TMI Blog2022 (9) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... t is found that the Corporate Debtor is an MSME, whether it was entitled to file Resolution Plan to revive Corporate Debtor as per Section 240A of the I B Code? - Whether the CoC which permitted the Corporate Debtor to file a Resolution Plan erred in not considering the Resolution Plan of the Appellant on the ground that no plan having been invited by the CoC, hence, the Resolution Plan of the Corporate Debtor cannot be considered? - Whether in the facts and circumstances of the present case, the decision of the CoC taken in the 5thCoC meeting to liquidate the Corporate Debtor is a sustainable decision? - HELD THAT:- The I B Code provide for special protection of MSME by inserting Section 240A w.e.f. 06.06.2018 where provision of clause (c) and (h) of Section 29A had been made not applicable to in respect of CIRP of any Micro, Small and Medium Enterprise. In the present case, although in 5th CoC meeting, the CoC had taken a decision to liquidate the Corporate Debtor but subsequently in the 6th CoC meeting, the Appellant appeared before the CoC and claimed to file a plan to revive the Corporate Debtor. In the Agenda Item No. 12, in the 6th CoC meeting, the CoC and Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deora , Advocate For the Respondents : Mr. Sanjeev Bindal , Liquidator Mr. Aakash Dahiya , Advocate JUDGMENT ASHOK BHUSHAN, J. This Appeal has been filed against the order dated 26.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi allowing I.A. No. 5087 of 2020 filed by the Resolution Professional under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) directing for liquidation of the Corporate Debtor M/s Radhey Sham Tandon Manufacturing Pvt. Ltd. . The Suspended Director of the Corporate Debtor aggrieved by the order has come up in this Appeal. The brief facts of the case necessary to be noticed for deciding this Appeal are: (i) An Application under Section 7 filed by the Small Industries Development Bank of India against the Corporate Debtor was admitted vide order dated 10.10.2019 passed by the Adjudicating Authority. The Respondent No.1 was appointed as Resolution Professional in the second meeting of the Committee of Creditors (CoC). (ii) The 5th meeting of the Committee of Creditors was held on 24.02.2020. Item No. 4 in the meeting was to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was that the total claim of Financial Creditor is much more from the plan amount. Ultimately, the CoC took decision that the Resolution Plan submitted by Mr. Nikhil Tandon cannot be deliberated since no Resolution Plan was invited. Further, the Appellant was not entitled to submit the Resolution Plan and the liquidation has already been approved in the CoC meeting dated 24.02.2020. (vi) The Resolution Professional filed an application for liquidation before the Adjudicating Authority and by the impugned order the Adjudicating Authority has allowed the application and directed for liquidation of the Corporate Debtor. Aggrieved by the order dated 26.08.2021, this Appeal has been filed by the Suspended Director of the Corporate Debtor. 2. Learned counsel for the Appellant challenging the impugned order submits that the Corporate Debtor being a Micro, Small and Medium Enterprise was fully entitled to submit the Resolution Plan, which was also done with the permission of the CoC. The Committee of Creditors did not consider the Resolution Plan submitted by the Appellant on the ground that no plans were ever invited which reason has no substance. The Resolution Professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmitted the Corporate Debtor to file a Resolution Plan erred in not considering the Resolution Plan of the Appellant on the ground that no plan having been invited by the CoC, hence, the Resolution Plan of the Corporate Debtor cannot be considered? IV. Whether in the facts and circumstances of the present case, the decision of the CoC taken in the 5thCoC meeting to liquidate the Corporate Debtor is a sustainable decision? Question I: 6. Under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as Act, 2006 ) Section 8 deals with Memorandum of Micro, Small and Medium Enterprises. Section 8 Subsection (1) entitles a person who intends to establish a micro, small or medium enterprise to file the memorandum of micro, small or, as the case may be, of medium enterprise with such authority as may be specified by the State Government under sub-section (4) or the Central Governmentunder sub-section (3). Section 8 Sub-section (1) and (2) are as follows:- 8. Memorandum of micro, small and medium enterprises.-(1) Any person who intends to establish,- (a) a micro or small enterprise, may, at his discretion; or (b) a medium enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Number, the Corporate Debtor is to be treated as a Registered Unit. Copy of Form Part II has been brought on record by the Appellant alongwith his additional affidavit which indicates that the form was filled under the small category of enterprise and the month of installation of plant and machinery has been mentioned in the Form as July, 2004. When Notification has been issued by the Central Government under Sub-section (2) of Section 8 providing for form of the memorandum, the procedure of its filing and Appellant in pursuance of the Notification dated 30.09.2006 has filed Entrepreneur Memorandum and Entrepreneur Memorandum Number was allotted, Appellant is required to be treated as Registered Small Industry. 8. The Liquidator in its reply has referred to the Notification dated 16.01.2009 issued under Sub-section (1) of Section 7 and has relied on Clause 13 as inserted in Schedule II by Notification dated 16.01.2009. Clause 13 is as follows: 13. The Acknowledged Entrepreneurs Memorandum shall be liable to be cancelled in case the unit is found closed for more than 6 months or furnished wrong information in the Entrepreneurs Memorandum filed or did not follow the instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. 13. In the present case, although in 5th CoC meeting, the CoC had taken a decision to liquidate the Corporate Debtor but subsequently in the 6th CoC meeting, the Appellant appeared before the CoC and claimed to file a plan to revive the Corporate Debtor. In the Agenda Item No. 12, in the 6th CoC meeting, the CoC and Resolution Professional advised the Appellant to file Resolution Plan by August 14, 2020. It is useful to extract the relevant part of the minutes of the meeting where CoC and Resolution Professional advised the Appellant to file a Resolution Plan: Mr. Sanjeev Bindal, RP,informed the COC that he had received a brief Resolution Plan from Mr. Nikhil Tandon, Suspended Director. However, RP had advised Mr. Tandon that the Resolution Plan could not be considered by the COC because same was not in accordance with Section 30 of the IBC 2016. Mr. Nikhil Tandon, who was present in the Sixth meeting, intimated that he was not apprised of the fourth meeting nor he was given the minute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which was a MSME but ultimately plan was refused to be considered only on the ground that no Resolution Plan was not invited. When in the CoC meeting Appellant was permitted to file a Resolution Plan, it cannot be said that Appellant was not invited to submit a Resolution Plan. It is another issue that CoC ought to have given opportunity to others to submit Resolution Plan by directing for issuance of Form G which was never done. As noted above, the Appellant was not considered as MSME during the proceedings of the CoC and the Liquidators view as reflected in the meeting of CoC and as submitted before us is clearly refuting the claim of the Appellant as Registered MSME. Non-acceptance of Corporate Debtor as a Registered MSME is a material irregularity which has been committed in the Insolvency Resolution Process. 17. The decision of the CoC taken in the 5th CoC meeting to liquidate the Corporate Debtor also cannot be approved due to more than one reason. Firstly, CoC when in the next CoC meeting permitted the Appellant to file Resolution Plan, the decision to liquidate the Corporate Debtor itself was not proceeded with any further. The minutes of the 6th, 7th and 8th meeting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the plan and ultimately decision thereon. 20. When we look into the entire facts and circumstances of the present case and sequence of events, we are satisfied that decision of the CoC in the 5th meeting to liquidate the Corporate Debtor is unsustainable for the reasons as indicated above. In result, we allow the appeal, set aside the order of the Adjudicating Authority dated 26.08.2021 and reject the application filed by the Resolution Professional under Section 33(2). 21. In consequence to setting aside of order of liquidation further steps need to be taken in the CIRP. We are of the view that one opportunity has to be given to the CoC for finding out as to whether there can be any Resolution Plan to revive the Corporate Debtor. In result, while allowing the appeal we issue following directions: I. An extension of period of 90 days is granted to the Resolution Professional and the CoC to take steps to prepare Information Memorandum and issuance of Form G and consideration of Resolution Plan, if any, and take appropriate decision regarding resolution in the CIRP process. II. The Appellant may also in pursuance of issuance of Form G submit its Resolution Plan whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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