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The Certificate or Memorandum showing that the company is an MSME is required to take the benefit under Section 240 A of IBC: NCLAT

In the recent case of National Company Law Appellate Tribunal has held that the MSME certificate is required to take benefit of Micro Small and Medium Enterprises under Section 240 A of the IBC. According to the facts of the case, the appellant has initiated the liquidations proceedings against the corporate debtor where in the appellant is the promoted and director of the company. The Company i.e., the Corporate debtor is into the business of sale and service of cars and owns certain immovable assets, plants, machinery and stocks of the spare parts of the cars.

The appellant initiated the liquidation proceeding against this company which was passed on 12th September 2017. Later the appellant contended that instead of reviving the company through settlement under the Section 230 of the companies’ act, 2013, it sought to close the business of the company. It was further submitted by the appellant that even though the order was passed by the Tribunal, the liquidator did not initiate any steps to ensure that Section 230 is duly followed.

However, the appellant was not able to show the certificate to the government authorities that the company is an MSME. Therefore, the counsel for appellant relied on the Section 240 A of the IBC to submit that the certificate or memorandum to show that the company is an MSME is not required and just going by the definition in the act and the balance sheet, it can be proved that the company is an MSME.

But the Tribunal taking in consideration all the arguments, dismissed the appeal and stated that When we find that it is not necessary for us to pursue Section 230 of the Companies Act at the stage of Liquidation, the same not being part of Procedure of IBC when the Corporate Debtor is in Liquidation, both the Appeals must fail, not having substance in the contentions raised. The Company Appeal also needs to be dismissed as the Appellant is pushing forward a scheme of amalgamation compromise and arrangement for three companies which are already in Liquidation under IBC.

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