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of <h1>MSME debtor's pre-packed insolvency resolution upheld despite late filing under Section 11A(3) IBC</h1> <h3>Bank of Baroda Versus Shree Rajashthan Syntex Ltd.</h3> Bank of Baroda Versus Shree Rajashthan Syntex Ltd. - TMI 1. **Issues Presented and Considered**The Tribunal identified several key issues for consideration:(1) Whether the Corporate Debtor (CD) qualifies as a Micro, Small, and Medium Enterprise (MSME) based on its registration.(2) Whether the investment in the CD's plant, machinery, and equipment exceeds Rs.50 crores, thus affecting its MSME status.(3) Whether the 14-day period mentioned in Section 11A(3) of the Insolvency and Bankruptcy Code (IBC) is mandatory or directory, and the implications of this on the adjudication process.(4) The consequences of considering the 14-day period as mandatory on the orders passed by the Adjudicating Authority.(5) Whether the approved Resolution Plan, which has been implemented, should be set aside due to procedural issues.(6) Whether the Section 7 Application filed by the Bank of Baroda should be heard on merits, potentially invalidating actions taken under Section 54C.(7) Whether the payment to the dissenting financial creditor, Bank of Baroda, complies with Section 30(2)(b) of the IBC.(8) The appropriate relief for the appellant in these appeals.2. **Issue-Wise Detailed Analysis****Issues (1) and (2): MSME Status of the Corporate Debtor**The Tribunal examined the MSME registration of the CD, which was issued on 21.07.2020. Under the MSME Development Act, 2006, an enterprise is classified based on investment in plant and machinery or equipment and turnover. The Tribunal referenced the Notification dated 26.06.2020, which provides that the calculation of investment is linked to the Income Tax Return (ITR) of the previous year. The CD provided evidence that its classification as an MSME was automatically updated based on ITR data. The Tribunal concluded that the CD's MSME registration was valid and that it was eligible to file an application under Section 54C.**Issues (3) and (4): Interpretation of the 14-Day Period in Section 11A(3)**The Tribunal considered whether the 14-day period in Section 11A(3) was mandatory. The statutory scheme of Section 11A provides a sequence for disposing of applications under Sections 54C and 7. The Tribunal noted the literal interpretation principle, emphasizing that when a statute prescribes a consequence for non-compliance, it is generally deemed mandatory. The Tribunal concluded that the 14-day period is mandatory, requiring the Adjudicating Authority to first dispose of a Section 7 application if a Section 54C application is filed after 14 days.**Issues (5) and (6): Consequences of the Mandatory 14-Day Period**Despite the mandatory nature of the 14-day period, the Tribunal decided not to set aside the Resolution Plan, which had already been implemented. The Tribunal recognized the special protection afforded to MSMEs and the efforts made by the CD for resolution through a negotiated settlement. The Resolution Plan had been approved by a majority of creditors and implemented, with payments made to all financial creditors. The Tribunal concluded that setting aside the actions taken under Section 54C would not serve the interests of stakeholders or the CD.**Issues (7) and (8): Compliance with Section 30(2)(b) and Relief**The Tribunal addressed the appellant's contention that the payment to dissenting financial creditors was not in accordance with Section 30(2)(b) of the IBC. The Tribunal agreed that dissenting creditors should receive at least the amount they would have received in liquidation, as per Section 53(1). The Tribunal directed the Successful Resolution Applicant (SRA) to pay any differential amount owed to the appellant under Section 30(2)(b) within 30 days, with the Resolution Professional (RP) to compute and notify the SRA of the amount.3. **Significant Holdings**The Tribunal held that the 14-day period in Section 11A(3) is mandatory, requiring the Adjudicating Authority to prioritize the disposal of Section 7 applications if a Section 54C application is filed after 14 days. However, due to the implementation of the Resolution Plan and the special status of the CD as an MSME, the Tribunal decided not to disrupt the resolution process. The Tribunal directed the SRA to address any payment discrepancies to the dissenting creditor, ensuring compliance with Section 30(2)(b).The Tribunal's decision emphasizes the importance of adhering to statutory timelines while balancing the need for efficient resolution processes, especially for MSMEs. The Tribunal's directive for additional payments to dissenting creditors underscores the requirement for equitable treatment under the IBC.
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