NCLAT (09.07.2021) in Digambar Anandrao Pingle Vs. Shrikant Madanlal Zawar & Ors. [Company Appeal (AT) (Insolvency) No. 43-43A of 2021] held that;
The Appellant has not shown that the application for MSME was made through the IRP/RP. The Learned Counsel for Respondent No. 5 is claiming that there was no consent of the IRP/RP. When the Corporate Debtor was not under the management of the Appellant, such unauthorized application could not have been made and the claim of the Appellant that the Corporate Debtor is MSME would require to be ignored.
SCI (29.11.2023) in Hari Babu Thota [Civil Appeal No.4422/2023] held that.
The aforesaid statement, while giving the objective of interpretation of Section 29A and referring to the disqualification in Clause (c), is in regard to those who are corporate debtor and provides the cut off “as on date of the application making a bid”.
Thus, we are constrained to observe that the law laid down in Digambar Anand Rao Pigle (supra) case by the Tribunal is not the correct position in law and the cut off date will be the date of submission of resolution plan.
Excerpts of the order;
# 2. The appeal is basically against passing of orders on the application of the Resolution Professional directing liquidation and not accepting the plan of the Appellant which he had submitted as the Resolution Applicant. The Appellant claimed that the Corporate Debtor was an MSME and that he could file a Resolution Plan.
# 5. Now when this Appeal has come up before us for hearing, the Learned Counsel for Appellant has not referred to any of the above grounds raised by the Appellant which are referred in the Appeal and has limited his arguments to request that the Corporate Debtor is now in liquidation and in the liquidation proceedings the Appellant has given a bid to take over the Corporate Debtor as going concern but the obstruction in the way of the Appellant are observations of the Adjudicating Authority in Para 4 of the impugned order holding that the Appellant was hit by Section 29A of the IBC. The Learned Counsel submitted that all the other grounds raised by the Appellant in the Appeal are not being pressed by the Appellant and the Appeal is now limited to the observations made by the Adjudicating Authority in Para 4 of the impugned order.
# 7. Learned Counsel for the Liquidator (Respondent No. 2) submitted that in the liquidation proceedings bids have been called, in which the Appellant has given a bid and there are other bids also. The Liquidator is considering the eligibility of the Appellant in the context of observations in Para 4 of the impugned order and other relevant factors with regard to the Appellant.
# 8. Learned Counsel for Respondent No. 5 is submitting that the Corporate Debtor was not an MSME and during the pendency of the CIRP, Appellant procured the MSME Certificate without authority, copy of which has been filed in the Appeal. The Learned Counsel for Respondent No. 5 is also making various other allegations against the Appellant to state that the Appellant has acted fraudulently.
# 9. The Adjudicating Authority in the impugned order in Para 4 observed as under:
“4. Again, there are several allegations against the ex-promoter who is also the resolution applicant herein regarding the fraudulent transactions etc. Also, on earlier occasions, he has promised to pay and later failed to pay the amount and thus this attempt by him appears merely to stall the proceeding and buy time. Also, the applicant in these two M.A.s is the ex-promoter of the Corporate Debtor against whom an application for preferential transactions was filed by the RP. Here, it is to be noted that the applicant gets hit by Section 29A of the Code and is therefore, restrained from filing the resolution plan. For ready reference, we would like to reproduce Section 29A hereunder:”
# 10. Thereafter, the Adjudicating Authority reproduced Section 29A of IBC. Then, in Para 5, the Adjudicating Authority made the following observations:
“5. Keeping the above facts and circumstances in mind and relying upon this settled position of law, we believe that the matter is unnecessarily being dragged by the ex-promoters and is merely an attempt to stall the proceeding. This Tribunal has therefore allowed the application filed by the Resolution Professional for liquidation of the Corporate Debtor. As an order has been passed by this Bench in M.A. No. 1506 of 2019 today itself allowing liquidation of the corporate debtor company, these two Interlocutory Applications bearing numbers I.A.1156 of 2020 and M.A. 2261 of 2019 wherein prayers have been sought by the ex-directors for directing the CoC to consider the resolution plan submitted by them, are hereby disposed of as dismissed.”
# 11. The Learned Counsel for the Appellant is submitting that if Clause (g) of Section 29A of IBC is seen, the party gets debarred if an order has been made by the Adjudicating Authority in that regard. It is stated that M.A. No. 3020 of 2019 filed under Section 43, 66 and 65 of IBC is still pending before the Adjudicating Authority and order in that regard has not been passed. Thus, according to Learned Counsel, the Appellant should be permitted to participate in the liquidation proceedings so as to bid for taking over the Corporate Debtor as a going concern. The Learned Counsel for the Liquidator accepts that the M.A. is still pending.
# 14. There is yet another factor which is relevant and we find that the Appellant has obtained Annexure-A-3 – an MSME Certificate for which application had been made on 5th March, 2019. Clearly, CIRP with regard to the Corporate Debtor started on 19th July, 2018 and on 5th March, 2019 the Corporate Debtor was under the management of IRP/RP. The Appellant has not shown that the application for MSME was made through the IRP/RP. The Learned Counsel for Respondent No. 5 is claiming that there was no consent of the IRP/RP. When the Corporate Debtor was not under the management of the Appellant, such unauthorized application could not have been made and the claim of the Appellant that the Corporate Debtor is MSME would require to be ignored. Appellant cannot take advantage of his wrongful act. Keeping in view Judgment in the matter of ‘Arun Kumar Jagatramka vs Jindal Steel and Power Ltd.’ – 2021 SCC Online SC 220, back door entries cannot be allowed. After CIRP was initiated former Promoter/ Director cannot suppress from IRP/RP and apply for MSME Certificate and tide over ineligibility under Section 29A of the IBC.
# 16.(A) For the above reasons, we would ignore the observations made in Para 4 of the impugned order. It would be appropriate for the Adjudicating Authority to formally decide M.A. No. 3020/2019 which is stated to be still pending, at the earliest. We request the Adjudicating Authority to do so.
(B) Averments made by the Appellant against the Resolution Professional referred to by the Learned Counsel for Respondent No. 1 are required to be ignored as there is no foundation for the averments, and they appear to be based on surmises.
(C) We decline to give any direction to Liquidator, as requested by Advocate for Appellant, as we decline to accept claim made in Appeal that the Corporate Debtor is MSME. We dispose of the Appeal without setting aside the impugned order explaining context of observations in Para 4 of the impugned order.
(D) The Appeal is disposed of as above. No orders as to costs.
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