The NCLT on Monday ordered the liquidation of Overnite Categorical after admitting the plea of its lender Deutsche Financial institution AG towards a decision plan submitted by a member of the debt-ridden firm’s suspended board.
Whereas the Insolvency and Chapter Code (IBC) bars promoters of a company debtor from submitting a decision plan below the CIRP, there’s rest for MSMEs.
The decision plan was submitted citing that the corporate is an MSME below the Company Insolvency Decision Course of.
A two-member bench of the Nationwide Firm Legislation Tribunal (NCLT) ordered the liquidation of company debtor Overnite Categorical “with speedy impact” as a timeframe of greater than 330 days of the Company Insolvency Decision Course of (CIRP) has already elapsed.
It additionally appointed Tarun Jain as liquidator of the company debtor to hold on the liquidation course of as per the related provision of the IBC 2016.
A decision plan was submitted on behalf of a member of the suspended board of Overnite Categorical, claiming that the company debtor falls below the MSME class by way of the central authorities’s notification dated June 1, 2020.
The whole admitted claims of the secured monetary collectors are Rs 10.82 crore towards which they’re supplied a meagre quantity of Rs 3.24 crore, which is roughly 30 per cent of the admitted claims.
Deutsche Financial institution AG’s declare is Rs 6 crore and was supplied 30 per cent of the admitted declare. The mentioned provide was with out contemplating the valuation of the safety held by the applicant, which is valued at greater than Rs 12 crore as of date.
It was alleged by the financial institution that the decision skilled is in hand in glove with the suspended board of administrators, who’s the profitable decision applicant additionally.
It additionally alleged that RP has not performed any forensic or transactional audit of the company debtor as a way to discover whether or not any defrauding of the belongings of the company debtor has been carried out by the suspended board of administrators or by any third social gathering.
Furthermore, RP obtained MSME certification throughout CIRP and submitted the decision plan.
Part 29A of IBC forbids the promoters to submit a bid, nevertheless, part 240 A offers an exception for MSMEs.
It says part 29A shall not apply to the decision applicant in respect of CIRP of any micro, small and medium enterprises.
The NCLT agreed with the submission of the financial institution and mentioned: “Beneath the garb of fixing the factors for the intending Potential Decision Candidates, the RP can’t assume the position of a ‘Facilitator’ to allow the Defaulter Promoter(s)/ Suspended Board of Director(s)/Ex-Administration to submit the EOI/Decision Plan by abusing the provisions contained below Part 240A of IBC 2016”.
NCLT mentioned IBC doesn’t empower the RP or the CoC to acquire an MSME certificates to allow the again door entry of the defaulting promoters into the company debtor.
“We conclude that neither the Promoters/Ex-Administrators nor the RP/COC are empowered below the IBC 2016 to acquire an MSME Certificates post-commencement of CIRP with the only objective of opening or enabling a again door entry to the defaulting promoters, who’re in any other case barred below Part 29A of IBC, 2016 to submit the EOI/Decision Plan,” it mentioned.
NCLT additional mentioned: “Accordingly, the prayer (b) of … is allowed and the Decision Plan filed is rejected”.
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