2023 (6) TMI 151 - AT - Insolvency and Bankruptcy

Seeking approval of the Resolution Plan - validity of MSME status provided to the Corporate Debtor - HELD THAT - In the instant case, the Resolution Applicant registered as an MSME only after the initiation of CIRP. This Tribunal in the case of Digamber Anand Rao Pingle Vs. Shrikant Madanlal Zawar Ors. 2021 (7) TMI 456 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI , wherein the Promoter of the Corporate Debtor had filed an Appeal against the Liquidation Order passed by the Adjudicating Authority claiming that the Corporate Debtor was an MSME and that he could file a Resolution Plan, but this Tribunal observed that as the Application for MSME certificate was made after the commencement of CIRP, such unauthorized Application cannot be considered and cannot tide over ineligibility under Section 29-A. The ratio of this matter is squarely applicable to the facts of this case and the matters of eligibility under Section 29-A as observed by the Hon ble Supreme Court in a catena of Judgements, cannot be undermined. There are no grounds to interfere with the well-reasoned Order of the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) - appeal dismissed.

Summary

Issues Involved:
1. Validity of MSME registration post-CIRP initiation.
2. Eligibility of the Resolution Applicant under Section 29-A of the Insolvency and Bankruptcy Code, 2016.
3. Rejection of the Resolution Plan by the Adjudicating Authority.

Summary:

Validity of MSME Registration Post-CIRP Initiation:
The Corporate Debtor was incorporated in 1995 but never sought MSME registration until after the initiation of the Corporate Insolvency Resolution Process (CIRP). The MSME certificate was obtained on 15.07.2021, subsequent to the CIRP initiation on 06.04.2021. The Adjudicating Authority noted that the MSME status was not valid as it was obtained post-CIRP and was not discussed during the Committee of Creditors (CoC) meetings. This was considered unauthorized and could not be used to bypass ineligibility under Section 29-A.

Eligibility of the Resolution Applicant Under Section 29-A:
The Resolution Professional (RP) argued that the Resolution Applicant did not disqualify under the primary conditions of Section 29-A, despite the MSME status being invalid. The RP submitted an affidavit asserting compliance with Section 29-A, listing conditions such as not being an undischarged insolvent, not being a willful defaulter, and not having accounts classified as Non-Performing Assets (NPA). However, the Adjudicating Authority observed that the affidavit required under Regulation 39(1)(a) should have been submitted by the Resolution Applicant, not the RP.

Rejection of the Resolution Plan by the Adjudicating Authority:
The Adjudicating Authority dismissed the Resolution Plan due to the ineligibility of the Resolution Applicant under Section 29-A, as the MSME registration was obtained after CIRP initiation. The Tribunal referenced the Supreme Court's judgment in `Arun Kumar Jagatramka Vs. Jindal Steel & Power Limited & Anr.` emphasizing the purpose of Section 29-A to prevent unscrupulous persons from gaining control over the company. The Tribunal also cited the case of `Digamber Anand Rao Pingle Vs. Shrikant Madanlal Zawar & Ors.` where it was held that MSME registration post-CIRP initiation could not be considered to overcome ineligibility under Section 29-A.

Conclusion:
The Appellate Tribunal upheld the Adjudicating Authority's decision, stating that the Resolution Applicant's MSME registration post-CIRP initiation was unauthorized and could not circumvent Section 29-A ineligibility. The appeal was dismissed with no costs.