Summary
The Supreme Court held that the date of submission of a resolution plan, rather than commencement of CIRP, is the relevant cut-off for the MSME exemption under Section 240A IBC. A promoter was not disqualified merely because MSME registration was obtained after CIRP began. The orders rejecting the plan were set aside and the application restored for reconsideration; consequential action against the resolution professional could not survive.
Issues
- Whether the promoters were disqualified under Section 29A IBC on the facts.
- Whether MSME status had to exist at commencement of CIRP to obtain the Section 240A exemption.
Provisions considered
- Section 29A(c), (g) and (h), Insolvency and Bankruptcy Code, 2016There were no relevant NPA bank dues, no adjudicating-authority order on the identified preferential transaction, and no factual basis for clause (h). Clause (c) expressly assesses eligibility at plan submission and permits curing overdue NPA amounts before that stage. (¶¶ 5–11, 23–24)
- Section 240A(1), Insolvency and Bankruptcy Code, 2016The overriding MSME exemption from clauses (c) and (h) is assessed at submission of the resolution plan, not the start of CIRP; registration obtained before plan submission can attract the exemption. (¶¶ 13–17, 19–23)
Held
- On the recorded facts the promoters were not independently disqualified under Section 29A: the conditions of clauses (c), (g) and (h) were not established. Promoter status alone did not prevent submission of the plan. (¶ 5–10)
- Section 240A protects MSME resolution because other applicants may not be forthcoming, making liquidation more likely. Its exemption concerns clauses (c) and (h), rather than all statutory disqualifications. (¶ 13–17)
- The relevant cut-off for the MSME exemption is submission of the resolution plan. Digambar Anand Rao Pingle incorrectly treated commencement of CIRP as controlling. A certificate obtained after commencement but before plan submission does not on that account defeat the exemption. (¶ 19–24)
- The plan required reconsideration by the adjudicating authority; the decision did not itself finally approve it. Consequential IBBI action against the resolution professional founded on the impugned orders could not survive. (¶¶ 25, 27–28)
Result
Appeal allowed. NCLT order dated 28 February 2023 and NCLAT order dated 2 June 2023 set aside. Plan-approval application restored to NCLT for reconsideration; consequential IBBI action against the appellant not to survive. Parties to bear their own costs; intervention application disposed of.