NCLT Kolkata Upholds Validity of MSME Certificate and Dismisses Allegations Against Successful Resolution Applicant

Tech Nirman’s Plea Dismissed; Tribunal Affirms Resolution Plan Amidst Debates on Eligibility Under Section 29A of IBC

In a significant ruling, the National Company Law Tribunal (NCLT), Kolkata Bench, dismissed the plea filed by Tech Nirman Ispat Private Limited challenging the approval of the resolution plan submitted by Rashmi Metaliks Limited for Jagdamba Industries Limited. The tribunal, presided over by Smt. Bidisha Banerjee and CMDE Siddharth Mishra, found no merit in the allegations that the resolution plan was vitiated by fraud or material irregularities, particularly concerning the eligibility criteria outlined in Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016.

The core of the dispute revolved around the MSME status of Jagdamba Industries Limited and its implications under Section 29A of the IBC. Tech Nirman argued that the MSME certificate, obtained post the initiation of the Corporate Insolvency Resolution Process (CIRP), was fraudulent and intended to circumvent the disqualification criteria under Section 29A. However, the tribunal clarified that the MSME status was valid and subsisting, with re-registration under the Udyam Portal being a procedural update rather than a new acquisition.

The tribunal further elaborated that the familial relationship between the promoters of Jagdamba Industries and Rashmi Metaliks did not inherently trigger disqualification under Section 29A. It underscored that mere blood relations or marital alliances do not constitute a "related party" unless there is substantive evidence of control or active management involvement, which was not established in this case.

Citing judgments from the Supreme Court, including "Swiss Ribbons Pvt Ltd v. Union of India" and "Eva Agro Feeds Pvt Ltd v. PNB," the tribunal emphasized that the definition of "related party" must be contextualized within business activities. It also referenced the NCLAT's stance that MSME status, if valid, exempts certain disqualifications under Section 29A as per Section 240A of the IBC, further fortifying the eligibility of Rashmi Metaliks to participate in the resolution process.

The tribunal concluded that the resolution plan approval process was conducted in compliance with statutory requirements, and Tech Nirman’s objections were primarily dilatory tactics without substantive legal grounding. Consequently, the application filed by Tech Nirman was dismissed, allowing the resolution plan of Rashmi Metaliks to proceed, marking a pivotal moment in the resolution process of Jagdamba Industries Limited.

Bottom Line:

Eligibility of a successful resolution applicant (SRA) under Section 29A of the Insolvency and Bankruptcy Code, 2016, and the validity of MSME registration of the Corporate Debtor.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Section 29A, Section 240A, MSME Development Act, 2006

Jagdamba Industries Limited, (NCLT)(Kolkata Bench) : Law Finder Doc Id # 2819860