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Issues: (i) Whether an MSME promoter was exempt from the prescribed net-worth criterion or entitled to exceptional relaxation; (ii) whether the criterion was arbitrary and the expression of interest could be rejected without consideration of the proposal by the committee of creditors; (iii) whether directed recomputation of the creditor's claim invalidated the criterion or required a revised information memorandum and fresh invitation; and (iv) whether mala fides or bias were established against the resolution professional or committee of creditors.
Issue (i): Whether an MSME promoter was exempt from the prescribed net-worth criterion or entitled to exceptional relaxation.
Analysis: Section 240A of the Insolvency and Bankruptcy Code, 2016 removes specified disqualifications under section 29A but does not dispense with the separate positive eligibility criteria prescribed under section 25. A promoter submitting a plan participates as a resolution applicant through the same invitation process. MSME status, promoter status, earnest money, income records and an undertaking to prove funding did not establish the prescribed current net worth. No applicable notification extending the exemption was identified.
Conclusion: The promoter was neither exempt from the criterion nor entitled to exceptional relaxation. The issue was decided against the appellant.
Issue (ii): Whether the criterion was arbitrary and the expression of interest could be rejected without consideration of the proposal by the committee of creditors.
Analysis: The net-worth threshold was approved with reference to the scale and value of the business and applied uniformly to applicants. The committee's commercial wisdom is subject to limited review. Regulation 36A requires the resolution professional to conduct due diligence on expressions of interest against the approved criteria; the applicant was given an opportunity to provide the certificate or explain its absence.
Conclusion: The criterion was not arbitrary, and the non-compliant expression of interest could be rejected without consideration of the proposal by the committee. The issue was decided against the appellant.
Issue (iii): Whether directed recomputation of the creditor's claim invalidated the criterion or required a revised information memorandum and fresh invitation.
Analysis: The threshold was based on the project's scale and asset value, rather than a percentage of the creditor's claim. The recomputed claim was not yet known. Revision of the information memorandum and any fresh invitation were matters for the resolution professional and committee of creditors, while the rejection was to be assessed against the criteria and facts existing when it occurred.
Conclusion: The recomputation direction did not invalidate the criterion or require the requested revisions on the record. The issue was decided against the appellant.
Issue (iv): Whether mala fides or bias were established against the resolution professional or committee of creditors.
Analysis: The criterion applied to all applicants, deficient submissions were handled under the same requirements, and the appellant was given an opportunity to respond. Existing disputes with the sole creditor did not by themselves establish improper conduct.
Conclusion: Mala fides and bias were not established. The issue was decided against the appellant.
Final Conclusion: MSME promoter participation remained subject to the approved financial eligibility criteria, which were not displaced by the claim-recomputation direction.
Ratio Decidendi: The MSME exemption from specified resolution-applicant disqualifications does not displace committee-approved eligibility criteria, which the resolution professional must apply at the expression-of-interest stage, subject to the Code's limited review of commercial decisions.
MSME promoter eligibility requires compliance with approved net-worth criteria despite exemption from specified insolvency resolution applicant disqualifications.
Section 240A of the Insolvency and Bankruptcy Code removes specified resolution-applicant disqualifications for MSME promoters but does not exempt them from separate financial eligibility criteria prescribed under section 25. Promoters must satisfy the committee-approved net-worth requirement through the same invitation process as other applicants. Under regulation 36A, the resolution professional checks expressions of interest against the approved criteria and may reject non-compliant submissions without referring the proposal to the committee. The committee's commercial decisions are subject to limited review. Where the threshold is based on business scale and asset value rather than a creditor's claim, recomputation of that claim does not itself invalidate the threshold or require a revised information memorandum or fresh invitation.
MSME promoters-limited exemption from resolution applicant disqualifications - Net-worth eligibility criteria-commercial wisdom of committee of creditors - Creditor-claim recomputation-effect on resolution applicant eligibility - Mala fides and bias in insolvency resolutionMSME promoters-limited statutory exemption - Resolution applicant eligibility-net-worth requirement - Applicability of the prescribed net-worth criterion to an MSME promoter claiming statutory protection and exceptional circumstances. - HELD THAT: - Section 240A removes only the disqualifications under Section 29A(c) and (h). In the absence of a notified exemption, it does not displace the separate, positive eligibility requirements prescribed under Section 25(2)(h). The Code creates no separate class of promoter-applicants outside the invitation and eligibility process. R. Raghavendran v. C. Raja John & Ors. rejected a general entitlement of MSME promoters to avoid competition; Saravana Global Holdings Ltd. & Anr. v. Bafna Pharmaceuticals Ltd. & Ors. was confined to the narrow settings identified by the Supreme Court. Timely submission, earnest money, income-tax returns, credit history, asserted past repayments and promises to establish funding later did not demonstrate present net worth or exceptional circumstances. Relaxation of the criterion, or acceptance of alternative financial assurances, remained a matter for the committee of creditors. A tribunal could not substitute its own eligibility test or compel relaxation merely because the applicant was an MSME promoter. [Paras 78, 89, 90, 91, 92]The promoter remained subject to the prescribed net-worth criterion, and no exceptional circumstances warranting departure from it were established.Net-worth eligibility criteria-commercial wisdom of committee of creditors - Expression of interest-mandatory eligibility scrutiny - Validity of the minimum net-worth criterion for the real-estate development project and rejection of a non-compliant expression of interest without substantive evaluation by the committee of creditors. - HELD THAT: - Eligibility criteria under Section 25(2)(h) must reflect the complexity and scale of the corporate debtor's business. The prescribed threshold was reasoned and proportionate to the substantial development potential and asset value of the project. Its approval was a commercial decision, and no statutory violation, discrimination or plain arbitrariness was demonstrated within the limited scope of judicial review. Regulation 36A required the resolution professional to verify compliance before admitting applicants to the process; the committee was not required to consider every expression of interest individually. Striking out the net-worth requirement rendered the expression of interest conditional. Despite an opportunity to comply, the promoter maintained that the requirement was inapplicable. Enforcement of the approved criterion was therefore the resolution professional's statutory duty. [Paras 79, 80, 85, 86, 87]The criterion and its enforcement were upheld; rejection of the non-compliant expression of interest did not require prior evaluation of the promoter's proposal on its merits.Creditor-claim recomputation-effect on existing eligibility criteria - Effect of the subsequent creditor-claim recomputation order on the net-worth criterion and the request for a revised Information Memorandum and fresh Form G. - HELD THAT: - The net-worth threshold was fixed by reference to the size and value of the business, not as a percentage of the creditor's claim. Recalculation of that claim did not alter the project's scale or asset value, and the revised claim remained unascertained. The legality of the earlier rejection had to be judged against the facts and criteria then prevailing; a subsequent development could not render a lawful rejection unlawful. Revision of the Information Memorandum or republication of Form G remained matters for the resolution professional and committee of creditors under the applicable Regulations. The merits of the separately challenged claim order were expressly left undecided. [Paras 93, 94]The recomputation order did not invalidate the criterion or warrant a direction for fresh Form G. If a fresh invitation were issued, the promoter could participate subject to the criteria then applicable.Mala fides and bias-enforcement of resolution applicant eligibility - Alleged mala fides in prescribing the net-worth criterion and bias by the resolution professional in excluding the promoter. - HELD THAT: - Allegations of mala fides and bias required a clear factual foundation, which was absent. Neither the sole-creditor composition of the committee nor its pre-existing disputes with the promoter made its commercial decisions suspect. The resolution professional's uniform application of the approved criterion constituted performance of statutory duty, not bias. The promoter's dissatisfaction with the outcome did not establish improper motive, while disputes concerning the debt and creditor's claim belonged to their respective proceedings. [Paras 81, 82, 95, 96, 97]The allegations of mala fides and bias against the resolution professional and committee of creditors were rejected.Final Conclusion: The appeal was dismissed, leaving the rejection of the promoter's expression of interest undisturbed. Pending interlocutory applications stood closed, with no order as to costs.