Indian Institute of Insolvency Professionals of ICAI (IIIPI) has designed a template that Insolvency Professionals (IPs) can adopt to report \u2018Avoidance Transactions\u2019 to the National Company Law Tribunal (NCLT).<\/p>\n
The \u2018Template\u2019 \u2014 which is recommendatory\u2014 is aimed to facilitate the filing of Avoidance Transaction petitions before NCLTs, to ensure uniformity and in expediting decision-making process in the court, which shall ultimately enhance recovery by creditors.\u00a0\u00a0<\/p>\n
The said \u2018Template\u2019 was developed by a Study Group constituted by IIIPI under the Chairmanship of Subodh Agarwal, Past-President of ICAI, after consultations with group members, experts and stakeholders. \u201cThe adoption of such templates by IPs would enhance the quality of findings, applications, and outcomes in the context of avoidance transactions.\u00a0\u00a0This would not only improve efficiencies in the ecosystem but also help in maximising the value by clawing back the dues from avoidance transactions under IBC,\u201d Ashok Haldia, Chairman, IIIPI-Board, said.<\/p>\n
The development of \u2018Template\u2019 is seen as part of best practices in the insolvency regime in India.\u00a0<\/p>\n
Under the IBC, \u201cAvoidance Transactions\u201d are essentially transactions undertaken by the Corporate Debtor prior to the initiation of the insolvency process to defraud its creditors or to benefit related parties.\u00a0\u00a0These are of four types \u2013 Preferential, Undervalued, Fraudulent, and Extortionate (PUFE) Transactions.\u00a0\u00a0<\/p>\n
The responsibilities of Resolution Professionals \/Liquidators include, inter alia, forming anopinion, determining the amounts involved and filing an application to the Adjudicating Authority in respect of such PUFE transactions.\u00a0\u00a0<\/p>\n
As per the latest data of the Insolvency and Bankruptcy Board of India (IBBI), till March 2024 a total of 1237 Avoidance Transaction applications amounting to \u20b93.7 lakh crore were filed before NCLT, out of which only 292 applications amounting \u20b951,738 crore were disposed by the court, through which only \u20b96,599 crore were recovered by creditors.\u00a0<\/p>\n
The long pendency of Avoidance Transaction petitions and low recovery has been a serious concern across stakeholders.<\/p>\n