Section 29A of IBC : Section 29A: Person Not Eligible To Be Resolution Applicant

Explanation using Example

Let's consider a hypothetical scenario to understand the application of Section 29A of the Insolvency and Bankruptcy Code, 2016:

Imagine a company, ABC Ltd., which is undergoing insolvency proceedings. A resolution plan is required to resolve the company's debt and revive its operations. Mr. X, who is a former director of a company that was recently declared a wilful defaulter by the RBI, is interested in submitting a resolution plan for ABC Ltd.

Under Section 29A(b), Mr. X is not eligible to submit a resolution plan for ABC Ltd. because he is associated with a company that has been declared a wilful defaulter. This provision ensures that individuals or entities that have a history of not fulfilling their repayment obligations cannot gain control of companies through the resolution process.

Furthermore, if Mr. X had been a promoter of another company, XYZ Ltd., that had engaged in fraudulent transactions, under Section 29A(g), he would also be ineligible to submit a resolution plan for ABC Ltd. unless he had acquired XYZ Ltd. through a prior resolution plan approved under the Code and was not involved in the fraudulent transactions.

This section acts as a filter to ensure that only credible and responsible applicants, who do not have a history of financial misconduct, can participate in the resolution process of a corporate debtor.