TMI Blog2020 (2) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional has raised disputes with regard to the claim of MSME. Even in the Reply (para - 12) filed in this Appeal, issue has been raised with regard to the claim to be small enterprise and reference is being made to the valuation report. Under section 29B of the Industries (Development Regulation) Act, 1951, Central Government has powers to exempt any industrial undertaking in public interest from applying all or any of the provision of that Act, subject to conditions as it may think fit. The learned Counsel for the Appellant has not been able to show us as to how Resolution Professional when he receives expression of interest could be expected to go into accounts and other factors or facts and go into Notifications to apply law and hold under which classification an applicant would or not fall. It is not shown how Resolution Professional with time bound milestones fixed in IBC can decide if or not the Corporate Debtor fits into classifications under section 7 or is not covered by MSME Act at all - Section 7 itself shows that the Central Government has to classify any class or classes or enterprises either as micro or small or medium on the basis of parameters fixed in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.I.S. Cheema, Judicial Member Kanthi Narahari And V.P. Singh, Technical Member Abhijeet Sinha, Ms. Bonita Singh, Ms. Naomi Chandra and Saikat Sarkar, Advs. for the Appellant. Siddharth Gautam, Vijay Kumar, Advs. and Yogesh Gupta, RP for the Respondent. JUDGMENT A.I.S. Cheema, The Appellant - Amit Gupta (Promoter/Shareholder of Corporate Debtor - M/s. Varanasi Auto Sales Pvt. Ltd.) has filed this Appeal against Impugned Order dated 9th August, 2019 passed by the Adjudicating Authority (National Company Law Tribunal, Allahabad Bench) in CA No.259/2018 in Company Petition No.(IB)64/ALD/2017 rejecting his prayer that Resolution Professional (Respondent) may be directed to revise expression of interest (EOI) issued and float new revised EOI by making changes suggested by him and extending date. 2. It is stated that the Appellant had filed Application under section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC - in short) on behalf of the Corporate Debtor as Applicant on the basis of Board Resolution and the Application under section 10 was admitted by the Adjudicating Authority on 26th April, 2018. After initiation of the CIRP process, Respondent - R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity making various allegations against the Resolution Professional (which have been summarized by the Adjudicating Authority in its Impugned Order) and inter alia claimed that section 240-A of IBC provides that provision under section 29A ('c' and 'h') did not apply to Resolution Applicant claiming that the Director of MSME is eligible to apply and such eligibility was not specified in the invitation for EOI. The Appellant before the Adjudicating Authority claimed that the Corporate Debtor was MSME. 5. The Respondent - Resolution Professional filed Counter Affidavit (Annexure A-4 - Page 101) before the Adjudicating Authority disputing the claims made by the Appellant and stated that it was for the first time before the Adjudicating Authority, claim was made that the Corporate Debtor is MSME and that the claim had no supporting material or registration details. The Affidavit also claimed that the e-mail was sent on the last date of submitting EOI. The Resolution Professional stated in the Affidavit that the e-mail was received at 11:50:58 on 18th August, 2018. (Although Respondent stated this in the Affidavit, the copy of e-mail filed at Annexure A-9 Page - 135 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation below section 240-A has been referred by the Counsel, which reads as under:- 'Explanation.- For the purposes of this section, the expression micro, small and medium enterprises means any class or classes of enterprises classified as such under sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006. [Emphasis needs to be kept in view] It is argued that in view of such Explanation, section 7 of the MSME Act has been adopted by reference for the expression Micro, Small and Medium Enterprises. The learned Counsel referring to the Impugned Order stated that the Adjudicating Authority referred to section 7 and relied on section 8 and held that the Corporate Debtor was not MSME. It is argued that when only section 7 is referred, the Adjudicating Authority could not have relied on section 8. In this regard, after referring to the rival cases (which we have also referred above), the Adjudicating Authority in the Impugned Order analysed section 7 and 8 of MSME Act. It may be recalled that the Appellant himself in the CA 259 of 2018 relied on sections 7 and also section 8 of MSME Act to claim that section 8 had given o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective Resolution Applicant, unless and until it is established that applicant being a Promoter Director establish that Corporate Debtor is MSME. The Promoter, Director is not qualified U/s 29A of the Code to present the resolution plan. Above all the applicant did not approach the IRP or this Authority till the closure of the CIRP period. It thus found no merits in the Application and the same was disposed of. 10. Learned Counsel for the Appellant relied on Judgement in the matter of Ramky Infrastructure (P.) Ltd. v. Micro Small Enterprises Facilitation Council 2018 SCC OnLine Del 9671 to submit that if an enterprise fulfils the requirements of section 7, it is not necessary for the entity to file memorandum under section 8 of MSME Act. In the said matter which was before the Hon'ble High Court of Delhi, the Petition was filed against reference being made by the Respondent whereby disputes between RIL and Respondent No.2 in that matter were referred to arbitration. The reference was made in terms of provisions of section 18 of MSME Act. RIL assailed the decision of the Council to make a reference claiming that at the material time, GCIL was not registered unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees; (ii) a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or (iii) a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees; (b) in the case of the enterprises engaged in providing or rendering of services, as- (i) a micro enterprise, where the investment in equipment does not exceed ten lakh rupees; (ii) a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or (iii) a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees. Explanation 1.-For the removal of doubts, it is hereby clarified that in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded. Explanation 2.-It is clarified that the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal standards for classification of small and medium enterprises. (9) Notwithstanding anything contained in section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951) and clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956), the Central Government may, while classifying any class or classes of enterprises under sub-section (1), vary, from time to time, the criterion of investment and also consider criteria or standards in respect of employment or turnover of the enterprises and include in such classification the micro or tiny enterprises or the village enterprises, as part of small enterprises. [Emphasis Supplied] 13. When at the time of arguments, the learned Counsel for the Appellant tried to show the investments made by the Corporate Debtor to claim that it was a small enterprise, it was noticed that the above explanations require not merely seeing the investment but other factors also. Under section 29B of the Industries (Development Regulation) Act, 1951, Central Government has powers to exempt any industrial undertaking in public interest from applying all or any of the provision of that Act, subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch criteria as may be laid down by him with the approval of Committee of Creditors having regard to the complexity and scale of operations of the business of the Corporate Debtor and such other conditions as may be specified by the Board, to submit a Resolution Plan or plans. This was done by the Resolution Professional as can be seen from Annexure A-3. The invitation was issued with last date and time fixed as 12 o' clock noon of 18th August, 2018. Regulation 36-A of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('Regulations' - in short) deals with invitation for expression of interest. Clause - 6 of Regulation 36-A provides that The expression of interest received after the time specified in the invitation under Clause (b) of the sub-regulation (3) shall be rejected. Although the Resolution Professional in his Affidavit before Adjudicating Authority mentioned the time of receipt of e-mail dated 18th August, 2018 (Annexure A-9) from the Appellant at 11:50:58 hours, the document filed by the Appellant himself shows that it was received/sent after 12 o' clock. In terms of Clause - 6 of Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different, but otherwise), he is not expected to sit down and decide applying facts to provisions of section 7 of MSME Act and applying them to the Corporate Debtor on the basis of various parameters as provided to see whether or not the Corporate Debtor will fit into the requirement of one or the other class of enterprise or not under MSME. There is no reason why, looking to the nature of proceedings under the IBC the prospective Resolution Applicant who claims eligibility on the basis that the Corporate Debtor is MSME, should not provide necessary Memorandum Certificate. The Resolution Professional cannot be going into investigations and enquiries and findings whether or not a Corporate Debtor falls under the classifications of MSME and Adjudicating Authority is also not expected to make such investigations, enquiries on such evidence or give findings on such issues, which may not be accurate without assistance of an opposite side or Government Counsel bringing forth which or the other Notification etc. applies. Under sections of MSME Act, even if getting Memorandum Certificated for a given enterprise may be optional, if advantage is to be taken of MSME Act, the Applicant must t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. [2018] 96 taxmann.com 268/149 SCL 1 (NCL - AT) which was passed (subsequent to the admission order in the present matter) by this Tribunal on 19th July, 2018. In that Judgement, this Tribunal had referred to the Articles of Association of the Corporate Debtor in that matter and in that context considered the said Appeal and found that no decision had been taken by the shareholders in their Extraordinary General Body Meeting and the Application under section 10 was filed by person authorized by the Board of Directors which was not maintainable (see para - 26, 27, 28 and 38 of that Judgement). The learned Counsel for the Appellant relied on Judgement in the matter of Armada Singapore (P.) Ltd. v. Ashapura Minechem Ltd.in Company Appeal (AT) (Insolvency) No. 350 of 2019 and others dated 30th September, 2019 to submit that even in that matter, it was found that there was no dispute that to file Application under section 10, approval of AGM/EGM was not taken. This Tribunal had observed that it was against the provisions of law. This also, we find was subsequent to 6th June, 2018 when Sub-section (3) of section 10 of IBC was substituted and Clause 'c' came to be adde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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