Claims of Rs 1.6 L Cr filed by RPs of cos gone bankrupt | Economic Times

Resolution professionals (RPs) of 700 bankrupt companies have filed claims for recovery of Rs 1.6 lakh crore at the National Company Law Tribunal (NCLT) alleging ‘unlawful’ transactions entered into by the companies prior to their admission into Insolvency and Bankruptcy Code (IBC) proceedings, according to a government official.The list of companies whose RPs have filed such claims is said to include Aircel, Videocon, Reliance Communications, Jaypee Infratech, LancoInfratech, Bhushan Power and Steel, Bhushan Steel and Educomp Infra, among others.The IBC stipulates that RPs carry out an audit of all transactions undertaken by a company up to two years prior to the company’s admission into bankruptcy proceedings.The audit is supposed to identify if there are any unlawful transactions that have taken place and the RP of the bankrupt company is supposed to report the transactions to NCLT.These transactions are termed as ‘avoidance transactions’ in IBC parlance. Examples of such transactions could include preferential payments made to certain parties such as related entities of the promoter group without the knowledge of the creditors or the bankers of the company thereby causing wrongful loss to the creditors. RPs of the above mentioned companies declined to comment, citing confidentiality reasons when contacted.In many of the cases where such claims are pending adjudication by NCLT, the claims for recovery have been filed against connected entities of the past promoters of these companies who received undue gains or against creditors who benefited at the expense of others because they received out-of-turn payments. If the legal claims result in successful outcomes for the companies, the creditors could see their recoveries rise as the money would have to come back to the company. However, experts identified certain loopholes in the law governing recovery of such claims.“The law places the onus on the resolution professional to petition the courts for avoidance transactions. However, the law is not clear on who will take the litigation process forward once the resolution process is over and the resolution professional moves on. In that case, who is to continue the litigation process?” asked Ashish Chhawchharia, resolution professional and partner, Grant Thornton Bharat.