NCLAT: MSME promoter must meet net-worth test to bid for Ecstasy Realty in insolvency

The National Company Law Appellate Tribunal (NCLAT) on 29 October 2026 upheld the rejection of a bid by the promoter of Ecstasy Realty Private Limited, a real estate developer in insolvency, to take part in its resolution process. The tribunal held that the company's status as a micro, small and medium enterprise (MSME) does not exempt its promoter from a net-worth floor of Rs 400 crore set by the committee of creditors.

What Happened

Ecstasy Realty was admitted into the corporate insolvency resolution process on 9 March 2026, and the resolution professional invited expressions of interest from bidders on 8 May 2026. According to the order, the promoter, who is a suspended director, filed an expression of interest on 22 May 2026 with an earnest money deposit of Rs 5 crore, but struck out the net-worth requirement as "not applicable". The resolution professional asked for a net-worth certificate on 10 June 2026 and rejected the bid on 22 June 2026. The National Company Law Tribunal, Mumbai Bench, dismissed the promoter's challenge on 14 August 2026.

The promoter argued that Section 240A of the Insolvency and Bankruptcy Code (IBC), which eases some bars for MSME promoters, entitled him to have his proposal considered on merits. The NCLAT disagreed. It held that the criterion was approved by the creditors, applied to every bidder, and was proportionate to the size of the business. The resolution professional applied it equally to three bids that lacked documents and refunded the earnest money, the tribunal noted, and it rejected the allegations of bias.

What It Means

The tribunal said a committee of creditors may relax a criterion for an MSME promoter if it thinks fit, but no tribunal can compel it to do so on the basis of MSME status alone. Here the committee had declined to give a waiver.

If a fresh invitation for bids is issued, the promoter may respond like any other applicant under the criteria then in force, the NCLAT said. A separate appeal on how the creditor's claim is computed is pending before the tribunal. The NCLAT's order may be appealed to the Supreme Court.

Source: NCLAT order