BANKRUPTCY LAW

11/4/2021
Critical Analysis of Section
29A of Insolvency Bankruptcy
Code 2016

NAME :
ROLL NO : 52
CLASS : SY LLB (4TH SEM)
DIVISON :A
 INDEX

SR PARTICULAR PAGE
NO NO.
1 DECLARATION BY THE CANDIDATE 2
2 LIST OF ABBREVIATIONS 3
3 ABSTRACT 4

4 INTRODUCTION 5
5 APPLICABILITY OF SECTION 29A 5

6 INELIGIBILITY UNDER SECTION 29A 7

7 REPORT OF INSOLVENCY LAW 8
COMMITTEE (MARCH 2018)
8 ANALYSIS OF SECTION 29A 10
9 CONCLUSION 15

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 DECLARATION BY THE CANDIDATE

I HEREBY DECLARE THAT THE DISSERTATION ENTITLED “ANALYSIS OF

SECTION- 29A OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016”
SUBMITTED AT THAKUR RAMNARAYAN COLLEGE OF LAW, MUMBAI IS THE
OUTCOME OF MY OWN WORK WHICH HAS BEEN CARRIED OUT WITH THE
GUIDANCE OF MS. MADHURA BHANGLE, PROFESSOR AT THAKUR
RAMNARAYAN COLLEGE OF LAW, MUMBAI.

I FURTHER DECLARE THAT TO THE BEST OF MY KNOWLEDGE THE

DISSERTATION DOES NOT CONTAIN ANY PART OF WORK, WHICH HAS NOT BEEN
SUBMITTED FOR THE AWARD OF ANY DEGREE EITHER IN THIS UNIVERSITY OR
ANY OTHER INSTITUTIONS WITHOUT PROPER CITATION.

PLACE: MUMBAI SIGNATURE OF THE CANDIDATE

DATE: 07TH APRIL,2021

THAKUR RAMNARAYAN COLLEGE OF LAW, MUMBAI.

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LIST OF ABBREVIATIONS
IBC: Insolvency And Bankruptcy Code Of India, 2016

Code: Insolvency And Bankruptcy Code Of India, 2016

HC: High Court

NCLT: National Company Law Tribunal

NCLAT: National Company Law Apellate Tribunal

SC: Supreme Court

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ABSTRACT

The Insolvency And Bankruptcy Code, After Receiving Its Assent From The President,
Has Been Into Effect Since 2016. It Has Emerged As A Comprehensive Legislation With
A Speedy And Specific Procedure For Dealing With The Issue Of Insolvency. Since
Then, It's Been An Evolving Legislation Have Been Many Ordinances And
Amendments In The IBC.

One Of The Main Objectives Of The Code Is To Provide The Corporate Debtor With A
Resolution Plan. Earlier, A Resolution Applicant Could Have Been Any Person Who
Submits A Resolution Plan To The Resolution Professional And A Resolution Plan
Could Be A Plan Proposed By Any Person For Insolvency Resolution Of The Corporate
Debtor. There Was No Specific Criteria Or Qualification, Due To Which Any Party
Including The Promoters Of The Corporate Debtor Or Any Related Party Could
Propose A Resolution Plan. This Scheme Was Highly Criticized On The Basis That The
Wide Scope Permitted By The Code Served As A Loophole And Paved A Way For The
Promoters To Gain A Back-Door Entry To The Management Of The Corporate Debtor

The Code Aims For Resolution Of Insolvency As Opposed To Liquidation. The Law
Was Framed With The Intention To Expedite And Simplify The Process Of
Insolvency And Bankruptcy Proceedings In India Ensuring Fair
Negotiations Between Opposite Parties And Encouraging Revival Of The Company
By Formulation Of A Resolution Plan.

In Order To Rectify This Provision, The Government Brought Forth The Insolvency
And Bankruptcy Code (Amendment) Ordinance, 2017 And Later The Insolvency And
Bankruptcy Code (Amendment) Act, 2018 Wherein Section 29A Was Inserted Into The
Code.

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INTRODUCTION

Section 29A Of The Insolvency And Bankruptcy Code, 2016 Has Emerged As One Of
The Key Statutes In Determining The Eligibility Of Resolution Applicants In The
Corporate Insolvency Resolution Process. The Code, In Its Original Form Had Not
Incorporated Any Provisions To Prevent Defaulting Promoters From Buying-Back The
Corporate Debtor, Which Could Occur Potentially At Steep Discounts. Subsequently,
Through An Amendment To The Code, Section 29A Was Inserted With Retrospective
Effect From November 23, 2017. A Second Amendment To The Code, Effective From June
6, 2018, Included Amendments To Section 29A.

Before 29A, Every Individual Or Body Corporate Can Participate In A Bidding Process
Of Corporate Debtor Which Is Subject To Corporate Insolvency Resolution Process
Irrespective He Is Original Promoter, Director Or Person Connected To Them Directly Or
Indirectly. So, Persons Who, By Their Misconduct Or Fraudulent Motives, Contributed To
The Default Of The Corporate Debtor, Can Regain The Control Of Their Company Again
By Bidding In Heavy Discounts While Banks And Other Financial Institutes Taking
Haircuts.

Thus, This Section Was Introduced To Disqualify Those Who Had Contributed In The
Downfall Of The Corporate Debtor Or Were Unsuitable To Run The Company.

APPLICABILITY OF SECTION 29A

An Application Was Filed By The Resolution Applicant Before The National Company Law
Tribunal ("NCLT"), Mumbai Bench Seeking Permission To Grant Approval Of The
Resolution Plan And To Hold That He Is Not Debarred Or Disqualified Under The
Provisions Of Section 29A Of The Code.[1] The Resolution Applicant Was An Individual Who
Was Related To The Promoter Directors Of The Corporate Debtor I.E. Wig

Associates Private Limited. Therefore, The Question To Be Considered By The NCLT

Was Whether The Resolution Plan Submitted By The Resolution Applicant Can Be

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Approved By The NCLT In View Of The Bar Created Under Section 29A And Section 30
Of The Code Which States That The Committee Of Creditors Would Not Accept The
Resolution Plan If The Resolution Applicant Is Ineligible Under Section 29A Of The Code. In
The Present Case, The Committee Of Creditors Had Approved The Resolution Plan.[2]

The NCLT Vide Its Order Dated June 4, 2018, Recorded Its "Satisfaction" For Granting
Approval To The Resolution Plan And Consequently, Allowed The Application Of The
Resolution Applicant On The Following Grounds:

The IBC Amendment Act Vide Which Section 29A Has Come Into Place On January 18, 2018,
Is Operative With Effect From November 23, 2017. Further, The IBC Amendment Act
Does Not Provide For Any Retrospective Operation Of The Amended Provisions
Including Section 29A To The Insolvency Proceedings Pending On November 23, 2017.

It Is A Settled Position Of Law That Any Amendment To A Statute, Affecting The

Legal Rights Of An Individual Must Be Construed To Be Prospective Unless It Is Made
Expressly Or Impliedly Retrospective. Various Judicial Precedents Were Cited And Relied
Upon By
The NCLT In Support Of The Aforesaid Proposition Of Law.

The NCLT Specifically Referred And Relied Upon The Case Of Videocon International
Limited Vs. SEBI Reported In (2015) 4 SCC 331, Wherein It Was Held That Pending
Proceedings Are To Continue As If The Unamended Provisions Continue To Exist.
Accordingly Whilst Relying On The Various Judicial Precedents And Specifically The Case
Of Videocon International Limited , The NCLT Held That Section 29A Of The Code Is
Effective From The Date Of The Passing Of The IBC Ordinance I.E. November 23, 2017
And Would Not Apply To The Present Insolvency Proceedings Which Were Initiated On July
19, 2017 I.E. Prior To The IBC Ordinance.

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INELIGIBILITY UNDER SECTION 29A

Section 29A – Who Is Ineligible?

A Person Shall Not Be Eligible To Submit A Resolution Plan, If Such Person, Or Any Other
Person Acting Jointly Or In Concert With Such Person –

1. Is An Undischarged Insolvent;

2. Is A Willful Defaulter In Accordance With The Guidelines Of The RBI Issued Under The
Banking Regulation Act, 1949?

3. Has An Account, Or An Account Of A Corporate Debtor Under The Management Or

Control Of Such Person Or Of Whom Such Person Is A Promoter, Classified As Non-
Performing Asset In By The RBI And At Least A Period Of 1 Year Has Lapsed From
The Date Of Such Classification; Provided That The Person Shall Be Eligible To Submit
A Resolution Plan If Such Person Makes Payment Of All Overdue Amounts With
Interest Thereon And Charges Relating To Non-Performing Asset Accounts Before
Submission Of Resolution Plan;

4. Has Been Convicted For Any Offence Punishable With Imprisonment For 2 Years Or
More;

5. Is Disqualified To Act As A Director Under The Companies Act, 2013;

6. Is Prohibited By The SEBI From Accessing The Securities Markets;

7. 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 Has Taken Place And In Respect Of Which An
Order Has Been Made By The Adjudicating Authority Under This Code;

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 8. Has Executed An Enforceable Guarantee In Favor Of A Creditor In Respect Of A
Corporate Debtor Against Which An Application For Insolvency Resolution Made By
Such Creditor Has Been Admitted Under This Code.

There Are Three Layers Of Ineligibility:

Person Acting In Concert: Persons Who Have The Common Objective/Purpose Of Acquisition
Of Shares/Voting Rights In/Exercising Control Over A Company Pursuant To An Agreement Or
Understanding, Formal Or Informal, Directly Or Indirectly Co-Operate For Acquisition Of
Shares/Voting Rights In/ Exercise Of Control Of The Company.

Connected Persons: Any Person Who Is The Promoter Or In The Management Or Control Of
The Resolution Applicant; Any Person Who Shall Be The Promoter Or In Management Or
Control Of The Business Of The Corporate Debtor During The Implementation Of The
Resolution Plan; Or Holding Company, Subsidiary Company, Associate Company Or Related
Party Of A Person Referred In Above

Related Party: Anyone In Relation To The Individual (Defaulter Promoter) Or Their Spouse;
Partner In A Partnership Firm Or Trustee In A Trust In Which The Defaulter Individual Is
Associated; A Private Company In Which Is The Individual Is A Director And Holds Over 2%
Share Capital Including Family And Relatives.[3]

REPORT OF INSOLVENCY LAW COMMITTEE (MARCH 2018)

In The Month Of March 2018, The Insolvency Law Committee, Which Was Set Up To Make
Recommendations To The Government On Issues Arising From The Implementation Of
IBC And Issues Raised By Stakeholders, Submitted Its Report. Among Various Amendments
Proposed By The Committee Were Some Recommendations Pertaining To Eligibility To Submit
A Resolution Plan. The Committee Made The Following Recommendations:

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The Scope Of The Section Was Seen As Too Wide As The Terms ~Person Acting In Concert'
May Be Read To Apply To Connected Person Under Clause (J). Further, The Definition
Adopted From SEBI SAST Regulations Will Also Cast A Wide Net For The Applicants.
Hence The Terms ~Person Acting Jointly Or In Concert' Must Be Removed.

Regarding Npas, The Committee Recognized That Arcs, AIFS, IVS, ETC Could By Virtue Of
Nature Of Their Business Be Classified As NPAs Under 29A(C) And Be Subject To
Disqualification. Hence An Explanation For ~Financial Entities' Was Proposed Which Will
Be Exempt From The Ambit Of The Clause. The Possibility Of Acquiring NPAs Due To
Previous CIRPS Were Considered And A Time Limit Of 3 Years Was Proposed From The
Time Of Acquisition Within Which Such NPAs Acquired From CIRP Will Not Be Hit By
29A(C).

In The Same Clause, The Classification Of Accounts As NPA Has Been Limited To Banking
Regulation Act 1949. This Must Be Expanded To Include Accounts Declared As NPA Under
Other Guidelines Issued By A Financial Sector Regulator In India.

Considering The Personal Nature Of 29A(D) Relating To Conviction For Offences And
29A Relating To Disqualification To Act As Director, Both These Clauses Must Be
Exempted From The Scope Of Clause (Iii) Of ~Connected Persons', I.E., The Holding
Company, Subsidiary Company, Associate Company And Related Persons.

In 29A(D), Merely Having A Condition Of Conviction Of 2 Years For Any Offence Was To
Wide An Ambit As It Could Also Include Certain Minor Offences Which Have Nothing
To Do With The Ability To Run The Company In Question Efficiently. Hence, A List Of
Relevant Laws Could Be Provided In A Schedule, Similar To One In Companies Act 2013
Thereby Narrowing The Scope Of The Provision. Further, Similar To A Provision Under
Representation Of People Act, 1951 The Disqualification Period Must Be Reduced To Six
Years Instead Of Indefinitely As Is The Case With The Section.[4]

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Further, In The Same Clause, The Committee Considered Insertion Of A Proviso To Clarify
That In Case Of Stay Of An Order By A Court, The Disqualification Will Not Be
Attracted. In Extension Of This, The Committee Also Proposed That In Case Of
Disqualification In This Clause And Others Such As Willful Defaulter, Disqualification
From Directorship Or Prohibition Under SEBI, The Ineligibility Will Not Apply In Case An
Appeal Is Preferred Against Such Disqualification Or Until The Expiry Of Statutory
Period For Filing An Appeal. The Committee Was Also Conscious Of The Possibility Of
Exploitation And Misuse Of Such A Provision.

In 29A(G) Dealing With Preferential, Extortionate, Undervalued Or Fraudulent

Transactions Have Taken Place, The Committee Opined That The Acts Of Predecessors
Should Not Impede Those In Management Or In Control From Submitting Plans. Hence A
Proviso, Similar To That Of Npas Must Be Inserted Stating That Is Such Transaction Has
Taken Place In An Entity Acquired Through CIRP And Such Action Took Place Prior To
Such Acquisition, This Clause Will Not Apply.

In 29A(H), The Committee Took The View Similar To That Taken By NCLT In The RBL
Bank Case Pertaining To Disqualification Of Guarantors That The Intent Of The
Provision Is Not To Disqualify All Guarantors Merely For The Presence Of An
Enforceable Guarantee. Hence The Term "Enforceable" Is To Be Deleted And The
Guarantee Must Be Invoked By The Creditor And Must Subsequently Remain Unpaid In
Part Or Full For Disqualification Under This Clause To Be Invoked.

Considering The Nature Of Disqualifications And The Wide Ambit, It Was Proposed That
An Affidavit Be Submitted By Applicant Stating That The Person Does Not Attract
Ineligibility Under Any Of The Clauses Of 29A. In This Regard, Regualation 38(3) Of The
Insolvency And Bankruptcy Board Of India (Insolvency Resolution Process For Corporate
Persons) Regulations 2016 Inserted By Way Of Third Amendment Notification On 05/10/17
Be Removed Since The Details Under The Regulation Will Be Covered By The Above-
Mentioned Affidavit. Further, Considering The Tedious And Extensive Nature Of

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Verification Under 29A, The Timeline Of 270 Days For The Resolution Was Proposed To Be
Extended.

Finally, Certain Amendments To Section 30 (Submission Of Resolution Plan) Were

Proposed Pertaining To The Applicability Of Amendments To 29A So As To Not Impede
Cirps That Are At An Advanced Stage (Which Was The Case In The RBL Bank Case).

ANALYSIS OF SECTION 29A

The Inclusion Of Section 29A In The Code, Persons Who Have Contributed To The
Defaults Of The Corporate Debtor Or Are Undesirable Due To Incapacities As Specified In
The Section Or Are A 'Related Party' To Another Defaulting Party, Are Prevented From
Gaining Control Of The Corporate Debtor By Being Declared Ineligible To Submit A
Resolution Plan Under The Code. This Provision Asserts Protection To The Creditors Of
The Company By Safeguarding Them Against Unscrupulous Persons Who Irrespective Of
Their Earlier Defaults Are Trying To Reward Themselves By Undermining The Whole
Objective Of The Code And Do Not Aim To Contribute To The Revival Of The Corporate
Debtor.[5]

The Resolution Professional Has The Responsibility To Conduct Section 29A Due Diligence.
A Prospective Resolution Applicant Submitting An Affidavit Stating That He/She Is
Eligible Under Section 29A To Submit Resolution Plan Will Not Suffice. Adequate Due
Diligence On The Prospective Resolution Applicants And Its Connected Persons Needs To
Be Conducted Effectively And Within The Requisite Timeline To Identify
Ineligibility, If Any. The Resolution Professional Should Seek Clarifications Or
Additional Information Or Document From The Prospective Resolution Applicants, If Needed
For Conducting The Due Diligence. The Coc Should Review The Due Diligence Report
Submitted By The Resolution Professional At The Time Of Approving Or Disapproving A
Resolution Plan Specifically Lists Down The Persons Who Are Not Eligible To Be
Resolution Applicants. Section 29A In Its Entirety Not Only Restricts Promoters But Also
The People Related/Connected With The Promoters. It Is Obvious That The Intention Behind

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Inserting Section 29A Is To Restrict Those Persons From Submitting A Resolution Plan Who
Could Have An Adverse Effect On The Entire Corporate Insolvency Resolution Process.
This Would Also Aid In Adhering To The Timelines Outlined Under IBC Which Were
Otherwise Being Hampered Due To The Exploitation Of The Loopholes In The Bidding
Process.[6]

In The Case Of Jaypee Infratech Case/Homebuyers Case [See Endnote XIV] Has Clarified And Put
An End To The Questions Raised With Respect To Application And Scope Of Section 29A.
While Dealing With The Eligibility Of Jaiprakash Associates Limited (~JAL'), The Parent
Company Of Jaypee Infratech Limited As A Resolution Applicant Under Section 29A, The
Supreme Court Has Observed That JAL And Other Promoters Are Disqualified From
Submitting A Resolution Plan As They Fall Within The Scope Of The Section 29A And
Therefore Are Ineligible. It Has Described Insertion Of Section 29A As A ~Plugging
Loophole' And Has Ruled That Strict Adherence To Section 29A Is Mandatory And That
Willful Defaulters Shall Not Be Permitted To Participate In The Corporate Insolvency
Resolution Process.[7]

It Provides For A Diligence Framework Enabling The Committee Of Creditors To Make

Proper Assessment Of The Solvency, Integrity And Credibility Of A Resolution Applicant
Before Approving A Resolution Plan Keeping In View The Scale, Complexity, Viability
And Feasibility Of A Resolution Plan To Avoid Entry Of Frivolous Applicants.

It Also Aims To Protect The Insolvency Resolution Process From Any Impurity Or
Intoxication Which Had Recently Been Seen In The Matter Of Synergies Dooray Where
The Corporate Debtor Company Got Merged With

A Related Party While Edelweiss ARC As A Lender Undertook Nearly A 95% Haircut
On Its Recovery. The Ordinance Prescribes Penalty For Violation Of The Code Which
Will Ultimately Prove To Be A Deterrence For Frivolous Applicants Participating In The
Resolution Process.

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The Section Also Allows The Applicant If It Clears Off All Its Dues To Be Eligible As A
Resolution Applicant Under Section 29A, As Per The Instructions Of The Apex Court. In
The Case Of Essar Steel, The Bidders - Arcelormittal And Numetal - Were Held Ineligible
Due To The Related Party Clause. Numetal Had Rewant Ruia, The Son Of Essar Steel
Promoter Ravi Ruia, As Beneficiary, While Arcelormittal Owned 29.05% Stake In Defaulter
Uttam Galva. Arcelormittal's Bid For Essar Steel Was Finalized After It Paid Outstanding
Dues Of Uttam Galva To The Tune Of Rs 7,000 Crore. The Promoters Of Essar Steel
Offered The Lenders A Settlement Offer Which Was Approximately 25% Higher Than
The Amount Being Offered By The H1 Bidder. The Promoters Were Barred From
Offering A Competing Bid Due To Section 29A Of The IBC. The Promoters Of Essar
Steel Sought Withdrawal Of The CIRP Under The Newly Introduced Section 12A. [8]The
Lenders Of Essar Steel Offered To Proceed With The H1 Bidder, Thereby Rejecting The
Offer Of The Promoters To Withdraw The CIRP Process Under Section 12A Of The IBC.

The Insertion Of Section 29A Cured A Few Gaps In The Law Under The Code, The
Insolvency Resolution Procedure Had Become Complicated As The Resolution Professional
Or Liquidator Had Been Accorded With An Additional Responsibility Of Inspecting The
Eligibility Of Resolution Applicants Putting A Strain On The Deadline For Completion Of
The Corporate Insolvency Resolution Process.

Due To Its Stringent Qualifying Criteria, The Ordinance Disqualifies Majority Of The
Domestic And International Aspirants From Participation In The Bidding Process. This Has
The Potential To Further Weaken An Already Depressed Financial Value Of Any Resolution
Plan.

The Definition Of ~Related Party' In Relation To An Individual Is Extensive Bringing A

Large Number Of People In The Ineligibility Criteria. Moreover, In Determining The
Connected Persons Of An Individual Where He/She Is Married, The Relatives Of The
Spouse Of The Individual Will Also Be Included In The Scope Of The Term
~Connected Persons' For The Purpose Of Section 29A.

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The ~Financial Entity' Have Been Excluded From The Purview Of ~Related Party' In The
Code. It Also Provides For Limited Exemptions To The Micro, Small And Medium Sector
Enterprises (~Msmes') From The Application Of Section 29A And Allows Its Promoters
To Submit A Resolution Plan Provided He Is Not A Wilful Defaulter As Concerns With
Respect To Third Party Interest In Submitting A Resolution Plan For The Msmes
Was Recognized[I].

The Insolvency Proceedings Of Ruchi Soya Industries Ltd. Is A Noteworthy Example

Showcasing The Wide Ambit Of Ineligibility That Could Be Used By Other Bidders To
Challenge The Eligibility Of The Resolution Applicants. In This Case, The Committee
Of Creditors Declared Adani Wilmar As The Highest Bidder And A Resolution Plan Was
Being Finalized. Meanwhile, A Claim Of Ineligibility Was Raised By Patanjali Ayurveda,
The Second Highest Bidder Against Adani Wilmar Contesting Its Eligibility Under Section
29A Of The Code. The Peculiarity Of This Case Is That Adani Wilmar Is Claimed To Be
Ineligible Because The Spouse Of The Managing Director Of Adani Wilmar Is The Daughter
Of A Defaulting Promoter. Patanjali Ayurveda Has Approached NCLT Challenging The
Decision Of The Committee Of Creditors Approving The Bid Of Adani Wilmar.

As A Consequence Of Inclusion Of Section 29A In The Code, Persons Who Have

Contributed To The Defaults Of The Corporate Debtor Or Are Undesirable Due To
Incapacities As Specified In The Section Or Are A 'Related Party' To Another Defaulting
Party, Are Prevented From Gaining Control Of The Corporate Debtor By Being Declared
Ineligible To Submit A Resolution Plan Under The Code. This Provision Asserts
Protection To The Creditors Of The Company By Safeguarding Them Against
Unscrupulous Persons Who Irrespective Of Their Earlier Defaults Are Trying To Reward
Themselves By Undermining The Whole Objective Of The Code And Do Not Aim To
Contribute To The Revival Of The Corporate Debtor.

The Promoters Are Willing To Pay To The Lenders Sums Higher Than That Offered By
The Highest Bidder. Accordingly, The Lenders Are In A Better Position By Accepting The
Offer Made By The Promoters As Opposed To That Of The Highest Bidder. The
Restrictions Under Section 29A Result In The Lenders Being Devoid Of This Higher

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Price Being Offered By The Promoters. The Legislature Has To Tow A Fine Line Between
Protecting The Interests Of The Creditors And Not Harming Them. Any Amendments That
Are Brought In, Have To Provide Strict Qualifying Parameters To Prevent Dubious
Promoters From Regaining Control Of The Corporate Debtor And Its Assets But At The
Same Time Who Is Bidding The Highest And Providing The Creditors With Greatest
Returns Must Be Kept In Mind.

For Instance, In The Case Of Bankrupt Monnet Ispat, The Related Party Clause Created
Some Confusion. The Only Bidder Of The Company Was AION Capital And JSW
Consortium JSW Steel Promoter Sajjan Jindal Is The Brother-In-Law Of Monnet Ispat's
Founder Sandeep Jajodia. The Lenders Had To Take Legal Opinion Before Finalizing The
Bid. Sajjan Jindal, Being Furious About This Section, Commented That, It's An Immature
Provision Which Stops The Highest Bidder From Reviving The Company And Paying The
Greatest Return Just Because Of Certain Ineligibility.

When The Creditors Are Getting What They Want And The Resolution Plan Is Meeting All
The Requirements Then What Is The Need Of Reconsidering It.

The Ultimate Aim Of The Legislation Is To Revive The Company And Avoid Liquidation
And This Section Is Not Meeting That Aim As It Disqualifies Most Competent Resolution
Applicants.

CONCLUSION

Section 29A Laid Down A Multiple Layered And Comprehensive Standard Of

Disqualification That Will Exclude Bona Fide Resolution Applicants. The Application Of
The Section Might Also Disbar Crucial Stakeholders To Bid For The Revival Of The
Company. Therefore, Certain Amount Of Leniency By The Courts In Deciding The Issue Of
Disqualification Is The Need Of The Hour To Maximize The Objectives Of The Code. As
An Alternate To The Current Restriction, A Middle Ground Could Be Adopted, Which
Permits Promoters To Bid For The Corporate Debtor, While Ensuring There Are Sufficient
Safeguards In Place To Ensure That The Lenders Make The Most Of The Resolution Process.

Also, Ensuring A Middle Path Permitting Promoters From Becoming A Resolution Applicant,
Although Ensuring Appropriate Safeguards (Such As The Above) To Protect The Other

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Stakeholders May Make The IBC And The CIRP Process Much More Economically Viable
For The Promoters And The Lenders, Without Compromising The Sanctity Of The
Process.

There Must Also Be Certain Relaxations In The Related Party Transactions So That The
Excess Of Payments That The Competent Companies' Promoters Are Willing To Make To
The Lenders Cannot Be Let Go For The Cost Of Morality.

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