In exceptional circumstances, if the ‘Corporate Debtor’ is MSME

In exceptional circumstances, if the ‘Corporate Debtor’ is MSME, it is not necessary for the Promoters to compete with other ‘Resolution Applicants’ to regain the control of the ‘Corporate Debtor’

In Saravana Global Holdings Limited And And. Vs. Bafna Pharmaceuticals & Ors., the Hon’ble Appellate Tribunal dismissed the appeal filed by the Appellant by holding that In exceptional circumstances, if the ‘Corporate Debtor’ is MSME, it is not necessary for the Promoters to compete with other ‘Resolution Applicants’ to regain the control of the ‘Corporate Debtor’.

Brief Facts:-
Pursuant to an application filed by M/s aries under section. 9 of the I & B Code (Insolvency and Bankruptcy Code,2016), where Corporate Insolvency Resolution Process was proposed against Corporate Debtor i.e. M/s Bafna Pharmaceuticals Limited, a MSME (Micro, small and Medium Enterprise). In this case, 3rd Respondent, who is Mr. Mahaveer Chand Bafna, Promoter of Corporate Debtor filed improved ‘Resolution Plan’ which was approved by the COC (Committee of Creditors), later vide order dated 01.02.2019 the NCLT (National Company Law Tribunal) approved the improved ‘Resolution Plan’ filed by the 3rd Respondent which was challenged in the present appeal.

Learned Council appearing on behalf of the Appellants holds the opinion that Saravana Global Holdings LTD along with Mrs. P. Shobha were prejudiced to defer their Resolution Plan and eventually no chance was given to them to approach for the same. Also, it was contented that Promoters resolution plan do not meet the requirements under section 25, 29 & 29A of the Code.

In the present case, the Resolution Plan proposed by the Promoter of Corporate Debtor was submitted & approved by the 74.84% votes in favour of the Resolution Plan. Also, It was informed that the ‘Resolution Plan’ provides for payment to‘Operational Creditors’ who had submitted their claim and which was admitted by the ‘Interim Resolution Professional’/’Resolution Professional’ and the statutory dues, employee’s and workmen dues. The financial creditors have been provided for to the tune of 70% of the admitted claims. Thus the ‘Resolution Plan’ has taken care of all the stakeholders and there is no discrimination of any kind whatsoever amongst the same set of creditors

With regard to the Appellants, it was submitted that Mr. Padam J. Challani, as a director of Sarvana Holdings Ltd, had a NPA account, declared on 29th March, 2018 and answerable to SBI Bank with pending amount rupees 48.33 crores. Due to not getting any amount from him, SBI agreed to sacrifice 50% pending amount and ready to receive 50% amount as 23.14 crores from him in total settlement. However, It may be noted that the Appellants, belonging to the same group companies, is making tall claims of proposing a plan worth 100 Crores. However, before this Appellate Tribunal, learned counsel for the Appellant submitted that the Appellant is ready to pay total amount of Rs. 81.57 Crores.”

It was noted that the Parliament initiated the strong step to improve the I & B Code by allowing the promoters of MSME to register Resolution Plan. This in turn, will enable promoters of MSME to give back the amount to COC and win back the control of the Corporate Debtor and Entrepreneurs by just filling the Resolution Plan, registering all the procedures laid down by I & B Board successfully. In extreme cases, if the Corporate Debtor is MSME then it’s not necessary for the promoters to cope up with other Resolution Applicants to win back their control.

By considering all the figures and facts, it can be said that the Resolution Applicant being the promoter of the M/s Bafna Pharmaceutical Ltd who is a Corporate Debtor and MSME then it is open to the Committee of Creditors to defer the process of issuance of Information Memorandum Set if the promoter of MSME offers a viable and feasible plan maximising the assets of the Corporate Debtor and balancing all the pending amounts of stakeholders. For all such purposes, it is not required to follow all the procedures and accepting proposals under section 12 A of the I & B Code.

Hence, the appeal was dismissed being devoid of merits by the Hon’ble NCLAT.