The Supreme Court permitted the Central Bank of India to challenge the validity of the MSME Registration Certificate issued to the Corporate Debtor through a writ petition, stayed the CIRP proceedings, and directed the High Court to expedite the matter.
The Supreme Court Bench headed by CJI Sanjiv Khanna and Justice Sanjay Kumar reviewed multiple Appeals and held that the validity of the MSME registration certificate issued to the Corporate Debtor could not be examined under the limited scope of an appeal under Section 62 of the IBC; however, the appellant is permitted to challenge the certificate's issuance through a writ petition in the jurisdictional High Court, with directions for expeditious adjudication. The Supreme Court emphasized that the CIRP proceedings would remain stayed until further orders.
The Supreme Court considered an appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016, arising from proceedings related to the Corporate Debtor. The Corporate Debtor’s insolvency petition under Section 9 of the IBC was admitted on February 14, 2020, by the adjudicating authority, which also appointed a Resolution Professional. During the pendency of the Corporate Insolvency Resolution Process (CIRP), the Resolution Professional instructed an employee of the Corporate Debtor to apply for MSME registration under the Micro, Small and Medium Enterprises Development Act, 2006, following the issuance of a government notification dated June 1, 2020. Subsequently, the registration certificate was issued on October 23, 2020.
The appellant, the Central Bank of India, objected to the Corporate Debtor being categorized as an MSME, arguing that the Corporate Debtor's asset value exceeded the prescribed norms. These objections were recorded in the Committee of Creditors' meetings. The appellant further alleged that the MSME registration was wrongfully obtained and contrary to law. However, the Supreme Court noted that the appeal under Section 62 of the IBC limited its scope to examining the validity of the registration certificate and acknowledged the certificate's implications under Sections 29A and 240A of the IBC, particularly concerning the secured creditors' interests.
Given the unique circumstances, the Court allowed the appellant to file a writ petition before the jurisdictional High Court to challenge the MSME registration certificate. The Supreme Court directed the High Court to expedite the hearing and resolve the matter within six months of filing. It clarified that the validity of the MSME certificate had not been assessed by the Court and left all contentions open for adjudication. Meanwhile, the Court stayed the CIRP proceedings and proceedings before the adjudicating authority until further orders and scheduled the matter for relisting in August 2025.
Mr. Gaurav Agrawal, Sr. Advocate, Mrs. Rathina Maravarman, Advocate and Mr. Ravi Raghunath, AOR represented the Appellant.
Ms. Purti Gupta, AOR, Mr. Sahil Chandra, AOR, Mr. Rajendra Beniwal, Mr. Ashkrit Tiwari, Mr. Sunil Beniwal, Ms. Richa Singh, Mr. Arun Kumar Shukla, Mr. Naman Shukla, Mr. Yasharth Shukla, Mr. Astu Khandelwal, Mr. Ali Khan, Advocates and Mr. Surya Prakash, AOR appeared for the Respondents.
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