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TMI Blog2023 (12) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... crucial date. The submission is that while for some other aspects the initiation of the CIRP proceedings would be the cut off date, the same would not apply in the case of Section 240A, in view of the statement by the Minister themselves while introducing the amendment Bill. The statement of the Minister is looked into for purposes of a cut off date that there is no other specific provision providing for cut off date which submits that it should be the date of application of making a bid. Thus, to opine that it is the initiation of the CIRP proceedings which is the relevant date, cannot be said to reflect the correct legal view and thus, it is constrained to observe that the law laid down in DIGAMBAR ANANDRAO PINGLE VERSUS SHRIKANT MADANLAL ZAWAR, SHRIKANT MADANLAL ZAWAR, VANDANA GARG LIQUIDATOR M/S PINGLE BUILDERS PVT. LTD., STATE BANK OF INDIA, VIJAYA BANK, M/S SOORAJMULL BAIJNATH PVT. LTD. [ 2021 (7) TMI 456 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] case by the Tribunal is not the correct position in law and the cut off date will be the date of submission of resolution plan - Thus, even on this count, the plan submitted in question will not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r order of the National Company Law Appellant Tribunal in Digamber Anand Rao Pingle v. Shrikant Madanlal Zawar Ors. Comp. App. (AT) (Ins.) No.43-43A/2021. 4. There are two aspects to be examined out of the contours of the submissions: Firstly : Whether the resolution applicant was disqualified under the primary conditions as specified under Section 29 A of the Code; and Secondly : Whether the corporate debtor not having an MSME status at the time of commencement of CIRP proceedings would disqualify the Resolution applicant under Section 29A of the Code as benefit of Section 240A would not be available. It is the say of learned Amicus that if the MSME certificate is obtained prior to the presentation of the plan such disqualification would not be incurred and benefit of the provision would be available. 5. Learned counsel for parties have taken us through Section 29A of the said Code. It has been pointed out that other sub-Clauses except Clauses (c), (g) and (h) which apply to promoters and guarantors are generic in nature. We reproduce the relevant provisions as under: 29A. Persons not eligible to be resolution applicant- (C) at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under this Code: Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of the corporate debtor by the resolution applicant pursuant to a resolution plan approved under this Code or pursuant to a scheme or plan approved by a financial sector regulator or a court, and such resolution applicant has not otherwise contributed to the preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction. (h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part: 6. We may note that the aforesaid section was added as an amendment by Act 8 of 2018 with effect from 23.11.2017. The objective was to cure the mischiefs of the persons who may be responsible for the financial situation of the company against trying to submit a plan and take over the company. If we turn to Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassification of a person as a non-performing asset. Further, the expression used is has , which as Dr. Singhvi has correctly argued, is in praesenti. This is to be contrasted with the expression has been , which is used in Clauses (d) and (g), which refers to an anterior point of time. Consequently, the amendment of 2018 introducing the words at the time of submission of the resolution plan is clarificatory, as this was always the correct interpretation as to the point of time at which the disqualification in clause (c) of Section 29-A will attach. In fact, the amendment was made pursuant to the Insolvency Law Committee Report of March, 2018. That Report clearly stated: In relation to applicability of Section 29-A (c), the Committee also discussed that it must be clarified that the disqualification pursuant to Section 29-A(c) shall be applicable if such NPA accounts are held by the resolution applicant or its connected persons at the time of submission of the resolution plan to the RP. 47. The ingredients of clause (c) are that, the ineligibility to submit a resolution plan attaches if any person, as is referred to in the opening lines of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tested is whether the Tribunal s view in Digambar Anand Rao Pingle s case (supra) sets forth the correct position of law. 13. In the factual scenario of that case, the application for MSME certificate was made after the commencement of the CIRP and it was opined that such unauthorized application cannot be considered and cannot tide over the ineligibility under Section 29A. In order to appreciate the provision in question, we reproduce Section 240 A as under: Section 240A: Application of this Code to micro, small and medium enterprises. 240A. (1) Notwithstanding anything to the contrary contained in this Code, the provisions of clauses (c) and (h) of section 29A shall not apply to the resolution applicant in respect of corporate insolvency resolution process or pre-packaged insolvency resolution process of any micro, small and medium enterprises. (2) Subject to sub-section (1), the Central Government may, in the public interest, by notification, direct that any of the provisions of this Code shall (a) not apply to micro, small and medium enterprises; or (b) apply to micro, small and medium enterprises, with such modifications as may be specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government may, for the purposes of this Act, by notification and having regard to the provisions of sub-sections (4) and (5), classify any class or classes of enterprises, whether proprietorship, Hindu undivided family, associations of persons, cooperative society, partnership firm, company or undertaking, by whatever name called, (a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951), as (i) a micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees; (ii) a small enterprise, where the investment in plant and machinery is more than twenty- five lakh rupees but does not exceed five crore rupees; or (iii) a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees; (b) in the case of the enterprises engaged in providing or rendering of services, as (i) a micro enterprise, where the investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to micro, small and medium enterprises; or (b) apply to micro, small and medium enterprises, with such modifications as may be specified in the notification. (3) A draft of every notification proposed to be issued under sub-section (2), shall be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions. (4) If both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or shall be issued only in such modified form as may be agreed upon by both the Houses, as the case may be. (5) The period of thirty days referred to in sub-section (3) shall not include any period during which the House referred to in subsection (4) is prorogued or adjourned for more than four consecutive days. (6) Every notification issued under this section shall be laid, as soon as may be after it is issued, before each House of Parliament. Explanation. For the purposes of this section, the expression micro, small and medium enterprises means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aforesaid thus, makes it clear as opined in the said judgments also, that excluding such industries from disqualification under 29A (c) and (h) is because qua such industries other resolution applicants may not be forthcoming which thus would inevitably lead not to resolution but to liquidation. 18. We may also note that in para 93 of this very judgment the challenge to Section 29A was repelled and the statement of the then Finance Minister while moving the amendment Bill was extracted. The said statement reads as under: 93. xxx xxx . The core and the soul of this new Ordinance is really clause 5, which is Section 29-A of the original Bill. I may just explain that once a company goes into the resolution process, then applications would be invited with regard to the potential resolution proposals as far as the company is concerned or the enterprise is concerned. Now a number of ineligibility clauses were not there in the original Act, and, therefore, Clause 29-A introduces those who are not eligible to apply. For instance, there is a clause with regard to an undischarged insolvent who is not eligible to apply: a person who has been disqualified under the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, we are constrained to observe that the law laid down in Digambar Anand Rao Pigle (supra) case by the Tribunal is not the correct position in law and the cut off date will be the date of submission of resolution plan. 23. Thus, even on this count, the plan submitted in question will not incur the disqualification. We may also note that the aforesaid intent is reflected in the statutory provision itself that in Section 29A (c) which begins with at the time of submission of the resolution plan . 24. It is also pointed out that even if it was an NPA, the defect can be cured as set out in proviso (1) before submission of the plan, making the submission of the plan the crucial date. 25. We are thus, setting aside the impugned orders of the NCLT dated 28.02.2023 and NCLAT dated 02.06.2023 and allow the appeal leaving parties to bear their own costs. 26. We appreciate the assistance rendered by Mr. Bishwajit Dubey, learned Amicus. 27. As a sequiter, IA No.192/2022 in C.P. (IB) No.196/BB/2020 before the Adjudicating Authority would stand restored to National Company Law Tribunal for reconsideration. 28. Needless to say any consequential action in pursuance to the im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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