Kolkata, Jun 21 (KNN) In a significant ruling, the National Company Law Tribunal (NCLT) Kolkata bench has decided to relax the net worth eligibility criteria for Micro, Small and Medium Enterprise (MSME) promoters submitting resolution plans during insolvency proceedings.

However, the tribunal maintained that these promoters must still furnish the required Earnest Money Deposit (EMD) and Security Deposit.

The tribunal cited the Insolvency and Bankruptcy Code's objectives and recommendations from the 2018 Insolvency Law Committee Report, which support special considerations for MSMEs due to their crucial role in the Indian economy.

The NCLT emphasised that this relaxation aims to promote entrepreneurship and protect employee livelihoods in the MSME sector. However, it maintained that MSME promoters must still provide the EMD and Security Deposit to demonstrate their seriousness in reviving the business.

The case in question involved Wearit Global Ltd., an MSME that entered the Corporate Insolvency Resolution Process (CIRP) in April 2022. 

The company's suspended director, Manish Kumar, sought exemption from the minimum tangible net worth requirement of Rs. 15 crore for submitting an Expression of Interest (EoI) and Resolution Plan.

While the Committee of Creditors (CoC) initially rejected the request, the NCLT Kolkata bench ruled in favour of relaxing the net worth criteria for MSME promoters. 

This ruling strikes a balance between facilitating MSME promoters' participation in the resolution process and ensuring the integrity of the insolvency proceedings. It is expected to have significant implications for future MSME insolvency cases across India.

(KNN Bureau)