APPLICABILITY OF SECTION 29A IN PRE-PACK

Section 29A of the Insolvency and Bankruptcy Code, restricts certain persons including the
Promoter to become a Resolution Applicant in CIRP and because of this reason it becomes of
significant importance to analyze the section in relation with newly introduced pre-packaged
insolvency for MSME’s under IBC. The Legislature may propose exempting provisions of
Section 29A (c) in order to allow Promoters to submit a resolution plan to the Resolution
Professional under the prepack regime, which can then be presented to the COC for approval as
Promotors possess complete knowledge of the Business and eliminating them from the process
would not be effective for the purpose of pre-packs. A person who is unable to submit a
resolution plan under Section 29A of the IBC is also precluded from submitting a scheme of
compromise and arrangement under Section 230 of the Companies Act, 2013. 1 Allowing
someone who is disqualified under Section 29A to submit a compromise and arrangement
proposal under Section 230 of the Act, 2013 during the liquidation stage goes against the
language and spirit of the Code. However, in the case of prepacks, a purposeful interpretation of
the Code will be required, and appropriate exceptions will be carved through proper check and
balances in place, such as the appointment of a Resolution Professional and the formation of a
CoC in the same way as in the normal CIRP Process but the Promoters should also be permitted
to come up with Resolution Plans. There should be a Harmonious construction between both the
statutes so that the conflict can be reduced.

1
Arun Kumar Jagatramka Vs Jindal Steel and Power Limited