2022 (6) TMI 987 - Tri - Insolvency and Bankruptcy

Seeking permission to allow to submit expression of interest published on 05/03/2022 so that the Applicant can file resolution plan - Applicant is not disqualified under section 29A of the insolvency and Bankruptcy code, 2016 in view of provisions of section 240A of the Insolvency and Bankruptcy Code, 2016 - eligibility of Micro, Small and Medium Enterprises to participate in the resolution plan - HELD THAT - The Application under Section 10 of IBC filed by the CD itself for its default to the FCs was admitted by this Bench on 23/11/2021. When the CIRP Period of 180 days was going to complete on 21/05/2022 and at that stage almost after 41 days from the last date of submission of the EOI, the Applicant on behalf of the Corporate Debtor in which he was Promoter/Director has submitted a simple letter dated 02.05.2022 to the Respondent No. 1 (RP) requesting the RP to allow them to submit a Resolution Plan and treat the said Letter as EOI without any reference of the compliance of the terms and conditions of the EOI. Hence it is apparent that the letter submitted is all hypothetical when the Applicant CD itself couldn t pay the dues to the FCs and had filed application under Section 10 of IBC for CIRP. The question of the Liquidation does not arise, as claimed by the Applicant here, when the Resolution plans received are under consideration. It is clear that the intent of the Applicant is only to delay and defeat the CIRP process of the Corporate Debtor by filing this type of IA. The IBC process shall not be allowed to misuse and CIRP has to be completed in time in the interest of all stake holders - Application dismissed.

Issues Involved:
1. Eligibility of the Applicant under Section 240A of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with the Expression of Interest (EOI) criteria.
3. Timeliness and procedural adherence in submitting the EOI.
4. Allegations of intent to delay the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Eligibility of the Applicant under Section 240A of the Insolvency and Bankruptcy Code, 2016:
The Applicant, a Director of the Corporate Debtor (CD), sought permission to submit an expression of interest (EOI) and file a resolution plan under Section 240A of the Insolvency and Bankruptcy Code (IBC), 2016. The Applicant argued that Section 240A allows Micro, Small, and Medium Enterprises (MSMEs) to participate in the resolution plan, overriding the disqualification under Section 29A. The Tribunal acknowledged the Applicant's submission that Section 240A, which starts with a non-obstante clause, exempts MSMEs from the applicability of certain clauses of Section 29A, thus enabling promoters of MSMEs to bid for their stressed assets.

2. Compliance with the Expression of Interest (EOI) criteria:
The Resolution Professional (RP) and the Committee of Creditors (CoC) had set eligibility criteria for submitting the EOI, including a minimum tangible net worth, turnover, profitability, business experience, and an earnest money deposit. The Applicant admitted in their representation that they could not meet these criteria due to the MSME's account being declared as a Non-Performing Asset (NPA). The RP argued that these criteria were necessary to ensure the feasibility and viability of the resolution plan and were approved by the CoC.

3. Timeliness and procedural adherence in submitting the EOI:
The RP had published the EOI on 05.03.2022, with a submission deadline of 21.03.2022. The Applicant submitted a letter on 02.05.2022, requesting to be allowed to submit a resolution plan and treating the letter as an EOI. The RP rejected this request, citing non-compliance with the stipulated timeline and criteria. The Tribunal noted that the Applicant's request came 41 days after the deadline, indicating a lack of procedural adherence.

4. Allegations of intent to delay the Corporate Insolvency Resolution Process (CIRP):
The RP argued that the Applicant's actions were intended to delay the CIRP process. The Tribunal observed that the Applicant's submission was hypothetical and aimed at delaying the process, as the resolution plans had already been received and were under scrutiny. The Tribunal emphasized that the IBC process should not be misused and must be completed in a timely manner to protect the interests of all stakeholders.

Conclusion:
The Tribunal dismissed the Applicant's Interlocutory Application (IA) seeking permission to submit an EOI and resolution plan. It found that the Applicant's intent was to delay the CIRP process and that the RP had acted within the legal framework. The Tribunal directed the RP to complete the CIRP without further delay and dismissed the IA with no costs.

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