Application for MSME Certificate made After Commencement of CIRP is not Valid: NCLAT [Read Order]
Application for MSME – Certificate – CIRP NCLAT – TAXSCAN
Application for MSME – Certificate – CIRP NCLAT – TAXSCAN
The Chennai bench of the National Company Law Appellate Tribunal(NCLAT) held that an application for Micro, Small and Medium Enterprises (MSME) certificate made after the commencement of the Corporate Insolvency Resolution Process (CIRP) is not valid.
Hari Babu Thota, the appellant is a Resolution Professional (RP) of Shree Aashraya Infra-Con Ltd challenged the Impugned Order passed by the `Adjudicating Authority’, (National Company Law Tribunal, Bengaluru Bench, Bengaluru), dismissing the Application, whereby and where under the Resolution Professional (‘RP’)/the Appellant sought for approval of the Resolution Plan.
It was submitted that the Corporate Debtor was incorporated in the year 1995, it never sought registration as MSME and it was expressly denied in the Expression of Interest (EOI) issued by the RP under the order for initiation of CIRP.
It was also noted that there were pending Avoidance Applications pending against the Corporate Debtor; though not decided one way or the other, which leads to disqualification under Section 29A(g). The NCLT, New Delhi has rejected the claim of eligibility under Section 29A r.w.s 240A of IBC based on such MSME certificate which was obtained after the initiation of CIRP.
Further submitted that the Section 7 Application filed by Shree Aashraya Souhard Credit Society Limited was admitted on 06.04.2021 and the first Committee of Creditors (‘CoC’) Meeting was held on 13.08.2021. While so, the `Corporate Debtor got registered under the Micro, Small and Medium Enterprises Development Act, 2006, (‘MSME Act’) as an MSME entity, on the advice of the RP to obtain the certificate while keeping the Corporate Debtor as a Going Concern.
It was contended that the Resolution Applicant does not disqualify under the primary conditions as specified in Section 29-A of the Code and, therefore, even if the MSME status provided to the `Corporate Debtor’ is not valid, the Resolution Applicants are not barred under any provisions of the Section 29-A.
A two-member bench comprising Ms Shreesha Merla, Member (Technical) and Justice M. Venugopal, Member (Judicial) observed that the Resolution Applicant registered as an MSME only after the initiation of CIRP. Further viewed that in the case of Digamber Anand Rao Pingle Vs. Shrikant Madanlal Zawar & Ors., it was held 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 of the IBC.
While dismissing the appeal, the Authority upheld the Order of the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench).
To Read the full text of the Order CLICK HERE
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