NCLT Mumbai admitted a ₹70.72 crore Section 7 IBC petition, rejecting claims that MSME status nullifies debt liability or default under the Code.
MSME Status Cannot Override IBC Debt: NCLT Mumbai Rules
The National Company Law Tribunal (NCLT), Mumbai, admitted a Section 7 application under the Insolvency and Bankruptcy Code, 2016, for ₹70.72 crore, rejecting the corporate debtor’s contention that its status as an MSME extinguishes the debt or precludes a default finding.
The tribunal clarified that while MSME protections exist under other statutes and policies, they do not override the statutory obligations under the IBC. A financial debt, once acknowledged and overdue, remains enforceable regardless of the debtor's micro or small enterprise classification.
Implications for Practitioners
This judgment affirms that MSME status is not a defence against IBC proceedings. Creditors and legal advisors must assess debt enforceability based on contractual and factual existence of default, unaffected by the enterprise size. Practitioners should prepare for similar objections in future IBC cases involving MSMEs.
