2021 (10) TMI 1233 - Tri - Insolvency and Bankruptcy

Jurisdiction - competence of suspended management of the CD to file Composite Resolution Plan - HELD THAT - The CD is an MSME Unit and the Hon'ble NCLAT has passed an order in this regard holding that there is no harm in giving an opportunity to the MSME in accordance with the provisions of the Code for keeping the promotion of entrepreneurship alive. Section 29 A of IBC provides for the eligibility of Resolution Applicant and Section 240 A explains how IBC code is applicable to MSMEs - One Resolution plan has been approved by the COC and placed before this bench and the Applicant has filed this Petition as a matter of abundant caution. There are no merits in the petition - petition dismissed.

Issues Involved:
1. Initiation and continuation of the Corporate Insolvency Resolution Process (CIRP) for National Plywood Industries Ltd.
2. Eligibility and participation of Mr. Piyush Periwal in the resolution process.
3. Applicability of Section 29A and Section 240A of the Insolvency and Bankruptcy Code (IBC) to MSMEs.
4. Approval and submission of resolution plans by different parties.

Detailed Analysis:

1. Initiation and Continuation of CIRP:
The Petition CP (IB)/09/GB/2019 was filed by the Financial Creditor (FC) under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating the Corporate Insolvency Resolution Process (CIRP) of National Plywood Industries Ltd. The petition was admitted on 26.08.2019, and Mr. Sandeep Khaitan was appointed as the Interim Resolution Professional, later confirmed as the Resolution Professional. The admission was challenged but upheld by NCLAT and further remanded by the Apex Court for fresh consideration on the point of limitation. Eventually, NCLAT upheld the admission again.

2. Eligibility and Participation of Mr. Piyush Periwal:
Mr. Piyush Periwal, the promoter, shareholder, and Chairman-Cum-Managing Director of the suspended Board of the Corporate Debtor (CD), filed an application to submit a Composite Resolution Plan. The Tribunal held that the CD is an MSME unit, and under Section 240A of IBC, MSMEs are given certain relaxations regarding the applicability of Section 29A. Despite this, the Tribunal noted Mr. Periwal's past conduct, including non-payment of dues and alleged manipulation in property sales, which raised questions about his integrity and eligibility to participate in the resolution process.

3. Applicability of Section 29A and Section 240A of IBC to MSMEs:
Section 29A of IBC outlines the eligibility criteria for Resolution Applicants, particularly disqualifying those with accounts classified as non-performing assets or those who have executed guarantees for corporate debtors in insolvency. However, Section 240A provides exemptions for MSMEs from certain clauses of Section 29A. The Tribunal emphasized the legislative intent to promote entrepreneurship and the viability of MSMEs, thus allowing them certain flexibilities in the resolution process.

4. Approval and Submission of Resolution Plans:
A Resolution Plan submitted by PLBB Products Pvt. Ltd. was approved by the Committee of Creditors (CoC) and was pending Tribunal approval. Meanwhile, Mr. Periwal sought to submit a Composite Resolution Plan, which led to the Tribunal directing that both plans be considered by the CoC. Ultimately, the CoC approved the plan by PLBB Products Pvt. Ltd. The Tribunal acknowledged the importance of a commercially viable and technically feasible plan that maximizes asset value and balances stakeholder interests.

Conclusion:
The Tribunal dismissed the application filed by the Financial Creditor seeking to restrain Mr. Piyush Periwal from participating in the resolution process. The Tribunal reiterated the legislative intent behind Section 240A, allowing MSMEs certain exemptions from Section 29A, thereby promoting entrepreneurship and economic growth. The Tribunal found no merit in the prayers to bar Mr. Periwal from submitting or participating in the Resolution Plan process, emphasizing the need for a viable and feasible plan that meets the objectives of the IBC.

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