“Section 29A was introduced in the Insolvency and Bankruptcy Code, 2016 to prevent certain persons from applying as resolution applicant.” Comment.

The Insolvency and Bankruptcy Code, 2016 was created to benefit the Financial and Operational Creditors, through the insolvency resolution process. However, it was observed that existing promoters of the Corporate Debtor were directly or indirectly acquiring stake in their own assets through the resolution plan, at a big discount. Hence, through the resolution process, the existing promoters were regaining control over their assets (directly or indirectly) after a huge hair-cut (discount) from lenders. In other words, re-purchase the same assets at a much lower cost and getting a back-door entry into their company. To plug this loophole, the IBC was amended though the ordinance of the President of India. The amendment inserted section 29A, which provides for persons ineligible to be a Resolution Applicant. The newly added section 29A declares certain persons ineligible to be a resolution applicant and prohibits such persons from submitting a resolution plan. As per Section 29A of the Insolvency and Bankruptcy Code, 2016 following persons are not eligible to submit a resolution plan - applicant is an undischarged insolvent, wilful defaulters (as defined by RBI and Banking Regulation Act, 1949), persons whose accounts are classified as NPA for one year or more and are unable to settle their overdue amount (incl. interest), at the time of submission of the resolution plan, persons convicted for any offence punishable with imprisonment for two years or more (for offences of XII Schedule) or for seven years or more (under any other law) and a period of two years has not been expired from the date of his release from imprisonment persons disqualified to act as director under the Companies Act, 2013, persons prohibited by SEBI, from trading in securities or accessing the securities market, person who has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction (PUFE) has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code except when such PUFE transactions has taken place prior to acquisition of such corporate debtor by resolution applicant and resolution applicant has not contributed in those transactions. persons who have executed any guarantee to a creditor for the corporate debtor w.r.t. which CIRP application initiated by such creditor has been admitted by the Adjudicating Authority and such guarantee has been invoked by the creditor and remains unpaid in full or part persons disqualified by any law of other country, for the conditions mentioned in (a) to (h), has connected person not eligible under clauses mentioned in (a) to (i).