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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 small enterprise under the MSMED Act, 2006, has defaulted on a financial debt. Its directors want to start a pre-packaged insolvency resolution process. Which statement is correct regarding eligibility of the company?

A corporate debtor classified as a micro, small or medium enterprise under the MSMED Act, 2006 is eligible for an application for the pre-packaged process. Being an MSME is itself a basis for eligibility, whereas a pending CIRP or a liquidation order bars eligibility.

  1. AIt can be the subject of an application because it is classified as a micro, small or medium enterpriseCorrect
  2. BIt is eligible only if its default exceeds the threshold applicable to large companies
  3. CIt is eligible only if a corporate insolvency resolution process is already pending against it
  4. DIt is eligible only if an order of liquidation has been passed against it

Explanation

Section 54A(1) allows an application for a pre-packaged process in respect of a corporate debtor classified as a micro, small or medium enterprise under the MSMED Act, 2006. Option C and D are wrong because section 54A(2) bars a debtor already undergoing CIRP or one against whom a liquidation order has been passed.

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