As per comments of stakeholders received by the Committee, there is lack of clarity on whether proceedings for avoidable transactions and improper trading can continue after the completion of CIRP.
Sections 43-51, 66, and 67 of the Code lay down various transactions that may be avoided by the resolution professional or liquidator (collectively referred to as “avoidable transactions”), and the actions that can be taken against the erstwhile management for fraudulently or wrongfully trading in insolvency (referred to as “improper trading”).
The Committee has stated that the continuation of such proceedings is permitted by Section 26 of the Code and has recommended that a clarificatory amendment may be made to this provision to avoid any doubts in this regard.
In addition, the Committee has recommended for suitable amendments to the Code to ensure that the resolution plan provides sufficient clarity for the smooth conduct of proceedings for avoidable transactions or improper trading.
Source: Barandbench
