Delhi HC Stays NCLT Order Initiating Insolvency Proceedings Against An MSME Despite The March 24 Order Which Increased The Jurisdiction Of The Tribunal To 1 Crore [Read Order]

While holding that there's a prima facie case in favour of the Petitioner, the Single Bench of Justice Prathiba M Singh relied upon the notification dated 24/03/20 wherein the jurisdiction of the NCLT has been increased to ₹ 1 crore.

The order has come in a petition challenging the order passed by the NCLT on 29th May, 2020 by which the NCLT has entertained a petition against the Company M/s. VMA Enterprises Pvt Ltd. of which the Petitioner is one of the Promoter-Directors, under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Petitioner argued that it falls within the category of Micro, Small and Medium Enterprise (MSME), with more than 20 employees and at least

50 vendors would be affected if the insolvency proceeding continues against the Petitioner. Moreover, the Petitioner said that it would completely go out of business overnight.

The Petitioner further submitted that the NCLT did not consider the fact that from 24th March, 2020, onwards the jurisdiction of the NCLT has been increased to Rs 1 crore. However, in the operative portion of the NCLT's order, the NCLT proceeds on the basis that the defaulted amount is more than Rs.1 lakh, and has exercised jurisdiction.

After perusing the documents, the court took note of the fact that notification dated 24th March 2020 has changed the `minimum amount of default' from one lakh rupees to one crore rupees in respect of `Insolvency Resolution and Liquidation for Corporate Persons' in Part II of the Code.

The court further highlighted that the purpose of the said notification was to ensure that the MSMEs are not subjected to Insolvency proceedings during the lockdown or immediately thereafter.

Therefore, after satisfying itself that there's a prima facie case in favour of the Petitioner, the court stayed the said order till the next date of hearing upon the Petitioner submitting ₹10 lakh with the Registrar General of the court.

The court will next take up this matter on August 13.

Petitioner Company in this case was represented by Mr Prabhat Kumar

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