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Section 29A and Exemptions for MSMEs - Section 29A of the IBC sets disqualifications for Resolution Applicants, but these do not apply to MSMEs, as explicitly stated in Section 240A of the IBC. MSMEs are generally exempt from the ineligibility criteria under Section 29A, allowing their promoters or entities to submit resolution plans without being disqualified under these provisions. Notably, the exemption applies unless specific disqualifications (like ineligibility under clauses (a), (b), (f), or (j) of Section 29A) are proven, such as involvement of connected persons or violations requiring SEBI or other regulatory prohibitions ["2024 Supreme(Online)(NCLT) 1294"], ["2024 Supreme(Online)(NCLT) 1299"], ["2025 Supreme(Online)(NCLT) 2366"].
Role of the Committee of Creditors (CoC) - The CoC has the authority to decide on the eligibility of resolution applicants, including whether they meet the criteria under Section 29A. The CoC can also set additional eligibility criteria, which can include compliance with Section 29A, with approval from the RP and under Regulation 36A(4)(a) of CIRP Regulations. The CoC's decisions are based on commercial wisdom, and they can exclude plans that do not meet the criteria, even if the applicants are MSMEs ["2024 Supreme(Online)(NCLT) 3121"], ["2025 Supreme(Online)(NCLT) 1866"].
Impact of Section 29A on Promoters and Connected Persons - Promoters and connected persons are generally disqualified under Section 29A if involved in certain violations (e.g., accounts declared NPA, involvement in securities violations). However, MSME promoters may be exempted from disqualification if they can demonstrate their ability to maintain the Corporate Debtor as a going concern, and if they are not disqualified under specific clauses ["2025 Supreme(Online)(NCLT) 515"], ["2024 Supreme(Online)(NCLT) 2368"].
Legal Clarifications and Judicial Views - Courts have reaffirmed that Section 29A does not automatically disqualify promoters or MSME resolution applicants unless specific disqualifications are proven. The exemption for MSMEs is explicit, and the eligibility criteria can be relaxed or waived for MSMEs, provided they meet other conditions and the CoC approves ["2024 Supreme(Online)(NCLT) 1294"], ["2025 Supreme(Online)(NCLT) 2366"].
Analysis and Conclusion:An entity putting forward a resolution plan under Section 29A of the IBC, particularly if it is an MSME, can be exempt from certain disqualification criteria outlined in Section 29A, especially clauses related to MSME status (such as 29A(c) and 29A(h)). However, disqualifications based on other clauses (e.g., involving connected persons or regulatory violations) still apply unless explicitly waived or proven otherwise. The CoC has the authority to determine eligibility, including considering whether the applicant qualifies for exemptions under Section 240A, and can approve plans accordingly. Therefore, an MSME entity submitting a resolution plan under Section 29A can be exempt from meeting some of the ineligibility criteria, provided it satisfies the exemption conditions and the CoC's approval.
In the complex world of India's (IBC), promoters often find themselves at the center of eligibility debates when seeking to revive distressed companies. A key question arises: Can a promoter entitled to submit a if he faced Sec 66 of IBC Act? Section 66 deals with liability for by prior officers, which can intersect with disqualification provisions under Section 29A. This post delves into whether such promoters get an automatic pass or must still clear broader eligibility hurdles.
Drawing from judicial interpretations and statutory provisions, we'll unpack the nuances, ensuring you grasp the legal landscape without venturing into specific advice.
acts as a gatekeeper, disqualifying certain persons—including promoters—from submitting resolution plans to prevent 'back-door re-entries' into mismanaged companies. It targets , those with , or persons connected to disqualified entities 2018 0 Supreme(SC) 965.
Section 66 complements this by imposing personal liability on directors or promoters for fraudulent conduct contributing to the 's insolvency. If a promoter faces Section 66 proceedings, it often triggers ineligibility, as it flags willful default or misconduct. However, Section 29A is strictly a , not an exemption from other requirements 2019 2 Supreme 524.
Courts have emphasized: was inserted to prevent certain persons, such as promoters or those involved in malpractices, from submitting resolution plans 2018 0 Supreme(SC) 965. Thus, clearing Section 29A doesn't greenlight submission; additional criteria like financial stability and regulatory compliance apply.
Landmark cases clarify that Section 29A compliance is necessary but insufficient. In ArcelorMittal, courts ruled that ineligibility under Section 29A does not exempt applicants from other statutory criteria 2019 2 Supreme 524 2019 5 Supreme 744. The stressed that resolution applicants must be credible, with Section 29A as one disqualification ground among many.
Similarly, discussions around Numetal Ltd. and AM India Ltd. highlight: even if Section 29A hurdles are navigated, other criteria must be met unless waived 2018 0 Supreme(NCLAT) 691. The law mandates that resolution applicants must be credible and meet the prescribed criteria, and ineligibility under Section 29A is one of the grounds for disqualification, but not the sole determinant 2019 2 Supreme 524.
In 2023 Supreme(Online)(NCLAT) 2876, the (RP) assessed: considering the response of Epitome and eligibility criteria for Section 29A compliance under IBC, the RP is of the view that Epitome doesn't meet the criteria for Section 29A compliance under IBC 2023 Supreme(Online)(NCLAT) 2876. The rejected the plan, underscoring holistic checks.
Resolution applicants must satisfy Section 30 requirements, including an affidavit affirming eligibility 2025 0 Supreme(SC) 670. Section 30 provides for submission of . As per sub-section (1), a resolution applicant may submit a alongwith an affidavit stating that he is eligible under Section 29A 2025 0 Supreme(SC) 670.
Financial thresholds, technical capabilities, and regulatory nods are mandatory. Non-compliance leads to rejection, as seen where plans failed muster 2022 7 Supreme 991. When the does not meet the requirements of , the same cannot be approved 2022 7 Supreme 991.
Section 66 exposure amplifies scrutiny, as promoters must prove no ongoing taint affects viability.
Certain carve-outs exist. exempts MSMEs from Sections 29A(c) and (h): clearly states that the provisions of Section 29A (c) and (h) do not apply to the resolution applicants in respect of of any 2025 Supreme(Online)(NCLT) 1244. In one case, ineligibility claims failed because the debtor was an 2025 Supreme(Online)(NCLT) 1244.
Thus, the rationale for excluding such industries from the eligibility criteria laid down in and 29A(h) is because qua such industries, other resolution applicants may not be forthcoming 2024 Supreme(Online)(NCLT) 1402.
However, these are narrow; no blanket exemption for Section 66-impacted promoters applies generally.
rules further limit challenges: An entity that has not submitted a lacks to contest the validity of another approved 2025 Supreme(Online)(NCLT) 1244.
In liquidation scenarios, Section 29A ineligibility may not extend to schemes, but IBC primacy holds 2021 0 Supreme(SC) 144.
Entities intending to submit resolution plans must ensure compliance with all statutory and regulatory eligibility criteria, including financial and regulatory requirements, regardless of their status under Section 29A 2018 0 Supreme(SC) 965.
Typically, promoters facing Section 66 cannot rely solely on Section 29A clearance; full eligibility is required unless waived. Judicial trends prioritize process integrity over promoter reinstatement.
Disclaimer: This analysis provides general insights based on available precedents and is not legal advice. Consult qualified professionals for case-specific guidance.
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Since the Resolution plan was submitted by the Company and none of the ineligibility criteria as adumbrated under Section 29A of the Code is attracted and hence the decision of the RP was illegal. ... of Resolution Plans from 24th August to 5th September 2020 along with the Affidavit under Section 29A of the Code stating that the prospective ....
Section 240A clearly states that the provisions of Section 29A (c) and (h) do not apply to the resolution applicants in respect of CIRP of any MSME.
Section 29A was added to the IBC by the Insolvency and Bankruptcy Code (Amendment) Act, 2017, which incorporates a list of disqualifications criteria for Resolution Applicants from submitting a Resolution Plan during Corporate Insolvency Resolution Process (CIRP). 32. ... because of their ineligibility under Section ....
Section 29A was added to the IBC by the Insolvency and Bankruptcy Code (Amendment) Act, 2017, which incorporates a list of disqualifications criteria for Resolution Applicants from submitting a Resolution Plan during Corporate Insolvency Resolution Process (CIRP). 32. ... because of their ineligibility under Section ....
Thus, the rationale for excluding such industries from the eligibility criteria laid down in Section 29A(c) and 29A(h) is because qua such industries, other resolution applicants may not be forthcoming, which then will inevitably lead not to resolution, but to liquidation.” ... That Section 29A of the Code attaches the ineligibility ....
Section 29A of the IBC governs the eligibility or otherwise of persons to become resolution applicants. Section 25(2)(h) relating to the duties of the RP reads: “25. ... 3.3 The Respondent/RP further stated that in the second CoC meeting dated 29.04.2024, the resolution for additional eligibility criteria to be published in Form G wa....
(Paras 9, 18) ... ... (B) The court reaffirmed that the provisions of Section 29A do not apply ... Thus, Section 240A clearly states that the provisions of Section 29A(c) and (h) do not apply to the resolution applicants in respect of CIRP of any MSME. ... Whether the eligibility criteria pursuant to the ‘Net Worth’ and ‘EMD amount’ can be relaxed/wa....
The RP informed that considering the response of Epitome and eligibility criteria for Section 29A compliance under IBC, the RP is of the view that Epitome doesn't meet the criteria for Section 29A compliance under IBC. ... In the said meeting, the CoC in its commercial wisdom unanimously decided not to place Epitome’s resolu....
The RP informed that considering the response of Epitome and eligibility criteria for Section 29A compliance under IBC, the RP is of the view that Epitome doesn't meet the criteria for Section 29A compliance under IBC. ... In the said meeting, the CoC in its commercial wisdom unanimously decided not to place Epitome’s resolu....
It is further claimed that the CoC attributed disqualification criteria arbitrarily, exceeding the scope outlined in Section 29A of the Code. 1.6. ... It is averred that despite the Applicant's status as an MSME promoter, they are still subject to disqualifications under Section 29A(b) and 29A(f) read with Section 29A(j) of the Code. ... The ....
25. At the outset, let us examine a few relevant provisions of the IBC. Section 30 provides for submission of resolution plan. As per sub-section (1), a resolution applicant may submit a resolution plan alongwith an affidavit stating that he is eligible under Section 29A to the resolution professional prepared on the basis of the information memorandum in terms of Section 29. 24. Submissions made by learned counsel for the parties have received the due consideration of the Co....
When the Resolution Plan does not meet the requirements of Section 30(2), the same cannot be approved. 41. Section 31 of the IBC which provides for approval of a Resolution Plan by the Adjudicating Authority makes it clear that the Adjudicating Authority can approve the Resolution Plan only upon satisfaction that the Resolution Plan, as approved by the Committee of Creditors (CoC), meets the requirements of Section 30(2) of the IBC.
The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its approval upon all stakeholders - including the Central and State Government, local authorities to whom statutory dues are owed, operational creditors who were not a part of the CoC and the workforce of the Corporate Debtor ....
On the other hand, what Mr Sibal urges is that when an order of liquidation has been passed under and in pursuance of proceedings which were initiated under the IBC, Section 230 of the Act of 2013 expressly contemplates that the liquidator appointed under the IBC may move the NCLT where a compromise or arrangement is proposed. On one hand, Mr Bajaj submits that the ineligibility under Section 29A of the IBC attaches to the proceedings under the IBC alone, involving the submission of ....
The petitioner as the resolution applicant under section 5(25) of the IBC placed its resolution plan for approval. The said plan was approved by the committee of creditors and it was then placed before the Adjudicating Authority i.e. the National Company Law Tribunal, under section 5 (1) of the IBC. By order dated 15/05/2018 the Adjudicating Authority approved the resolution plan.
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