2023 (6) TMI 151

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....lows: "viii). Moreover, it was also pointed out in the above decision that though the Corporate Debtor was incorporated in the year 1995, it never sought registration as MSME and it was expressly denied in the Expression of Interest (EOI) issued by the RP pursuant to the order for initiation of CIRP. It was also noted that there were pending Avoidance Applications pending against the Corporate Debtor; though not decided one way or the other, which leads to disqualification under Section 29A(g). Therefore, the NCLT, New Delhi has rejected the claim of eligibility under Section 29A r.w.s 240A of IBC based on such MSME certificate which was obtained subsequent to the initiation of CIRP. ix). Similar observation has been made in the order dated 12.01.2021 by the Hon'ble NCLAT in the case of Harkirat Singh Bedi vs the Oriental Bank of Commerce & Anr. in Company Appeal (AT)(Ins.) No.40 of 2020 in which also considering that the date of registration as MSME was subsequent to initiation of CIRP, it was held that the erstwhile promoter, being the Appellant was ineligible to take the benefit of Section 240A; and therefore was not qualified under Section 29A." 2. Learned ....

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.... force; iv. Have not been convicted for any offence punishable with imprisonment - for two years or more under any Act specified under the Twelfth Schedule; or for seven years or more under any law for the time being in force: v. Are not disqualified to act as a director under the Companies Act, 2013; vi. Are not prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets; vii. Have not been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code; viii. Have not executed a guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part; ix. Are not subject to any disability, corresponding to clauses (a) to (h), under any ....

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....ent Act. Owing to this provision, persons, who by their misconduct contributed to the defaults of the corporate debtor or are otherwise undesirable, are prevented from gaining or regaining control of the corporate debtor. This provision protects creditors of the company by preventing unscrupulous persons from rewarding themselves at the expense of creditors and undermining the processes laid down in the Code." 48. The underlying purpose of introducing Section 29-A was adverted to in a judgment of this Court in Chitra Sharma v. Union of India [Chitra Sharma v. Union of India, (2018) 18 SCC 575] (hereinafter referred to as "Chitra Sharma"). One of us (D.Y. Chandrachud, J.) speaking for a Bench of three learned Judges took note of the Statement of Objects and Reasons accompanying the Bill and emphasised the purpose of Section 29-A thus : (SCC p. 601, para 38) "38. Parliament has introduced Section 29-A into IBC with a specific purpose. The provisions of Section 29-A are intended to ensure that among others, persons responsible for insolvency of the corporate debtor do not participate in the resolution process. The Statement of Objects and Reasons appended to the Inso....

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.... 29-A as contained in the Amendment Act, 2017. What is important to note is that the phrase "persons acting in concert" is conspicuous by its absence in the 2017 Ordinance. The concepts of "promoter", "management" and "control" which were contained in the opening lines of Section 29-A under the Ordinance have now been transferred to clause (c) in the 2017 Amendment Act. It is, therefore, important to note that the 2017 Amendment Act opens with language which is of wider import than that contained in the 2017 Ordinance, evincing an intention to rope in all persons who may be acting in concert with the person submitting a resolution plan." 7. At this juncture, it is relevant to reproduce Section 240-A, which is detailed as hereunder: "240-A. Application of this Code to micro, small and medium enterprises. - (1) Notwithstanding anything to the contrary contained in this Code, the provisions of clauses (c) and (h) of section 29A shall not apply to the resolution applicant in respect of corporate insolvency resolution process 2 [or pre-packaged insolvency resolution process] of any micro, small and medium enterprises. (2) Subject to sub-section (1), the Central Gove....