2021 (5) TMI 18 - Tri - Insolvency and Bankruptcy

Tribunal Orders Promoter to Submit Resolution Plan, Corporate Debtor May Qualify as MSME

K. SATHEESH BABU RAJESH Versus MR. GEORGE VARKEY, RESOLUTION PROFESSIONAL OF PROPYL PACKAGING LIMITED

The Tribunal directed the applicant, a promoter of the Corporate Debtor, to submit the Expression of Interest/Resolution Plan in their individual capacity ... Requirement of submission of Resolution Plan in the name of the Corporate Debtor - eligibility to submit the Resolution Plan in view of the Govt. of India Gazette Notification dated 26th June, 2020 - HELD THAT:- As per the IBBI Regulations, the Corporate Debtor cannot submit a Resolution Plan in the CIR Process. When this issue was argued, the learned counsel for the applicant stated that the applicant is ready to submit the Resolution Plan in the name of the applicant in his individual capacity. Eligibility to submit the Resolution Plan in view of the Govt. of India Gazette Notification dated 26th June, 2020 - HELD THAT:- Considering the revised criteria laid down by the MSME as per Notification dated 26.6.2020, the Corporate Debtor qualified as a MSME under the revised norms. However, the notification was issued after admission of the application for initiation of CIRP considering the covid 19 pandemic in the country. The Resolution Professional further states that the Corporate Debtor meets the statutory requirements and revision in the MSME criteria and the Resolution Professional is ready to accept the Resolution Plan from the applicant, if a direction to that effect is granted by this Tribunal - In SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT], the Hon’ble Apex Court made it clear that I&B Code envisages maximisation of value of Assets of the Corporate Debtor so that they are efficiently runs as going concerns and in turn will promote entrepreneurship. The liquidation can be ordered as a last resort if there is no Resolution Plan and the Resolution Plans submitted are not fulfilling the criteria laid down therein. Application is disposed off. Issues involved:1. Eligibility of the applicant to submit the Resolution Plan in the name of the Corporate Debtor.2. Eligibility of the applicant to submit the Resolution Plan in view of the Government of India Gazette Notification dated 26th June, 2020.Issue 1: Eligibility of the applicant to submit the Resolution Plan in the name of the Corporate Debtor:The applicant, a promoter of the Corporate Debtor, sought relief under Section 60(5) of Insolvency and Bankruptcy Code, 2016, and Rule 11 of NCLT Rules. The applicant requested the respondent to accept their Expression of Interest as a Prospective Resolution Applicant under Section 240A of IBC, emphasizing that the Corporate Debtor is a deemed MSME. The applicant argued that they should not be required to meet the eligibility criterion of a minimum tangible net worth of Rs. 10 crores. The respondent, however, stated that the applicant did not meet the eligibility criteria and failed to rectify the deficiency despite being given an opportunity. The Committee of Creditors did not agree to waive the eligibility criteria for the applicant. The Tribunal considered whether the applicant could submit the Resolution Plan in the name of the Corporate Debtor.Issue 2: Eligibility of the applicant to submit the Resolution Plan in view of the Government of India Gazette Notification dated 26th June, 2020:The applicant claimed that as per the Gazette Notification No. SO 2119-E dated 26th June, 2020, the revised MSME criteria would classify them as a micro, small, or medium enterprise based on investment and turnover limits. The Resolution Professional confirmed that the Corporate Debtor qualified as an MSME under the revised norms. However, the notification was issued after the initiation of the Corporate Insolvency Resolution Process (CIRP) due to the COVID-19 pandemic. The Resolution Professional expressed readiness to accept the Resolution Plan from the applicant if directed by the Tribunal. The Tribunal referred to a decision by NCLAT emphasizing that if the Corporate Debtor is an MSME, the Promoters need not compete with other Resolution Applicants to regain control.In conclusion, the Tribunal disposed of the application by directing the applicant to submit the Expression of Interest/Resolution Plan in their individual capacity within two weeks. If the applicant complies, the Resolution Professional is to register the Corporate Debtor as an MSME upon producing the necessary certificate. This decision was based on the fact that the Corporate Debtor qualified as an MSME under the revised norms, aligning with the legislative intent to promote entrepreneurship and maximize the value of assets of the Corporate Debtor.