The exemption under Section 240A of IBC is not applicable to Section 29A(b) of IBC | MSME Promoters are exempted only from clauses (c) and (h) of Section 29A of IBC and other eligibility criteria as stipulated under section 29A will be applicable – Namdev Hindurao Patil Vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors. – NCLAT New Delhi
April 26, 2024
In this important case, Hon’ble NCLAT interpreted Section 29A read with Section 240A that: (i) In a way, Section 29A intends to give protection to the genuine creditors of the Corporate Debtor by preventing unscrupulous persons from rewarding themselves at the expenses of the creditors and undermine the process and object of the Code. (ii) The Promoters of MSME are exempted only from clauses (c) and (h) of the Section 29A of the Code and other eligibility criteria as stipulated under section 29A of the Code will be applicable i.e., Section 29A(b) is not carved out. (iii) The CoC has full powers to decide regarding approval or non-approval of the Resolution Plan. The CoC is also duty bound to consider the eligibility or ineligibility of the Resolution Applicant under section 29A of the Code. (iv) The ineligibility for submission of the Resolution Plan, would be determinate w.r.t date on which the Resolution Applicant submits his Plan.