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2022 (2) TMI 18 - AT - Insolvency and BankruptcySeeking Liquidation of Corporate Debtor - Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor falls into the new classification criteria of MSME - benefit of exemption under Section 240A - Commercial Discussion of CoC - justifiable or not - Eligibility under the amended MSME Act 2006, Notified on 26.06.2020 - time limitation - HELD THAT - The contention of the Learned Counsel for the Appellant that the date of NPA is 30.03.2015 and Section 7 Application was filed on 03.07.2018 and hence is barred by Limitation , is unsustainable as the material on record evidences the revival letters, written by the Corporate Debtor , the last one being 28.11.2015. It is seen that the Bank has enclosed these revival letters duly acknowledged and signed by the Corporate Debtor from time to time and the Section 7 Petition filed on 06.07.2018, cannot be said to be barred by Limitation . Commercial Discussion of CoC - justifiable or not - HELD THAT - The Hon ble Supreme Court in Jaypee Kingston Boulevard Apartments Welfare Association Ors. 2021 (3) TMI 1143 - SUPREME COURT has observed that there is an intrinsic assumption that Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. They act on the basis of thorough examination of the proposed Resolution Plan and assessment made by their team of experts. The opinion on the said matter expressed by them after due deliberations in the CoC Meeting through e-voting, as per voting shares, is a collective business decision. The Legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual Financial Creditors or their collective decisions before the Adjudicating Authority that has made it non-justiciable - In the instant case, the Appellants have failed to establish by means of any documentary evidence that there was any material irregularity under Section 30(2) of the Code in the Order of the Liquidation passed by the Adjudicating Authority. Eligibility under the amended MSME Act 2006, Notified on 26.06.2020 - HELD THAT - It is an admitted fact that the registration itself of the Appellant Company under MSME has not taken place. Further, it is subsequent to the initiation of the CIRP and therefore the Appellant is ineligible to take the benefits of Section 240A under the Code. The eligibility to be a Resolution Applicant is tested on the date of submission of the Plan. In the instant case, that stage of submission of Resolution Plan was completed and subsequently the CoC has decided by a vote of majority of 88.44% to liquidate the Company. It is significant to mention that the eighth CoC Meeting was held on 20.04.2020 which was attended by the Appellant wherein the status of the Liquidation Application was discussed - In the instant case, the MSME Act, 2006, was amended with effect from 01.07.2020 whereas the CIRP Admission Order was passed on 26.04.2019. After going through the contents of the Notification, dated 26.06.2020, under the MSME Act, 2006, this Tribunal arrives at a definite conclusion that the said notification is only Prospective in nature and not a Retrospective one because the said notification does not in express terms speak about the applicability of retrospective operation. The relevant words are conspicuously absent besides there being no implicit reference to be drawn for such a construction. Appeal dismissed.
Issues Involved:
1. Limitation of the Insolvency Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Justiciability of the Committee of Creditors (CoC) decision for Liquidation. 3. Eligibility of the Corporate Debtor under the amended MSME Act, 2006. Detailed Analysis: Issue of Limitation: The Appellant argued that the Insolvency Application under Section 7 of the Code, filed on 03.07.2018, is barred by limitation since the Corporate Debtor was declared as NPA on 30.03.2015. However, the Tribunal found this contention unsustainable. The material on record evidenced revival letters written by the Corporate Debtor, with the last one dated 28.11.2015, acknowledging their liability. Hence, the Section 7 Petition filed on 06.07.2018 is within the limitation period. The ratio of the Hon’ble Supreme Court in 'Dena Bank (Now Bank of Baroda)' Vs. 'C. Shivkumar Reddy & Anr.' (2021) 10 SCC 330, was applied, affirming the jural relationship and acknowledgment of debt through revival letters. Commercial Decision of CoC – Whether Justiciable: The Tribunal addressed whether the CoC’s decision for liquidation was justified. It noted that the Hon’ble Supreme Court in various judgments, including 'Ghanshyam Mishra and Sons Private Limited' Vs. 'Edelweiss Asset Reconstruction Company Limited', (2021) 166 SCL 237 (SC), has established that the commercial decision of the CoC is non-justiciable unless there is material irregularity or fraud, which was not established in this case. The Tribunal emphasized that the CoC’s business decisions are based on thorough examination and collective wisdom, making them non-justiciable. The Appellants failed to prove any material irregularity under Section 30(2) of the Code in the liquidation order passed by the Adjudicating Authority. Eligibility under the Amended MSME Act 2006, Notified on 26.06.2020: The Appellant claimed that the Corporate Debtor should benefit from the amended MSME Act, 2006, which came into effect on 01.07.2021. However, the Tribunal noted that the registration of the Corporate Debtor under MSME had not occurred, and the CIRP was initiated before the amendment. The Tribunal held that the MSME Notification is prospective and not retrospective, as it does not explicitly state otherwise. The eligibility to be a Resolution Applicant is tested on the date of submission of the Plan, and the Corporate Debtor was not registered as an MSME at that time. The Tribunal cited the Hon’ble Supreme Court’s decision in 'S.L. Srnivas Jute Twine Mills P. Ltd.' Vs. 'Union of India & Ors.', (2006) 2 SCC 740, affirming that statutes are presumed to be prospective unless explicitly stated otherwise. The Tribunal concluded that the amendments to the MSME Act are prospective and cannot apply to the Corporate Debtor retrospectively. The CoC’s decision for liquidation, supported by a majority vote of 88.44%, was upheld as there was no material irregularity. The Tribunal dismissed the appeal and the IAs, affirming the liquidation order. Conclusion: The Tribunal dismissed the appeal, affirming the liquidation order and holding that the Insolvency Application was within the limitation period, the CoC’s decision for liquidation was non-justiciable, and the Corporate Debtor was ineligible to benefit from the amended MSME Act retrospectively. The judgment emphasized the prospective nature of the MSME amendments and the non-justiciable nature of CoC’s commercial decisions.
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