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CIRP Application cannot be rejected by the AA, only on the ground that the Corporate Debtor is MSME

A Three-Member Bench of the National Company Law Appellate Tribunal (NCLAT), New Delhi comprising the Chairperson-Justice S.J. Mukhopadhaya, Judicial Member-Justice A.I.S. Cheema and Technical Member Kanthi Narahari was hearing an Appeal where the section 9 Application was rejected by the Adjudicating Authority (AA).

The Appellant-Operational Creditor moved an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

The Adjudicating Authority, taking into consideration the relevant facts, including the fact that the Respondent denied certain parts of the claim, dismissed the application mainly on the ground that the Respondent-Corporate Debtor was a Micro, Small and Medium Enterprise (MSME), and the Act provides some safeguards to run its business and also a mechanism is provided in the Act itself to settle the dispute arising out of the business transactions made by the MSME with the other business establishments.

In the aforesaid circumstances, as there is a default of debt of more than Rs. 1 Lakh and, in absence of any pre-existence of dispute, the Three-Member Bench of the National Company Law Appellate Tribunal (NCLAT), New Delhi held that the Adjudicating Authority has no jurisdiction to reject the Application under Section 9 only on the ground that the ‘Corporate Debtor’ is MSME.

"There is no such provision under the Act which stipulates that a Corporate Debtor which is MSME does not come within the purview of ‘I&B Code’ or application under Sections 7 or 9 or 10 is not maintainable", the Appellate Authority (NCLAT) further observed.

The Appeal was allowed.

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