HARI BABU THOTA  versus *
[2023] 16 S.C.R. 917, Supreme Court of India, 2023
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
[2023] 16 S.C.R. 917 : 2023 INSC 1056
917
CASE DETAILS
HARI BABU THOTA 
v.*
(Civil Appeal No. 4422 of 2023)
NOVEMBER 29, 2023
[SANJAY KISHAN KAUL AND SUDHANSHU DHULIA, JJ.]
HEADNOTES
Issue for consideration: Whether the resolution applicant was 
disqualiﬁ ed under the primary conditions as speciﬁ ed u/s.29A of the 
Insolvency and Bankruptcy Code, 2016 and; whether the corporate 
debtor not having an MSME status at the time of commencement of CIRP 
proceedings would disqualify the Resolution applicant u/s.29A of the Code 
as beneﬁ t of s.240A would not be available.
Insolvency and Bankruptcy Code, 2016 – ss.29A, 240A – Persons 
not eligible to be resolution applicant – Application of the Code to micro, 
small and medium enterprises – Appellant-Resolution Professional 
presented plan as propounded by the promoters and approved by the 
Committee of Creditors – Application dismissed by NCLT holding that 
the promoters could not have presented the plan – Order upheld by 
NCLAT relying on its earlier order in Digamber Anand Rao Pingle v. 
Shrikant Madanlal Zawar & Ors. – Sustainability: 
Held: s.29A was added as an amendment by Act 8 of 2018 with eﬀ ect 
from 23.11.2017 – The objective was to cure the mischiefs of the persons who 
may be responsible for the ﬁ nancial situation of the company against trying 
to submit a plan and take over the company – On facts, there is no per say 
disqualiﬁ cation u/s.29A – s.240A also was introduced as an Amendment in 
2018 eﬀ ective from
06.06.2018 – It begins with a “notwithstanding clause” 
– Clauses (c) and (h) of s.29-A which apply to the promoters and exempts 
them to apply for a plan is not applicable qua any micro, small and medium 
enterprises – The objective obviously was to due to the nature of business 
carried out by such entities – Excluding such industries from disqualiﬁ cation 
u/s.29A (c) and (h) is because qua such industries other resolution applicants 
* Ed. Note: There was no respondent. Amicus Curiae was appointed in the matter.
918 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
may not be forthcoming which thus, would inevitably lead not to resolution 
but to liquidation – The submission that while interpreting s.240A, the 
reason for carving out an exception in micro, small and medium industries 
is set out on the date of application for making the bid as the crucial date 
and that while for some other aspects the initiation of the CIRP proceedings 
would be the cut oﬀ  date, the same would not apply in the case of s.240A, in 
view of the statement by the Minister himself, accepted – Law laid down in 
Digambar Anand Rao Pigle case by the Tribunal is not the correct position 
in law and the cut oﬀ  date will be the date of submission of resolution 
plan – Even on this count, the plan submitted in question will not incur 
the disqualiﬁ cation – Impugned orders of the NCLT and NCLAT set aside. 
[Paras 6, 10, 14, 17, 20-23 and 25]
LIST OF CITATIONS AND OTHER REFERENCES
Digamber Anand Rao Pingle v. Shrikant Madanlal Zawar & Ors. 
Decision of National Company Law Appellate Tribunal in Comp. App. (AT) 
(Ins.) No.43-43A/2021 – not the correct position in law.
India Private Limited v. Satish Kumar Gupta & Ors, (2019) 2 SCC 1 
: [2018] 12 SCR 362; Swiss Ribbons Private Limited and Anr. v. Union of 
India & Ors, (2019) 4 SCC 17 : [2019] 3 SCR 535 – referred to.
Insolvency Law Committee Report 2018 – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED 
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 4422 of 2023.
From the Judgment and Order dated 02.06.2023 of the National 
Company Law Appellate Tribunal, Chennai Bench in Company Appeal 
(AT) (CH) (Ins) No.110 of 2023.
Appearances:
Bishwaji Dubey, Ld. Amicus Curiae, Adhitya Srinivasan, Nikhil 
Saran, Advs.
Ms. Pritha Srikumar Iyer, Arun Srikumar, Ms. Neha Mathem, 
Shubhansh Thakur, Advs. for the Appellant.
919
Praveen Kumar Jha, S. Thennavan, Bholle Taguru Phanendra, N. 
Sakthivel, Chembugari Abheeshna, Sunil Fernandes, Zeeshan Diwan, Ms. 
Priyansha Indira Sharma, Faraz Ahmed, Praveen Kumar Jha, Advs. for the 
Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
SANJAY KISHAN KAUL, J.
1. Shree Aashraya Infra-Con Limited went into CIRP under the 
Insolvency and Bankruptcy Code, 2016 [for short “the Code”] and the 
appellant before us was appointed as the Resolution Professional. The 
Resolution Professional presented a plan before the National Company 
Law Tribunal, Bengaluru as propounded by the promoters and approved 
by the Committee of Creditors [COC] but in terms of the order dated 
28.02.2023, the application was dismissed on the ground that the promoters 
could not have presented the plan. It is the say of the appellant before 
us that this has far reaching consequences for him and his role as the 
Resolution Professional as:
a) the appellant is ineligible to continue as a Resolution Professional;
b) the applicant is ineligible to be considered as Board is liquidator 
of the corporate debtor;
c) the case of the appellant is required to be referred to the Insolvency 
and Bankruptcy Board of India (IBBI) for further action in accordance 
with law on the ground that the appellant had erred in putting up a 
plan that was not in consonance with law for consideration of the 
adjudicating authority.
2. Since there was really no representation on behalf of the other 
side,
we appointed Mr. Bishwajit Dubey, learned counsel as Amicus in 
the matter.
3. We have heard learned counsel for the appellant/Resolution 
Professional and the learned Amicus not only because it would aﬀ ect the 
professional abilities of the appellant but because certain issues required 
HARI BABU THOTA
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SUPREME COURT REPORTS 
[2023] 16 S.C.R.
adjudication by us, more so, in view of the impugned order relying on an 
earlier order of the National Company Law Appellant Tribunal in Digamber 
Anand Rao Pingle v. Shrikant Madanlal Zawar & Ors.1
4. There are two aspects to be examined out of the contours of the 
submissions:
Firstly: Whether the resolution applicant was disqualiﬁ ed under the 
primary conditions as speciﬁ ed under Section 29 A of the Code;
and Secondly: Whether the corporate debtor not having an MSME 
status at the time of commencement of CIRP proceedings would 
disqualify the Resolution applicant under Section 29A of the Code as 
beneﬁ t of Section 240A would not be available. 
It is the say of learned Amicus that if the MSME certiﬁ cate is 
obtained prior to the presentation of the plan such disqualiﬁ cation 
would not be incurred and benefit of the provision would be 
available.
5. Learned counsel for parties have taken us through Section 29A of the 
said Code. It has been pointed out that other sub-Clauses except Clauses (c), 
(g) and (h) which apply to promoters and guarantors are generic in nature. 
We reproduce the relevant provisions as under:
29A. Persons not eligible to be resolution applicant-
(C) at the time of submission of the resolution plan has an account, 
or an account of a corporate debtor under the management or control 
of such person or of whom such person is a promoter, classiﬁ ed as 
non-performing asset in accordance with the
guidelines of the Reserve 
Bank of India issued under the Banking Regulation Act, 1949 (10 of 
1949) or the guidelines of a ﬁ nancial sector regulator issued under 
any other law for the time being in force, and at least a period of one 
year has lapsed from the date of such classiﬁ cation till the date of 
commencement of the corporate insolvency resolution process of the 
corporate debtor:
1 
Comp. App. (AT) (Ins.) No.43-43A/2021
921
Provided that the person shall be eligible to submit a resolution 
plan if such person makes payment of all overdue amounts with interest 
thereon and charges relating to non-performing asset accounts before 
submission of resolution plan:
Provided further that nothing in this clause shall apply to a 
resolution applicant where such applicant is a ﬁ nancial entity and is 
not a related party to the corporate debtor.
Explanation I – For the purposes of this proviso, the expression “related 
party” shall not include a ﬁ nancial entity, regulated by a ﬁ nancial sector 
regulator, if it is a ﬁ nancial creditor of the corporate debtor and is a 
related party of the corporate debtor solely on account of conversion or 
substitution of debt into equity shares or instruments convertible into 
equity shares or completion of such transactions as may be prescribed, 
prior to the insolvency commencement date.
Explanation II -For the purposes of this clause, where a resolution 
applicant has an account, or an account of a corporate debtor under 
the management or control of such person or of whom such person is 
a promoter, classiﬁ ed as non-performing asset and such account was 
acquired pursuant to a prior resolution plan approved under this Code, 
then, the provisions of this clause shall not apply to such resolution 
applicant for a period of three years from the date of approval of such 
resolution plan by the Adjudicating Authority under this Code.
(g) has been a promoter or in
the management or control of a corporate 
debtor in which a preferential transaction, undervalued transaction, 
extortionate credit transaction or fraudulent transaction has taken place 
and in respect of which an order has been made by the Adjudicating 
Authority under this Code:
Provided that this clause shall not apply if a preferential 
transaction, undervalued transaction, extortionate credit transaction 
or fraudulent transaction has taken place prior to the acquisition 
of the corporate debtor by the resolution applicant pursuant to a 
resolution plan approved under this Code or pursuant to a scheme 
or plan approved by a ﬁ nancial sector regulator or a court, and such 
resolution applicant has not otherwise contributed to the preferential 
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
922 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
transaction, undervalued transaction, extortionate credit transaction 
or fraudulent transaction.
(h) has executed a guarantee in favour of a creditor in respect of a 
corporate debtor against which an application for insolvency resolution 
made by such creditor has been admitted under this Code and such 
guarantee has been invoked by the creditor and remains unpaid in 
full or part:”
6. We may note that the aforesaid section was added as an amendment 
by Act 8 of 2018 with eﬀ ect from 23.11.2017. The objective was to cure the 
mischiefs of the persons who may be responsible for the ﬁ nancial situation 
of the company against trying to submit a plan and take over the company. 
If we turn to Clause (c), it provides a time frame i.e. a period of one year 
should elapse from the date of classiﬁ cation as a non-performing asset (NPA). 
In the factual scenario, it is stated that there are no bank dues/outstanding 
which would at all invite a concept of NPA much less the period of one year.
7. Insofar as Clause (g) is concerned, it is pointed out that only one 
preferential transaction was identiﬁ ed by the appellant but no order was 
passed by the adjudicating authority as on the date of the impugned order.
8. It is similarly stated that Clause (h) again has no factual application 
in the given scenario.  
9. In eﬀ ect, what is stated is that these aforesaid Clauses are speciﬁ c to 
the promoters and thus, the promoter of the company
was not disqualiﬁ ed 
per say under Section 29A as to dis-entitle him from presenting the plan. 
This issue is stated to have been noted even in the impugned judgment in 
para 3 as raised but there is no ﬁ nding in the impugned order in this behalf. 
The impugned order has been based only on the issue of Section 240A of 
the said Code.
10. The aforesaid discussion thus, shows that as per the factual 
scenario on record, there is no per say disqualiﬁ cation under Section 29A 
and we could have left the matter at that. However, we proceed further as 
it is pointed out that the plea based on Section 240A needs the opinion of 
this Court as there are a number of such cases arising and the orders earlier 
passed are being followed.
923
11. In this behalf learned Amicus has drawn our attention to the 
judgment of this Court in Arcelormittal India Private Limited v. Satish 
Kumar Gupta & Ors.2. The discussion in this behalf is contained in paras 
46, 47 and 57 which are reproduced as under:
46. According to us, it is clear that the opening words of Section 29-A 
furnish a clue as to the time at which clause (c) is to operate. The 
opening words of Section 29-A state: “a person shall not be eligible 
to submit a resolution plan...”. It is clear therefore that the stage 
of ineligibility attaches when the resolution plan is submitted by a 
resolution applicant. The contrary view expressed by Shri Rohatgi is 
obviously incorrect, as the date of commencement of the corporate 
insolvency resolution process is only relevant for the purpose of 
calculating whether one year has lapsed from the date of classiﬁ cation 
of a person as a non-performing asset. Further, the expression used 
is “has”, which as Dr. Singhvi has correctly argued, is in praesenti. 
This is to be contrasted with the expression “has been”, which is 
used in Clauses (d) and (g), which refers to an anterior point of time. 
Consequently, the amendment of 2018 introducing the words “at the 
time of submission of the resolution plan” is clariﬁ catory, as this was 
always the correct interpretation as to the point of time at which the 
disqualiﬁ cation in clause (c) of Section 29-A will attach. In fact, the 
amendment was made pursuant to the
Insolvency Law Committee 
Report of March, 2018. That Report clearly stated:
“In relation to applicability of Section 29-A (c), the Committee also 
discussed that it must be clariﬁ ed that the disqualiﬁ cation pursuant 
to Section 29-A(c) shall be applicable if such NPA accounts are held 
by the resolution applicant or its connected persons at the time of 
submission of the resolution plan to the RP.”
47. The ingredients of clause (c) are that, the ineligibility to submit a 
resolution plan attaches if any person, as is referred to in the opening 
lines of Section 29-A, either itself has an account, or is a promoter of, 
or in the management or control of, a corporate debtor which has an 
account, which account has been classiﬁ ed as a non-performing asset, 
2 
(2019) 2 SCC 1
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
924 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
for a period of at least one year from the date of such classiﬁ cation 
till the date of commencement of the corporate insolvency resolution 
process. For the purpose of applying this sub-section, any one of three 
things, which are disjunctive, needs to be established. The corporate 
debtor may be under the management of the person referred to in 
Section 29-A, the corporate debtor may be a person under the control 
of such person, or the corporate debtor may be a person of whom such 
person is a promoter.
57.The interpretation of Section 29-A (c) now becomes clear. Any 
person who wishes to submit a resolution plan, if he or it does so acting 
jointly, or in concert with other persons, which person or other persons 
or other persons happen to either manage or control or be promoters 
of a corporate debtor, who is classiﬁ ed as a non-performing asset and 
whose debts have not been paid oﬀ  for a period of at least one year 
before commencement of the corporate insolvency resolution process, 
becomes ineligible to submit a resolution plan. This provision therefore 
ensures that if a person wishes to submit a resolution plan, and if such 
person or any person acting jointly or any person in concert with 
such person, happens to either manage, control, or be promoter of a 
corporate debtor declared as a non-performing asset one year before 
the corporate insolvency resolution process begins, is ineligible to 
submit a resolution
plan. The ﬁ rst proviso to clause (c) makes it clear 
that the ineligibility can only be removed if the person submitting a 
resolution plan makes payment of all overdue amounts with interest 
thereon and charges relating to the non-performing asset in question 
before submission of a resolution plan. The position in law is thus clear. 
Any person who wishes to submit a resolution plan acting jointly or 
in concert with other persons, any of who may either manage, control 
or be a promoter of a corporate debtor classiﬁ ed as a non-performing 
asset in the period abovementioned, must ﬁ rst pay oﬀ  the debt of the 
said corporate debtor classiﬁ ed as a non-performing asset in order to 
become eligible under Section 29-A(c).”
12. Thus, in a sense what is to be tested is whether the Tribunal’s 
view in Digambar Anand Rao Pingle’s case (supra) sets forth the correct 
position of law.
925
13. In the factual scenario of that case, the application for MSME 
certiﬁ cate was made after the commencement of the CIRP and it was opined 
that such unauthorized application cannot be considered and cannot tide over 
the ineligibility under Section 29A. In order to appreciate the provision in 
question, we reproduce Section 240 A as under:
Section 240A: Application of this Code to micro, small and medium 
enterprises.
240A. (1) Notwithstanding anything to the contrary contained in this 
Code, the provisions of clauses (c) and (h) of section 29A shall not 
apply to the resolution applicant in respect of corporate insolvency 
resolution process or pre-packaged insolvency resolution process of 
any micro, small and medium enterprises.
(2) Subject to sub-section (1), the Central Government may, in the 
public interest, by notiﬁ cation, direct that any of the provisions of 
this Code shall—
(a) not apply to micro, small and medium enterprises; or
(b) apply to micro, small and medium enterprises, with such 
modiﬁ cations as may be speciﬁ ed in the notiﬁ cation.
(3) A draft of every notiﬁ cation proposed to be issued under sub-
section (2), shall be laid before each House of Parliament, while it is 
in session, for a total period of thirty days which may be comprised 
in one session or in two or more successive sessions.
(4) If both Houses agree in disapproving the issue of notiﬁ cation or 
both Houses agree in making any modiﬁ cation in the notiﬁ cation, 
the notiﬁ cation
shall not be issued or shall be issued only in such 
modiﬁ ed form as may be agreed upon by both the Houses, as the 
case may be.
(5) The period of thirty days referred to in sub-section (3) shall not 
include any period during which the House referred to in sub-section 
(4) is prorogued or adjourned for more than four consecutive days.
(6) Every notiﬁ cation issued under this section shall be laid, as soon 
as may be after it is issued, before each House of Parliament.
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
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SUPREME COURT REPORTS 
[2023] 16 S.C.R.
Explanation.— For the purposes of this section, the expression 
“micro, small and medium enterprises” means any class or classes 
of enterprises classiﬁ ed as such under sub-section (1) of section 7 of 
the Micro, Small and Medium Enterprises Development Act, 2006 
(27 of 2006).]
14. The aforesaid provision also was introduced as an Amendment in 
2018 eﬀ ective from 06.06.2018. It begins with a “notwithstanding clause”. 
Clauses (c) and (h) of Section 29-A which apply to the promoters and 
exempts them to apply for a plan is not applicable qua any micro, small 
and medium enterprises. The objective obviously was to due to the nature 
of business carried out by such entities. 
15. Learned counsel has referred to the judgment in Swiss Ribbons 
Private Limited and Anr. v. Union of India & Ors.3 The relevant paras are 
as reproduced under:
Exemption of micro, small, and medium enterprises from Section 29A 
111. The ILC Report of March 2018 found that micro, small, 
and medium enterprises form the foundation of the economy and 
are key drivers of employment, production, economic growth, 
entrepreneurship, and ﬁ nancial inclusion. 
112.  Section 7 of the Micro, Small and  Medium Enterprises 
Development Act, 2006 classiﬁ es enterprises depending upon whether 
they manufacture or produce goods, or are engaged in providing and 
rendering services as micro, small, or medium, depending upon certain 
investments made, as follows:
“7.Classiﬁ
cation of enterprises. —(1) Notwithstanding anything 
contained in  Section 11-B of the Industries (Development and 
 Regulation) Act, 1951 (65 of 1951), the Central Government may, 
for the purposes of this Act, by notiﬁ cation and having regard to the 
provisions of sub-sections (4) and (5), classify any class or classes 
of enterprises, whether proprietorship, Hindu undivided family, 
3 
(2019) 4 SCC 17
927
associations of persons, cooperative society, partnership ﬁ rm, company 
or undertaking, by whatever name called,— 
(a) in the case of the enterprises engaged in the manufacture or 
production of goods pertaining to any industry speciﬁ ed in the First 
Schedule to the Industries (Development and Regulation) Act, 1951 
(65 of 1951), as— 
(i) a micro enterprise, where the investment in plant and machinery 
does not exceed twenty-ﬁ ve lakh rupees;
 (ii) a small enterprise, where the investment in plant and machinery 
is more than twenty- ﬁ ve lakh rupees but does not exceed ﬁ ve crore 
rupees; or
(iii) a medium enterprise, where the investment in plant and machinery 
is more than ﬁ ve crore rupees but does not exceed ten crore rupees;
(b) in the case of the enterprises engaged in providing or rendering 
of services, as—
(i) a micro enterprise, where the investment in equipment does not 
exceed ten lakh rupees;
(ii) a small enterprise, where the investment in equipment is more than 
ten lakh rupees but does not exceed two crore rupees; or
(iii) a medium enterprise, where the investment in equipment is more 
than two crore rupees but does not exceed ﬁ ve crore rupees. 
113. The ILC Report of 2018 exempted these industries from Section 
29A(c) and 29A(h) of the Code, their rationale for doing so being 
contained in paragraph 27.4 of the Report, which reads as follows: 
“27.4 Regarding the ﬁ rst issue, the Code is clear that default of 
INR one lakh or above triggers the right
of a ﬁ nancial creditor or an 
operational creditor to ﬁ le for insolvency. Thus, the ﬁ nancial creditor 
or operational creditors of MSMEs may take it to insolvency under 
the Code. However, given that MSMEs are the bedrock of the Indian 
economy, and the intent is not to push them into liquidation and aﬀ ect 
the livelihood of employees and workers of MSMEs, the Committee 
sought it ﬁ t to explicitly grant exemptions to corporate debtors which 
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
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SUPREME COURT REPORTS 
[2023] 16 S.C.R.
are MSMEs by permitting a promoter who is not a wilful defaulter, to 
bid for the MSME in insolvency. The rationale for this relaxation is 
that a business of an MSME attracts interest primarily from a promoter 
of an MSME and may not be of interest to other resolution applicants.
(emphasis supplied)
114. Thus, the rationale for excluding such industries from the 
eligibility criteria laid down in  Section 29A(c) and  29A(h) is 
because qua such industries, other resolution applicants may not be 
forthcoming, which then will inevitably lead not to resolution, but to 
liquidation. Following upon the Insolvency Law Committee‘s Report, 
 Section 240A has been inserted in the Code with retrospective eﬀ ect 
from 06.06.2018 as follows: 
“Section 240A: Application of this Code to micro, small and 
medium enterprises.- (1) Notwithstanding anything to the 
contrary contained in this Code, the provisions of clauses (c) 
and (h) ofsection 29A shall not apply to the resolution applicant 
in respect of corporate insolvency resolution process or pre-
packaged insolvency resolution process of any micro, small and 
medium enterprises.
(2) Subject to sub-section (1), the Central Government may, in the 
public interest, by notiﬁ cation, direct that any of the provisions 
of this Code shall—
(a) not apply to micro, small and medium enterprises; or
(b) apply to micro, small and medium enterprises, with such 
modiﬁ cations as may be speciﬁ ed in the
notiﬁ cation.
(3) A draft of every notiﬁ cation proposed to be issued under sub-
section (2), shall be laid before each House of Parliament, while 
it is in session, for a total period of thirty days which may be 
comprised in one session or in two or more successive sessions.
(4) If both Houses agree in disapproving the issue of notiﬁ cation 
or both Houses agree in making any modification in the 
notiﬁ cation, the notiﬁ cation shall not be issued or shall be issued 
only in such modiﬁ ed form as may be agreed upon by both the 
Houses, as the case may be.
929
(5) The period of thirty days referred to in sub-section (3) shall 
not include any period during which the House referred to in 
sub-section (4) is prorogued or adjourned for more than four 
consecutive days.
(6) Every notiﬁ cation issued under this section shall be laid, as 
soon as may be after it is issued, before each House of Parliament.
Explanation.— For the purposes of this section, the expression 
“micro, small and medium enterprises” means any class or classes 
of enterprises classiﬁ ed as such under sub-section (1) of section 7 of 
the Micro, Small and Medium Enterprises Development Act, 2006 
(27 of 2006).
115. It can thus be seen that when the Code has worked hardship to a 
class of enterprises, the Committee constituted by the Government, in 
overseeing the working of the Code, has been alive to such problems, 
and the Government in turn has followed the recommendations of the 
Committee in enacting  Section 240A. This is an important instance of 
how the executive continues to monitor the application of the Code, 
and exempts a class of enterprises from the application of some of its 
provisions in deserving cases. This and other amendments that are 
repeatedly being made to the Code, and to subordinate legislation 
made thereunder, based upon Committee Reports which are looking 
into the working of the Code, would also show that the legislature is 
alive to serious anomalies that arise in the working of the Code and 
steps in to rectify them.”
16. Under
the heading “exemption of Micro, Small and Medium 
Enterprises from Section 29-A” the discussion begins. It is referred to the 
ILC report of March, 2018 and its ﬁ nding that Micro, Small and Medium 
Enterprises form the foundation of the economy and are key drivers of 
employment, production, economic growth, entrepreneurship and ﬁ nancial 
inclusion. The ILC report 2018 exempted these industries from Section 29-A 
(c) and (h) and the rationale for the same was contained in para 27.4 of the 
report which reads as under:
“27.4 Regarding the ﬁ rst issue, the Code is clear that default of 
INR one lakh or above triggers the right of a ﬁ nancial creditor or an 
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
930 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
operational creditor to ﬁ le for insolvency. Thus, the ﬁ nancial creditor 
or operational creditors of MSMEs may take it to insolvency under 
the Code. However, given that MSMEs are the bedrock of the Indian 
economy, and the intent is not to push them into liquidation and aﬀ ect 
the livelihood of employees and workers of MSMEs, the Committee 
sought it ﬁ t to explicitly grant exemptions to corporate debtors which 
are MSMEs by permitting a promoter who is not a wilful defaulter, to 
bid for the MSME in insolvency. The rationale for this relaxation is that 
a business of an MSME attracts interest primarily from a promoter of 
an MSME and may not be of interest to other resolution applicants.”
17. The aforesaid thus, makes it clear as opined in the said judgments 
also, that excluding such industries from disqualiﬁ cation under 29A (c) 
and (h) is because qua such industries other resolution applicants may not 
be forthcoming which thus would inevitably lead not to resolution but to 
liquidation. 
18. We may also note that in para 93 of this very judgment the challenge 
to Section 29A was repelled and the statement of the then Finance Minister 
while moving the amendment Bill was extracted. The said statement reads 
as under:
93. ××× ×××
……….“The core and the soul of this new Ordinance is really clause 
5, which is Section 29-A of the original Bill. I may just explain that 
once a company goes into the resolution process, then
applications 
would be invited with regard to the potential resolution proposals as 
far as the company is concerned or the enterprise is concerned. Now a 
number of ineligibility clauses were not there in the original Act, and, 
therefore, Clause 29-A introduces those who are not eligible to apply. 
For instance, there is a clause with regard to an undischarged insolvent 
who is not eligible to apply: a person who has been disqualiﬁ ed under 
the Companies Act to act as a Director cannot apply: and a person who 
is prohibited under the SEBI Act cannot apply. So these are statutory 
disqualiﬁ cations. And, there is also a disqualiﬁ cation in clause (c) with 
regard to those who are corporate debtors and who, as on the date 
of the application making a bid, do not operationalize the account by 
paying the interest itself i.e. you cannot say that I have an NPA. I am
931
not making the account operational. The accounts will continue to be 
NPAs and yet I am going to apply for this. Eﬀ ectively, this clause will 
mean that those, who are in management and on account of whom 
this insolvent or the non-performing asset has arisen, will not try and 
say, I do not discharge any of the outstanding debts in terms of making 
the accounts operational, and yet I would like to apply and get the 
same enterprise back at a discounted value, for this is not the object 
of this particular Act itself. So Clause 5 has been brought in with that 
purpose in mind.”
(emphasis supplied)
19. The aforesaid statement, while giving the objective of interpretation 
of Section 29A and referring to the disqualiﬁ cation in Clause (c), is in regard 
to those who are corporate debtor and provides the cut oﬀ  “as on date of 
the application making a bid”.
20. The common submission thus, is that while interpreting Section 
240A, the reason for carving out an exception in micro, small and medium 
industries is set out on the date of application for making the bid as the crucial 
date. The submission is that while for some other aspects the initiation of the 
CIRP proceedings would be the cut oﬀ  date, the same would not apply in the 
case of Section 240A, in view of the statement by the Minister themselves 
while introducing the amendment Bill. 
21. We are inclined to accept the aforesaid plea as it is quite obvious 
that while seeking to protect this category of
industries, the disqualiﬁ cation 
is not to be incurred, especially in view of the “notwithstanding clause”.
22. We certainly can look to the statement of the Minister for purposes 
of a cut oﬀ  date that “there is no other speciﬁ c provision providing for cut 
oﬀ  date” which submits that it should be the date of application of making 
a bid. Thus, to opine that it is the initiation of the CIRP proceedings which 
is the relevant date, cannot be said to reﬂ ect the correct legal view and thus, 
we are constrained to observe that the law laid down in Digambar Anand 
Rao Pigle (supra) case by the Tribunal is not the correct position in law and 
the cut oﬀ  date will be the date of submission of resolution plan.
23. Thus, even on this count, the plan submitted in question will not 
incur the disqualiﬁ cation. We may also note that the aforesaid intent is 
HARI BABU THOTA
[SANJAY KISHAN KAUL, J.]
932 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
reﬂ ected in the statutory provision itself that in Section 29A (c) which begins 
with “at the time of submission of the resolution plan”.
24. It is also pointed out that even if it was an NPA, the defect can be 
cured as set out in proviso (1) before submission of the plan, making the 
submission of the plan the crucial date.
25. We are thus, setting aside the impugned orders of the NCLT dated 
28.02.2023 and NCLAT dated 02.06.2023 and allow the appeal leaving 
parties to bear their own costs.
26. We appreciate the assistance rendered by Mr. Bishwajit Dubey, 
learned Amicus.
27. As a sequiter, IA No.192/2022 in C.P. (IB) No.196/BB/2020 before 
the Adjudicating Authority would stand restored to National Company Law 
Tribunal for reconsideration.
28. Needless to say any consequential action in pursuance to the 
impugned order taken by the IBBI against the appellant will not survive.
IA No.230784/2023 for Intervention
In view of the view we have taken in the appeal, the application stands 
disposed of.
Headnotes prepared by: 
Appeal allowed.
Divya Pandey