Madras High Court: MSME Corporate Debtor Can't Misuse Clean Slate Theory To Withhold Information When Its Management Had A Duty To Disclose

The Madras High Court, under Justice N. Seshasayee, dismissed a writ petition by a MSME debtor against Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for unpaid electricity charges. 

The court rejected the debtor's reliance on the Clean Slate Theory, emphasizing its duty to disclose liabilities during insolvency proceedings. It questioned the debtor's intent in choosing Insolvency and Bankruptcy Code (IBC) over SARFAESI Act, hinting at possible collusion with its financial creditor. 

The court criticized the petitioner's attempt to evade payment obligations and highlighted the fairness expected in evaluating resolution plans. It suggested alternative solutions, like SARFAESI Act, to protect both the debtor and its operational creditors. 

Thus, the court upheld TANGEDCO's right to claim unpaid dues, dismissing the petition.