MSME provisions under Section 240A of the IBC do not exempt all eligibility requirements under Section 29A, particularly those pertaining to wilful defaulters in liquidation processes.

ORDER

I. The present application is filed under Section 60 (5) of the Insolvency & Bankruptcy Code, 2016 r/w Rule 11 of NCLT Rules, 2016, by Mr. Ashok Kumar and Mr. Vijay Sarda Krishna (herein after called as Applicants against Mr. G Madhusudhan Rao (herein after called as Respondent No.2 ), the Liquidator of M/s Sarda Agro Oils Limited (herein after called as “Company/CD”), seeking directions;

i. To declare the non-consideration of revised compromise and settlement plan dated 26.10.23 of the Applicants’ by the Respondent No.2 as ultra vires to the IBBI (Liquidation Process) Regulations and provisions of IBC, 2016.

ii. To direct the Respondent No. 2 to place the Applicants’ compromise and settlement proposal dated 03.10.23 for the approval of this Tribunal.

Applicants’ Case:

1. The liquidation process was commenced vide order dated 09.01.2023 against M/s Sarda Agro Oils Limited, a Micro Small and Medium Enterprise Company incorporated under the Companies Act, 1956 (MSME).

2. The Applicants had submitted a scheme of compromise /arrangement under Section 230 of the Companies Act, 2013 as per Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 ("Liquidation Regulations") but the same was rejected by the Respondents. For rejecting the Applicants' revised scheme at the 3rd Stakeholders Consultation Committee (SCC) meeting without affording an opportunity to the Applicants to explain the scheme, the Applicants had filed I.A No. 681 of 2023 seeking directions to convene the 3^rd SCC meeting and consequently invited the Applicants to the said meeting by giving an opportunity to present and negotiate the revised scheme of compromise/arrangement in respect of the Corporate Debtor.

3. After the rejection of the scheme, the Applicants had been engaged in talks with the members of the SCC, i.e. Bank of Baroda and Indian Bank and had submitted a revised proposal increasing their offer to Rs.42 Crores. Pursuant to discussions with the SCC members on 14.08.2023, the Applicants had revised the offer to Rs. 43 Crores, to which the member of the SCC (Indian Bank) also accepted 10% of the revised offer amount as an upfront payment, i.e. Rs. 4,30,00,000 which was deposited by the Applicants through investor M/s. BRS Refineries in the Lien Account maintained with Indian Bank. On 17.08.2023, the Applicants had also informed the Liquidator of these developments and the submission of the cheque towards the upfront amount.

4. The 5th SCC meeting was conducted on 26.09.2023, during which the SCC members informed the Applicants that its revised proposal should mention that the amount of Rs. 43 Crores was exclusive of the liquidation costs, liquidator fee and any payments to other creditors (Annexure A-5)

5. The Applicants vide email dated 30.09.2023 addressed to the Liquidator submitted that it would shortly comply and give such revised proposal. On 04.10.2023, the Applicants sent the revised proposal meeting the SCC's requirements. But on 26.10.23, the Respondent No.2 informed the Applicants that their proposal cannot be processed under IBC as Indian Bank had declared Jagadish Sarda and Manohar Lal Sarda as willful defaulters which makes the Applicants ineligible under Section 29A to submit a proposal under Section 230 of the Companies Act, 2013 .

6. It is claimed that the scheme of compromise/arrangement under Section 230 of the Companies Act as per Regulation 2B of the Liquidation Regulations would not be hit by any bar under Section 29A of the Code due to the declaration of third parties