IBC eligibility and MSME relaxation: expression of interest rejected because section 29A(a) disqualification remained in force.

An expression of interest submitted on behalf of the corporate debtor by its suspended director was invalid because, after commencement of CIRP, the corporate debtor can act only through the resolution professional. Section 240A of the IBC gives an MSME relaxation only from disqualifications under section 29A(c) and (h), and does not override ineligibility under section 29A(a). As the corporate debtor was an undischarged insolvent, it remained barred from acting as a resolution applicant. The rejection of the expression of interest was therefore upheld as lawful.

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Issues: Whether the rejection of the expression of interest submitted on behalf of the corporate debtor for submission of a resolution plan was illegal, including the applicability of the MSME exemption under section 240A and the disqualification under section 29A of the Insolvency and Bankruptcy Code, 2016.

Analysis: The expression of interest was submitted on behalf of the corporate debtor itself by the suspended director, whereas after commencement of the corporate insolvency resolution process the corporate debtor can act only through the resolution professional. The exemption under section 240A extends only to the disqualifications in clauses (c) and (h) of section 29A and does not remove the ineligibility under clause (a). The corporate debtor was found to be an undischarged insolvent, which independently barred eligibility to act as a resolution applicant. The claim that the corporate debtor was entitled to MSME treatment did not assist the applicant, since the relevant scrutiny was with reference to the position existing on the date of submission of the expression of interest.

Conclusion: The rejection of the expression of interest was held to be valid and no illegality was found in the action of the resolution professional.

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