Other-Net Worth

MSME promoter can be relaxed from net worth criterion for submitting its Resolution Plan but not be waived off from depositing Security Deposit and EMD – Mr. Manish Kumar, suspended director of Wearit Global Ltd. Vs. Rachna Jhunjunwala, RP and Anr. – NCLT Kolkata Bench

Hon’ble NCLT held that:
(i) As various relaxations have already been provided under Section 240A of the Code, further, relaxation to satisfy the financial solvency possessed by the MSME Promoter will not serve the object of the code.
(ii) As various exemptions and relaxations are catered to the MSME, including the exemption provided in Section 240A of the I&B Code to MSME sector, and furnishing EMD and Security Deposit, which is refundable in nature if the Plan of the Resolution Applicant including the MSME Promoter fails in the bid, denotes the seriousness and solemnity of the Resolution Applicant which indicates the affirmation that the Applicant is honestly interested in reviving the business of the Corporate Debtor but not merely participating as a probable attempt to regain the control over its business or vitiate the CIRP of the Corporate Debtor.
(iii) In the case in hand, the MSME promoter who has already defaulted and subsequently, its company has undergone into CIRP for its default, can be relaxed from the net worth criterion for submitting its plan but not be waived off from depositing the Security Deposit at time of submission of its EoI and the EMD at time of submission of its Resolution Plan.

MSME promoter can be relaxed from net worth criterion for submitting its Resolution Plan but not be waived off from depositing Security Deposit and EMD – Mr. Manish Kumar, suspended director of Wearit Global Ltd. Vs. Rachna Jhunjunwala, RP and Anr. – NCLT Kolkata Bench Read Post »

Whether Unsuccessful Resolution Applicant have vested right to challenge eligibility of Successful Resolution Applicant – Creative Channel Advertising & Marketing Pvt. Ltd. Vs. Mr. Rohit Ramesh Mehra and Ors. – NCLT Mumbai Bench

The Hon’ble NCLT with respect to the IAs filed by PRA considered that since the plan already stands approved by the CoC in its commercial wisdom, these belated contentions are filed after filing of the Application for the approval of the Resolution Plan by RP. Moreover, this process under the IBC is a time bound process wherein the legislature and the regulator have set out specific timelines within which the process should be completed, including timelines within which PRAs can raise objections with respect to inclusion or exclusion of a PRA in the provisional list of PRAs basis the eligibility criteria. Therefore, the contentions raised thereafter are highly belated and now cannot be used to turn around and derail the process. Hence, relying on the above the applications are not maintainable as the unsuccessful resolution applicants have no vested right.

Whether Unsuccessful Resolution Applicant have vested right to challenge eligibility of Successful Resolution Applicant – Creative Channel Advertising & Marketing Pvt. Ltd. Vs. Mr. Rohit Ramesh Mehra and Ors. – NCLT Mumbai Bench Read Post »

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai

In this important judgment, NCLAT held that:
(i) A simple and purposive reading of this Section 14 does not specify any ‘interest waiver’ during the period of moratorium.
(ii) The role of the RP under IBC, 2016 is only to collate the Claims and that he does not have any adjudicatory powers. The Claim of the Creditors does not stop on initiation of CIRP.
(iii) It is not in the domain of the IBC, 2016, even to decide any contractual interest liability. Section 14 does not impose any restriction on charging of any interest till the amount is paid. It is the commercial wisdom of the CoC with respect to the quantum of amounts to be paid to the Creditors within the Provisions of the Code.
(iv) There is no provision in the Code that enables the Corporate Debtor or a Guarantor to seek remission in the interest claims from the Financial Creditors solely on the basis that there is a Resolution Plan.
(v) Having not challenged the decision of the CoC in not qualifying him as a Prospective Resolution Applicant, the Promotor cannot now at the belated stage after the approval of the Plan by the Adjudicating Authority states that he is interested in offering a viable solution.
(vi)The Promotor being an MSME is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan.

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai Read Post »

NCLT allows Promoters of MSME to submit Resolution Plan at belated stage – Mr. K.C.M. Kumar Vs. Mr. Raghu Babu Gunturu, RP of M/s. Speck Systems Ltd. – NCLT Hyderabad Bench

allowed and the Applicant is permitted to submit his Resolution Plan to the RP within 20 days from the date of this Order and the RP shall collate the said Resolution Plan and place before the CoC and the CoC shall negotiate with the existing Resolution Applicants including the Applicant herein and decide on the Resolution Plans, considering the commercial viability and technical feasibility of the Plan.

NCLT allows Promoters of MSME to submit Resolution Plan at belated stage – Mr. K.C.M. Kumar Vs. Mr. Raghu Babu Gunturu, RP of M/s. Speck Systems Ltd. – NCLT Hyderabad Bench Read Post »

Whether promoter of MSME Corporate Debtor is exempted from the other eligibility criteria of RFRP under section 240A of IBC in submission of Resolution Plan – Mr. Haridas Krishna Kumar Vs. Mr. G.Kalpana, RP of M/s Feno Plast Ltd. – NCLT Hyderabad Bench

In this case, the main grievance of the applicants being two erstwhile directors of corporate debtor under CIRP which is registered as an MSME unit, is against the resolution professional who declared them ineligible to submit expression of interest as they are not meeting the criteria of Net Worth as stipulated in RFRP. Their submission is that being a MSME unit they are eligible for relaxation in meeting the eligibility criteria as laid down in RFRP.
NCLT Hyderabad Bench allowed the application and held that the object of the Code, which is maximization of the Value of the Assets of Corporate Debtor, is also taken into consideration by the NCLAT and it observed that in order to give an opportunity to regain the control of the Corporate Debtor, the Management/Promoters/Erstwhile Directors of the Corporate Debtor being an MSME, need not compete with other Resolution Applicants. Hence, the objective in permitting the MSMEs to participate without furnishing the Resolution Plan Certificate is very well explained in the various judgements.

Whether promoter of MSME Corporate Debtor is exempted from the other eligibility criteria of RFRP under section 240A of IBC in submission of Resolution Plan – Mr. Haridas Krishna Kumar Vs. Mr. G.Kalpana, RP of M/s Feno Plast Ltd. – NCLT Hyderabad Bench Read Post »

The calculation of the acceptable net worth of the company for participant in Resolution Plan would be the one which has been calculated on the basis of Section 2(57) of the Companies Act, 2013 and not by any other methodology – Kataria Industries Pvt. Ltd. Vs. Mr. Hemant Sethi RP of Emkay Automobiles Ltd. – NCLT New Delhi Bench Court-V

The Expression of Interest(EOI) filed by the Applicant Consortium has been declared as ineligible by the Resolution Professional(RP) and the same was confirmed by the CoC in terms of the eligibility criteria approved by the CoC and provided under Form-G dated 19.012022. The contention of the RP is that the het worth submitted by the Applicant Company had not been calculated in accordance with the definition of net worth as provided under the Section 2(57) of the Companies Act, 2013 and that on the basis of calculations made as per the definition of net worth under Section 2(57) the net worth falls short of the minimum requirement of Rs. 25 Crore as specified in the eligibility conditions, thereby making the Applicant ineligible.

The calculation of the acceptable net worth of the company for participant in Resolution Plan would be the one which has been calculated on the basis of Section 2(57) of the Companies Act, 2013 and not by any other methodology – Kataria Industries Pvt. Ltd. Vs. Mr. Hemant Sethi RP of Emkay Automobiles Ltd. – NCLT New Delhi Bench Court-V Read Post »

If the Corporate Debtor is an MSME it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor – Mr. C. Raja John Vs. Mr. R. Raghavendran RP of Springfield Shelters Pvt. Ltd. – NCLAT Chennai

In this case, Resolution Professional rejected the plan of the promoter of the Corporate Debtor(MSME) that the Appellant does not meet the eligibility norm as per Section 25(2)(h) of Code, prescribing the Net Worth of Rs.2 Crores by the COC and DIN of the Appellant is under default and not eligible as per Section 29A(e) of the Code, 2016. The AA upheld the view of the RP.
NCLAT set aside the AA’s order and held that in any event, it is unequivocal that the Corporate Debtor is an MSME and it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor. Further, this Tribunal, keeping in view of the object of the Code that the Maximization of the Value of the Assets of Corporate Debtor is to be kept in mind in achieving its object. To give an opportunity to regain the control of the Corporate Debtor, the Management/Promoters/Erstwhile Directors of the Corporate Debtor being an MSME, not necessary to compete with other Resolution Applicants.

If the Corporate Debtor is an MSME it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor – Mr. C. Raja John Vs. Mr. R. Raghavendran RP of Springfield Shelters Pvt. Ltd. – NCLAT Chennai Read Post »

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