which applications for recovery of more than ₹ 45,000 crores have been filed by Respondent No. 1, at Rupees one notional value and seeks to appropriate the future recoveries from these transactions. In other words, by valuing the Section 66 transactions at an unrealistic and arbitrary value of ₹1, Respondent No. 2 has attempted to appropriate massive recoveries that are likely to result from the avoidance applications filed by Respondent No. 1.
# 4.7 The Appellant contends that as a matter of law and its correct interpretation-recoveries from avoidance transactions to enure the benefit of the DHFL’s creditors. In support, authoritative external aids of interpretation based on which the Indian law has developed and case law cited and detailed written submissions were filed before the Adjudicating Authority/NCLT.
# 4.8 The Appellant cited the judgement of Hon’ble Delhi High Court in the case of Venus Recruiters Private Limited (supra) in which the Hon’ble High Court held that avoidance applications were meant to give benefit to the creditors of the Corporate Debtor, not for the Corporate Debtor in its new Avatar after the approval of the Resolution Plan and that avoidance applications will also not for the benefit of the Resolution Applicant after the Resolution was complete.
# 4.9 The question before the learned NCLT inter alia was; whether the stipulation in DHFL’s Resolution Plan of recoveries from various transactions in enuring to the benefit of Respondent No. 2 amounted to illegality (as alleged by the Appellant before the NCLT); whether the same was within the commercial domain of the COC (as urged by the Respondent before the learned NCLT). Further, if it was illegality, could it be saved by any majority strength within the CoC voting in favour of the Resolution Plan?
# 4.13 Appellant alleges that the impugned order is ex-facie an unreasonable and a non-speaking order. The learned NCLT has failed to consider the submissions and arguments of the Appellant and thereby failed to examine the legal issue viz. whether a Successful Resolution Applicant can appropriate recoveries from avoidance applications filed under Section 66 of the Code as stated above. The Hon’ble Delhi High Court has, in the case of Venus Recruiters Private Limited (supra), issued an authoritative and binding pronouncement holding that avoidance applications were meant to give benefit to the creditors of the Corporate Debtor, not for the Corporate Debtor in its new avatar after the approval of the Resolution Plan and that avoidance applications were also not for the benefit of the Resolution Applicant after the Resolution was complete.
# 9. Analysis
The present appeal raises important questions, given as under for our consideration;
a) Whether the stipulation in DHFL’s Resolution Plan of recoveries from Avoidance transactions enuring to the benefit to Resolution Applicant amounted to illegality?
b) Whether the action of approving the resolution plan to give the benefit of avoidance transactions to the Resolution Applicant was within the domain of commercial domain of the CoC?
c) Further if it was illegality, could it be saved by any majority strength within the CoC voting in favour of the Resolution Plan?
d) Can the Successful Resolution Applicant appropriate recoveries from avoidance applications filed under Section 66 of the Insolvency and Bankruptcy Code, 2016?
# 9.9 A mandatory statutory duty has been cast upon the Adjudicating Authority, in terms of Section 31 read with Section 30(2) of the Code, to ensure that a Resolution Plan which is placed before it for approval is compliant with the provisions of law. Despite the limited scope of enquiry in an application for approval of a Resolution Plan, the jurisdiction of the Adjudicating Authority to go into the aspects of illegality in Resolution Plans and the Resolution Plans to be compliant with the provisions of law has been well recognised & accepted by Hon’ble Supreme Court of India in a number of judgements including in a recent judgement in the case of Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr. (2021 SCC Online SC 204, Para 148).
# 9.12 The learned Senior Counsel for the Respondent adverted to the observations of the Hon’ble High Court of Delhi in paragraphs 3 and 77 of the judgement in Venus Recruiters Private Limited v. Union of India, reported in 2020 SCC OnLine Del 1479 Hon’ble High Court of Delhi has held that;
“3. The question that has arisen is whether, under the Insolvency and Bankruptcy Code, 2016 (hereinafter, ‘IBC’), an application filed under Section 43 for avoidance of preferential transactions can survive beyond the conclusion of the resolution process and the role of the RP in filing/pursuing such applications. The jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan, is thus under challenge.
77. Moreover, an RP cannot continue to file applications in an indefinite manner even after the approval of a Resolution Plan under Section 31. The role of a RP is finite in nature. He or she cannot continue to act on behalf of the Corporate Debtor once the Plan is approved and the new management takes over. To continue a RP indefinitely even beyond the approval of the Resolution Plan would be contrary to the purpose and intent behind appointment of a RP. The Resolution Professional (RP), as the name itself suggests has to be a person who would enable the Resolution. The role of the RP is not adjudicatory but administrative in nature. Thus, the RP cannot continue beyond an order under Section 31 of the IBC, as the CIRP comes to an end with a successful Resolution Plan having been approved. This is however subject to any clause in the Resolution Plan to the contrary, permitting the RP to function for any specific purpose beyond the approval of the Resolution Plan. In the present case, no such clause has been shown to exist.”
# 9.13 However, learned Senior Counsel for the Appellant had based its case on the observation of the Hon’ble High Court in paragraph 73, quoted below, of the same judgement.
“73. An avoidance application for any preferential transaction is meant to give some benefit to the creditors of the Corporate Debtor. The benefit is not meant for the Corporate Debtor in its new avatar, after the approval of the Resolution Plan. This is clear from a perusal of Section 44 of the IBC, which sets out the kind of orders which can be passed by the NCLT in case of preferential transactions. The benefit of these orders would be for the Corporate Debtor, prior to approval of the Resolution Plan. Any property transferred or sum acquired in an order passed in respect of a preferential transaction would have to form part of the final Resolution Plan. The Resolution Plan would have to take into consideration such amounts and benefits which can be given to the Corporate Debtor for the benefit of the CoC. The benefit of an avoidance application is not meant for the Company, after the Resolution Plan is considered by the CoC and approved by the NCLT.”
# 9.27 We are fully convinced with the argument advanced by the Appellants Counsel that the ratio of the ‘Venus Recruiters’ case applies to the facts of this case. Further, the ratio laid down by the Hon’ble Delhi High Court is that of the constitutional court directly answering the issues before the NCLT was binding on the AA/ NCLT.
# 9.70 Based on the different judgements of the Hon’ble Supreme Court, it is undisputed that NCLT/NCLT has to adopt a hands-off approach and should not undertake a judicial review of the COC’s commercial wisdom exercised. However, the question arises as to what can be considered commercial wisdom. Commercial wisdom is not defined anywhere. What would be treated under commercial wisdom can be inferred from the powers given to COC under the code. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the Corporate Debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximize the value of its assets; and that the interests of all stakeholders including operational creditors have been taken care of. Suppose the Adjudicating Authority finds that the aforesaid parameters have not been kept in view on a given set of facts. In that case, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters.
# 9.73 Hon’ble Supreme Court, in the case of Ebix Singapore (supra), has observed that the procedure designed for the insolvency process is critical for allocating economic coordination between the parties who partake in, or are bound by the process. This procedure produces substantive rights and obligations. For instance, the composition of the CoC, the method and percentage of its voting, the timelines for CIRP, the obligation on the RP to file specific forms after every stage of the process and the obligation to explain to the Adjudicating Authority reasons for any deviations from the timeline while submitting a Resolution Plan, and other such procedural requirements create a mechanism which tightly structures the conduct of all participants in the insolvency process. This process invariably impacts the conduct of the Resolution Applicant who participates in the process and consents to be bound by the RFRP and the broader insolvency framework. An analysis of the statute and regulations framework provides insight into the dynamic and comprehensive nature of the statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, Appellate Authority, must be cognizant of, and allied with that objective. Any claim seeking an exercise of the Adjudicating Authority’s residuary powers under Section 60(5)(c) of the IBC, the NCLT’s inherent powers under Rule 11 of the NCLT Rules 2016 must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective.
# 9.74 In the instant case, respondents claim that Section 66 of the insolvency and Bankruptcy Code 2016 does not impede the resolution applicant’s rights to avail the proceeds from the avoidance applications. Indeed, this Code does not have any provision restricting the resolution applicant to avail the benefits of avoidance proceedings initiated under Section 66. However, if there is no restriction, it can’t be presumed that the code authorises the resolution applicant for the same.
# 9.76 The question of whether the stipulation of future recoveries from Section 66 avoidance applications being retained by the Successful Resolution Applicant’s amounts to illegality or whether the same is within the commercial domain of COC as claimed by the respondent is to be addressed. Whether the same can be treated under the rights of commercial wisdom of the COC is also vital for the decision of these Appeals.
# 9.95 It is important to mention that Sections 66 and 67 of the Insolvency and Bankruptcy Code 2016 deal with wrongful trading. Sub-section 2 of Section 66 provides that where the adjudicating authority has passed an order either under Sub-section 1 or 2 of Section 66 of the Code, in relation to a person who is a creditor of the Corporate Debtor, the Adjudicating Authority may by order direct that the whole or any part of the debt owed by the Corporate Debtor to that person and any interest thereon shall be ranked in order of priority of payment under Section 53 after all other debts owed by the Corporate Debtor.
# 9.97 The phrase “in relation to a person who is a creditor of the Corporate Debtor” and the other expression “shall rank in the order of priority of payment under Section 53” used in Sub-section 2 of Section 67 of the Insolvency and Bankruptcy Code indicate that recoveries from avoidance transaction should be distributed among the creditors in order of priority given under Section 53 of the Code. Therefore, it cannot be the discretion of the Committee of Creditors to negotiate the terms against the statutory provision of the Code. However, language erred in Section 67 indicates that recoveries made under Section 66 could go only to the creditors of the Corporate Debtor.
# 9.103 Any decision taken by the committee of creditors which strikes at the very heart of the Code cannot simply be upheld under the garb of commercial wisdom. In other words, the COC’s decision to approve the resolution plan submitted by Respondent No. 2, which contains unlawful stipulations concerning intelligible bifurcations of recoveries under two similarly placed sets, is unsustained in the eyes of the law. Accordingly, it is illegal, and the plan containing such an illegal stipulation is not sustainable.
# 9.108 It is also important to mention that the depositors of the DHFL are the rightful beneficiaries, if not owners, of the monies that have been siphoned off by the promoter directors of the Corporate Debtor. Unfortunately, such activities generally disadvantage creditors, especially small investors.
# 9.109 Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016 (the “Liquidation Process Regulations”), which empowers a Liquidator to assign or transfer a not readily realizable asset during the liquidation of a Corporate Debtor. The conspicuous absence of a similar provision in the CIRP Regulations, which permits assignment or transfer of recoveries from avoidance transactions to a resolution applicant, supports the case of the Appellant that such recoveries cannot be transferred to a resolution applicant in the CIRP process, which is qualitatively different and distinct from the liquidation process.
# 9.111 This Tribunal is under a legal & statutory duty to enquire whether a Resolution Plan suffers from any illegality or otherwise contains unlawful terms. The said duty is not eclipsed by the manner of voting by a particular creditor or a class of creditors. Even in the absence of any person pointing out any illegality in a resolution plan, this Hon’ble Tribunal is expected to exercise its powers to enquire whether the requirements of Section 30(2) of the Code have been met to perform the said duty. The plea of the Respondents, if accepted, would amount to disregarding the well-settled and universally applicable legal principle that there cannot be any estoppels against the law.
# 9.122 While the proposition that the commercial wisdom of the Committee of Creditors is supreme is not disputed in so far as the commercial aspects of the Resolution Plan are concerned, the said principle is not applicable to the present facts where the issue of illegality has been raised. The CoC cannot countenance incorporating any term in the resolution plan which is contrary to the law or which otherwise makes the resolution plan illegal.
# 9.124 The Respondents have also contended that it is a common practice in insolvency cases to ascribe INR 1 value when there is uncertainty regarding the same. The Respondents have relied on the judgement in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors (2020) 8 SCC 531 (the “Essar Steel Judgement”) (Para 73)
# 9.125 A careful reading of the Essar Steel Judgement, the Supreme Court upheld the assignment of the notional value of INR 1 by the Resolution Professional to claims of Operational Creditors in respect of which there were pending disputes with various authorities. The case had nothing to do with avoidance applications and ascribing of’ value to recoveries. Therefore, the assignment of the notional value of INR 1 to the claims of operational creditors in the Essar Steel Judgement case was in an entirely different factual background which is inapplicable to the facts of the present case.
# 9.126 It is pertinent to mention that company appeal (AT) (insolvency) 546 of 2021 is filed by the Air Force Group Insurance Society, Company Appeal AT/INS/759 and 760 is filed by U P State Power Sector Employees Trust, CA /AT/INS 760 of 2021 is filed by Uttar Pradesh State Power Corporation Contributory Provident Fund Trust on being aggrieved by the resolution plan. Many other Fixed Deposit Holders and Public Deposit Holders had filed their appeal against the same resolution plan. None of them is satisfied with the amount awarded under the resolution plan. Provident fund holders and Employees Provident fund trust had invested in fixed deposits of the financial service provider, i.e. corporate debtor DHFL. However, this Tribunal is not a court of equity, and every stakeholder abides by the terms of the approved resolution plan.
# 9.127 In the circumstances, it is of utmost importance to see that there should not be any unjust enrichment at the cost of lakhs of creditors of the company whose money has been defrauded by the corporate debtor’s promoters. It is also important to mention that Government Agencies like CBI, a Special Fraud Investigation officer of the Ministry of Corporate Affairs and other agencies are also investigating the fraudulent transfers of money from the corporate debtor account to the shell companies rerouting them from there. In such a scenario, chances of recovery are very high. If any such recovery is made from these avoidance transactions, the benefit should go to the creditors of the company as per the prevailing practice in other countries.
# 9.128 It is also important to mention that outcome of the avoidance transaction is given in the notional value of ₹ one. In such a scenario, it should not have much impact on the resolution plan. However, since we have concluded that the outcome of the avoidance transaction cannot be given to the successful resolution applicant and it must go to the company’s creditors, it is essential to send back the resolution plan for reconsideration by the committee of creditors.
Conclusion
# 10. The only judgment that squarely covers the facts of the present case is the Venus Judgement of the Delhi High Court. Therefore, the contention that the Venus Judgement is not applicable or is distinguishable is incorrect and an afterthought. At the relevant time, it was not the case of any of the Respondents that the said judgement is not applicable. The same is clear from the following:
i) In the 17th CoC meeting held on 18th/19th December 2020, it was pointed out to the resolution applicants, including Respondent No. 2, that the treatment of recoveries from avoidance transactions was not in compliance with the terms of the September RFRP and the Venus Judgement was also pointed out to them. (Page No. 315-322 of the Appeal- Vol II)
ii) When the Venus Judgement was pointed out as above by the legal counsel, it was not the case of any of the Respondents that the said judgement does not apply to the case.
iii) Not only was no objection raised as regards applicability of the Venus Judgement, in fact, after 18th/19th December 2020, Respondent No. 2 modified its resolution plan to provide those recoveries from avoidance transactions under Sections 43 to 51 of the Code to benefit DHFL’s creditors.
iv) However, the issue about the applicability of the Venus judgement in the facts of the case was an adjudicatory issue that required adjudication. The law does not permit COC to exercise judicial function. There is a vast difference between the exercise of Commercial Wisdom during CIRP and the exercise of adjudicatory powers by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. Law is well settled that Adjudicating Authority cannot interfere with the commercial wisdom of the COC provided approved by the required majority. Similarly, in the instant case, COC was not authorised to decide the applicability of Venus judgement on the facts of the case.
# 11. Admittedly in the instant case, the Administrator under statutory duties under Regulation 36B of the CIRP Regulations requested for Resolution Plan (RFRP). It was provided in the RFRP that any transaction is avoided or set aside in terms of Sections 43, 45, 47, 49, 50 or 66 of the Code, and any amount is received by the 1st Respondent, Resolution Applicant or the Corporate Debtor; such sums shall be for the benefit of the CoC. In response to the said RFRP, four entities expressed interest in submitting the Resolution Plans.
# 12. However, when the Resolution Applicant’s raised the issue with respect to the stipulation of an RFRP providing that the recoveries from transactions debtor aside/avoided would be for the benefit of the DHFL creditors, RFRP was amended.
#13. Based on the above issue raised by Resolution Applicant’s, the Administrator, after deliberations with both the legal counsels and process adviser and based on their inputs, decided that the COC could evaluate options as they deem fit. Although the administrator stated that it is CoC’s prerogative to fix the term of RFRP to resolve the issues raised by PRA’s, CoC has the discretion to negotiate.
# 14. It is pertinent to mention the powers of COC where commercial wisdom can be exercised is provided under Sections 28, 30(4) of the Code. It is also provided that no action under Section 28 (1) of the Code shall be approved by CoC unless approved by a vote of 66% of the voting share. Section 28 (4) further provides that where the Resolution Professional takes any action under subsection 1, without seeking the approval of the Committee of Creditors in the manner as required in the section, such action shall be void.
# 15. The Insolvency and Bankruptcy Code is a self-contained code. In the exercise of its power under Section 30 (4), the CoC is authorised to approve a Resolution Plan with a vote share of 66%. Under Section 30 (2) of the Adjudicating Authority is given powers about approval of Resolution Plan. Section 30 (2) (e) of the Code imposes a duty on the Adjudicating Authority to ensure that the Resolution Plan presented for approval does not contravene any of the provisions of law for the time being in force.
# 16. Therefore, before approving the Resolution Plan, the Adjudicating Authority was obligated to test the Resolution Plan in terms of Section 30 (2) of the Code. In the instant case, the Administrator referred the matter to COC to decide on the applicability of the Venus judgement of Delhi High Court in providing the outcome of avoidance transactions to the Successful Resolution Applicant. Adjudicatory power could not have been delegated to the CoC. The Adjudicating Authority has not taken any decision about the applicability of the Venus judgement on the issue of providing the outcome of avoidance transaction to the resolution applicant. The Adjudicating Authority has stated that “as far as the claims of avoidance transactions, COC has consciously decided that the money realised through these avoidance transactions would accrue to the members of the CoC. At the same time, they have also consciously decided after a lot of deliberations negotiations that money realised if any under Section 66 of the IBC, i.e. fraud and fraudulent transactions, CoC has ascribed the value of ₹ one and if any positive money recovery the same would go to the Resolution Applicant of the Corporate Debtor.” Therefore, it cannot be considered the findings of the Adjudicating Authority. The COC was not empowered to exercise such Adjudicatory power and decide. Insolvency Law Committee Report, 2020, specifically provides that the key aim of providing certain transactions is to avoid unjust enrichment of some parties in the insolvency at the cost of all creditors. The underlying policy of such a proceeding is to prevent unjust enrichment of one party at the expense of other creditors. Thus, factual factors such as the kind of transactions being provided, party funding the action, assignment of claims, and creditors affected by transaction or trading may be considered when deciding on the distribution of recoveries. Thus it was recommended that instead of providing anything prescriptive in this regard, the decision on the treatment of recoveries might be left to the adjudicating authority.
# 17. Accordingly, the Adjudicating Authority should have decided whether the recoveries vested with the corporate debtor should be applied for the benefit of creditors of the corporate debtor, the successful resolution applicant or other stakeholders. In arriving at this decision, the Adjudicating Authority may take note of the facts and circumstances of the case and other listed factors.
# 18. The Respondents have also argued that the possibility of recovering monies from avoidance transactions is very low. However, the amount of the actual recovery that may be made in the future is entirely irrelevant. Since Respondent No. 2 has ascribed a value of INR 1 to the avoidance transactions, Respondent No. 2 has not factored in the avoidance transactions in the Resolution Plan amount. Moreover, there is no material on record to suggest that the avoidance transactions have been factored in Respondent No. 2’s Resolution Plan. Therefore, the oral contention of the Respondents that the avoidance transactions have been factored in the Resolution Plan amount is unsupported and not borne out from the material on record.
# 19. Therefore, the present appeals ought to be allowed. The term in the Resolution Plan that permits the Successful Resolution Applicant to appropriate recoveries, if any, from avoidance applications filed under Section 66 of the Code ought to be set aside. The Resolution Plan be sent back to the CoC for reconsideration on this aspect.
# 20. Company Appeals No. 454, 455 & 750 of 2021 are decided accordingly. No order as to costs.
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