MSME promoter regains his firm after lengthy insolvency proceeding
Even as the government is planning to make sweeping changes in the insolvency and the bankruptcy laws for the MSME sector, enabling the promoters of smaller firms to bid for their own firms, the National Company Law Tribunal (NCLT) recently allowed the promoter of a Muzaffarnagar, UP-based entity Jagdamba Loha Udyog Pvt Ltd to reposes the company through the IBC route.
The NCLT on 20 July approved the resolution plan submitted by the promoter Sushil Agarwal after the adjudicating authority was assured that the resolution plan complied with the norms under Section 29A , which effectively bars promoters from bidding from their companies under insolvency proceedings.
According to the copy of the NCLT order, the resolution applicant submitted that the corporate debtor being an MSME unit, therefore, he is eligible for submitting the resolution plan.
It is to be mentioned here that the government has through an ordinance amended IBC law by dispensing the applicability of Section 29A of IBC.
Further the resolution professional told the NCLT that Sushil Agarwal and his family has given bank guarantee for the corporate debtor and the DRT Dehradun had even issued certificate of recovery, However, none of the CoC members declared the resolution applicant willful defaulter.
But before getting the CoC approval, promoter Sushil Agarwal’s resolution plan had to be revised twice.
The resolution process began in July 2018. Initially the debtor received three bids – two of which fell by the wayside. By December 2019, only one resolution applicant – the promoter himself — was left. The CoC didn’t find Sushil Agarwal’s resolution plan commercially viable either and he was asked to revise his offer. So the promoter revised his initial offer of Rs 2 crore to ultimately Rs 5.76 crore in the 12th CoC meeting on 22 April 2019.
The CoC in July 2019 finally gave its nod to the resolution plan of Sushil Agarwal.
According to the resolution plan, the resolution applicant would pay Rs 5.56 crore to the financial creditors, Rs 10.51 lakh to operational creditors, Rs 6 lakh for CIRP cost and the rest for employees and workmen dues.
