NCLAT directed the CoC to reconsider the MSME promoter’s request for relaxation in eligibility criteria before proceeding with the CIRP.
On 21-02-2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed an appeal and held that the CoC failed to deliberate on the appellant’s request for relaxation in eligibility criteria despite prior communication from the RP. Consequently, the RP was directed to convene a CoC meeting to reconsider the appellant’s request before proceeding further with the CIRP.
The National Company Law Appellate Tribunal (NCLAT) heard the counsel for the appellant and the counsel for the Resolution Professional (RP) in the appeal challenging the order dated 12.12.2024 passed by the Adjudicating Authority. The appeal arose from the dismissal of I.A. No. 5798 of 2024, filed by the appellant, who is a promoter of the corporate debtor. The appellant had previously filed I.A. No. 4104 of 2024 before the Adjudicating Authority, seeking various directions, which was disposed of on 25.09.2024 with liberty granted to the applicant to approach the RP in compliance with an email dated 15.04.2024. Following the issuance of Form-G, the Prospective Resolution Applicants (PRAs) submitted their expressions of interest. However, the appellant’s name was not included in the list, despite expressing interest. The RP invited objections regarding the inclusion and exclusion of PRAs, and the appellant sent an email asserting his status as an MSME promoter, seeking relaxation in the eligibility criteria. The RP responded, indicating that the CoC would consider the eligibility criteria in a forthcoming meeting. In the 10th CoC meeting held on 09.12.2024, agenda item no.10, which addressed the appellant’s request for inclusion in the final list of PRAs, was not agreed upon.
The appellant argued that the CoC had initially set the net worth criteria at ₹25 crores, whereas his net worth stood at ₹3 crores, necessitating relaxation. It was contended that the minutes of the 10th CoC meeting, submitted by the RP, did not reflect any deliberation on granting relaxation but only recorded the CoC’s reliance on a legal opinion, rejecting the appellant’s claim based on its delayed submission. The RP countered that the appellant had been present when the criteria were finalized in the 2nd CoC meeting and that the Adjudicating Authority had never directed the inclusion of the appellant’s name in its order dated 25.09.2024. Consequently, the RP asserted that the order dated 12.12.2024 was correctly passed, requiring no interference. The NCLAT examined the previous order in I.A. No. 4104 of 2024, wherein the Adjudicating Authority had refused to direct the inclusion of the appellant’s name in the list of eligible PRAs but granted liberty to approach the RP for compliance with the email dated 15.04.2024, directing the RP to take an appropriate decision per law.
The records indicated that the appellant, after the first order, approached the RP, seeking relaxation in the net worth requirement applicable to MSMEs. An email from the RP dated 14.10.2024 acknowledged that a CoC meeting would be held to consider relaxation and permit submission of a resolution plan. However, the minutes of the 10th CoC meeting did not indicate that the appellant’s request for relaxation was deliberated upon. The RP, in the meeting, merely highlighted that the consortium led by the appellant did not meet the eligibility criteria and had failed to raise objections or seek relaxation before the deadline of 15.04.2024. The RP further noted that the appellant approached the NCLT belatedly, after four months, and that the Adjudicating Authority had observed that the CIRP was at an advanced stage, emphasizing the time-bound nature of the process. The CoC, in its 9th meeting held on 22.10.2024, had directed the RP to obtain a legal opinion, which concluded that only PRAs in the final list were eligible to submit resolution plans, and the RP had no discretion to relax eligibility norms under applicable laws. Consequently, the CoC agreed to proceed per the legal opinion, excluding the appellant from the list of eligible PRAs.
The NCLAT observed that the RP was aware of the appellant’s request for relaxation as an MSME promoter. The email dated 14.10.2024 explicitly suggested that the CoC would consider relaxation, yet the minutes of the 10th CoC meeting did not reflect any discussion on this aspect. The tribunal noted that the appellant had submitted an expression of interest following the issuance of Form-G, and the question of relaxation of the net worth criteria had not been duly examined by the CoC. Given that two resolution plans had been submitted but voting had not yet commenced, the NCLAT found it appropriate to direct the RP to convene a CoC meeting to consider the appellant’s request for relaxation and allow the CoC to take a decision before proceeding further with the CIRP. The tribunal clarified that it was not expressing any opinion on the merits of the appellant’s claim, leaving the decision to the CoC. With these observations, the appeal was disposed of.
Mr. Abhijeet Sinha Sr. Advocate with Mr. Sourasubha Ghosh, Ms. Sanaya Patel and Mr. Rahul Narang, Advocates represented the Appellants.
Mr. Nausher Kohli, Mr. Pulkitesh Dutt Tiwari and Ms. Shreeya Pednekar, Advocates appeared for the RP.
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