NCLAT Rejects MSME Company's Challenge To CIRP After It Failed To Invoke Rehabilitation Framework

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently rejected an MSME company's plea against insolvency proceedings, noting that it had failed to invoke the MSME rehabilitation framework at the appropriate stage.

The Bench of Officiating Chairperson Justice Yogesh Khanna and Technical Members Barun Mitra and Ajai Das Mehrotra observed that the company had lost its MSME status on March 31, 2021.

It had also failed to respond to the bank's SARFAESI notice or apply under the rehabilitation framework and was therefore unfit for any relief. 

“Thus, considering the law stated above, we find no reason to upset a reasoned order passed by the Ld. Adjudicating Authority; firstly as the M/s. S.S. Aluminium Pvt. Ltd. had lost its status of MSME on 31.03.2021 and secondly it never send a response under Section 13(3A) of SARFAESI Act for reconstruction of its debt and thirdly it was also the responsibility of the corporate debtor/appellant to apply in terms of notification dated 29.05.2025 at the earliest, which it never did,” the tribunal observed.

The appeal was filed by Jadabendra Pradhan, suspended director of S.S. Aluminium Private Limited, challenging the NCLT's September 9, 2025 order admitting Canara Bank's insolvency petition over a default of ₹15.88 crore.

The company argued that the bank had failed to follow the MSME rehabilitation framework under the May 29, 2015 notification, making the insolvency proceedings premature.

The NCLAT upheld the NCLT's finding that the petition was within limitation, noting that the company had acknowledged the debt on July 13, 2021, and repeatedly submitted OTS proposals.

On the MSME plea, the tribunal noted that the company had raised the issue only in written submissions. It had neither invoked the framework through a response to the SARFAESI notice nor approached the Committee for Stressed MSMEs.

Relying on Supreme Court rulings, the NCLAT held that borrowers also had a responsibility to seek the framework's protection. It dismissed the appeal.