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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Sunrise Packaging Pvt Ltd, classified as a micro enterprise under the MSMED Act, 2006, has committed a default. Its promoters want to know whether being an MSME is enough by itself to make it eligible to apply for a pre-packaged insolvency resolution process. Which statement is correct?

An MSME-classified corporate debtor may apply under section 54A(1). Without prejudice to that, a corporate debtor that has committed a default may also apply under section 54A(2), provided it meets the listed conditions. The statute does not limit eligibility to MSMEs alone.

  1. AOnly a corporate debtor classified as an MSME can apply, and no other conditions apply to it
  2. BA corporate debtor classified as an MSME may apply under section 54A(1), and a corporate debtor that has defaulted may also apply under section 54A(2) subject to the stated conditionsCorrect
  3. COnly corporate debtors with a default of at least Rs 1 crore can apply, whether or not they are MSMEs
  4. DOnly a corporate debtor that has already completed a CIRP can apply

Explanation

Section 54A(1) allows an application for a corporate debtor classified as an MSME. Section 54A(2) separately allows an application, without prejudice to sub-section (1), for a corporate debtor that commits a default, subject to conditions. The first option wrongly says no other route exists, and the others invent requirements.

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