The National Company Law Tribunal, Mumbai bench in its recent order dated January 2, 2024 (in C.P.(IB) No. 1632/MB/2019) held that post- dated cheques issued in prior point of time but encashed after commencement of corporate insolvency resolution process (“CIRP”) is violation of provisions of moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016.
In view thereof, the respondents, in whose favour the cheques were encashed after the commencement of CIRP, were directed to jointly and severally refund the cheque amount to the corporate debtor within a period of 7 days from the date of the order.
MSMEs ARE NOT ENTITLED TO BENEFIT OF NOTIFICATION DATED MAY 29, 2015 ISSUED UNDER SECTION 9 of MSME ACT IF THEY HAVE NOT APPLIED FOR THE SAME IN ACCORDANCE WITH THE NOTIFICATION, RULES BOMBAY HIGH COURT
Hon’ble Bombay High Court in its judgment dated January 11, 2024 rejected a group of petitions filed by several MSMEs raising a common issue involving a challenge to the action of respondent Banks or NBFCs under the SARFAESI Act, based on a Notification dated 29th May, 2015 issued under Section 9 of the MSME Act. The petitioners, who are stated to be duly registered under the MSME Act, and who are borrowers who have taken loans or other financial assistance from the Respondent Banks/NBFCs, have challenged the very action of declaring them as Non-Performing Assets (NPA) under Section 13 (2) of the SARFAESI Act. The notification dated May 29, 2015 dealt with the framework for revival and rehabilitation of MSME which are under incipient stress. Hon’ble Bombay High Court relied on its own
decision in Alexis Business Solutions Pvt. Ltd. Vs. The Board of Directors. (Writ Petition (L) No. 34253 OF 2022) and of Kerala High Court in N.
P. Abdul Nazer Vs. Union Bank of India & Anr. (Order dated 22nd August 2023 in O.P.(Crl) No.
288 of 2023) wherein it was held that the notification only gives an opportunity for the Bank to identify incipient stress accounts and provide means to MSMEs also to apply before its inability to pay debts. The notification does not, under any circumstances whatsoever, give it a mandatory character. Considering the legal and factual position, the Bombay High Court held that the Banks/NBFCs are not obliged to adopt the restructuring process on its own without there being any application by the Petitioners/MSMEs.
