Tribunal upholds rejection of Resolution Plan due to unauthorized MSME registration post-CIRP.

The Appellate Tribunal upheld the Adjudicating Authority's decision to reject the Resolution Plan due to the Resolution Applicant's unauthorized MSME registration obtained after CIRP initiation. The Tribunal emphasized the purpose of Section 29-A to prevent unfit individuals from gaining control over the company. Citing relevant case law, the Tribunal concluded that the MSME registration post-CIRP initiation could not override the ineligibility under Section 29-A. The appeal was dismissed without costs.

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Issues Involved:
1. Validity of MSME registration post-CIRP initiation.
2. Eligibility of the Resolution Applicant under Section 29-A of the Insolvency and Bankruptcy Code, 2016.
3. Rejection of the Resolution Plan by the Adjudicating Authority.

Summary:

Validity of MSME Registration Post-CIRP Initiation:
The Corporate Debtor was incorporated in 1995 but never sought MSME registration until after the initiation of the Corporate Insolvency Resolution Process (CIRP). The MSME certificate was obtained on 15.07.2021, subsequent to the CIRP initiation on 06.04.2021. The Adjudicating Authority noted that the MSME status was not valid as it was obtained post-CIRP and was not discussed during the Committee of Creditors (CoC) meetings. This was considered unauthorized and could not be used to bypass ineligibility under Section 29-A.

Eligibility of the Resolution Applicant Under Section 29-A:
The Resolution Professional (RP) argued that the Resolution Applicant did not disqualify under the primary conditions of Section 29-A, despite the MSME status being invalid. The RP submitted an affidavit asserting compliance with Section 29-A, listing conditions such as not being an undischarged insolvent, not being a willful defaulter, and not having accounts classified as Non-Performing Assets (NPA). However, the Adjudicating Authority observed that the affidavit required under Regulation 39(1)(a) should have been submitted by the Resolution Applicant, not the RP.

Rejection of the Resolution Plan by the Adjudicating Authority:
The Adjudicating Authority dismissed the Resolution Plan due to the ineligibility of the Resolution Applicant under Section 29-A, as the MSME registration was obtained after CIRP initiation. The Tribunal referenced the Supreme Court's judgment in `Arun Kumar Jagatramka Vs. Jindal Steel & Power Limited & Anr.` emphasizing the purpose of Section 29-A to prevent unscrupulous persons from gaining control over the company. The Tribunal also cited the case of `Digamber Anand Rao Pingle Vs. Shrikant Madanlal Zawar & Ors.` where it was held that MSME registration post-CIRP initiation could not be considered to overcome ineligibility under Section 29-A.

Conclusion:
The Appellate Tribunal upheld the Adjudicating Authority's decision, stating that the Resolution Applicant's MSME registration post-CIRP initiation was unauthorized and could not circumvent Section 29-A ineligibility. The appeal was dismissed with no costs.

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