Section 29A: Ineligibility to Submit a Resolution Plan
Ten grounds, a wide net of connected persons, and one cure. Here's how to test an applicant clause by clause.
Section 29A lists the persons who cannot submit a resolution plan. It was inserted with effect from 23 November 2017, and clauses (c), (g) and (h) are aimed squarely at promoters whose companies defaulted trying to buy them back through the CIRP. The bar reaches not just the applicant but anyone acting jointly or in concert with it, and every "connected person".
The 2026 amendment did not change section 29A, so the law at the exam cut-off of 4 February 2025 is also the law today. Each clause is a separate test, and a case study usually turns on one fact that triggers, or escapes, one of them.
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The Ten Grounds of Ineligibility
(a)
Ground
Undischarged insolvent
Key exception
None
(b)
Ground
Wilful defaulter under RBI guidelines
Key exception
None
(c)
Ground
At plan submission, has an account (or controls or promotes a corporate debtor with an account) classified NPA, where at least one year passed from classification to the CIRP commencement date
Key exception
Eligible if all overdue amounts with interest and charges are paid before submitting the plan. Does not apply to a financial entity that is not a related party, or for three years to an NPA acquired under an earlier approved plan
(d)
Ground
Convicted of an offence punishable with 2 years or more under a Twelfth Schedule Act, or 7 years or more under any law
Key exception
Lapses two years after release from imprisonment; does not apply to a connected person under Explanation I(iii)
(e)
Ground
Disqualified to act as a director under the Companies Act, 2013
Key exception
Does not apply to a connected person under Explanation I(iii)
(f)
Ground
Prohibited by SEBI from trading in or accessing the securities markets
Key exception
None
(g)
Ground
Promoter or in management or control of a corporate debtor in which a preferential, undervalued, extortionate or fraudulent transaction took place and the NCLT has made an order
Key exception
Does not apply if the transaction preceded the applicant's acquisition of that company under an approved plan or scheme and the applicant did not contribute to it
(h)
Ground
Executed a guarantee for a corporate debtor whose CIRP was admitted on that creditor's application, and the guarantee was invoked and remains unpaid
Key exception
None in the section; see MSMEs below
(i)
Ground
A disability corresponding to (a)-(h) under a foreign law
Key exception
None
(j)
Ground
Has a connected person ineligible under (a)-(i)
Key exception
Financial entities that are not related parties are carved out of Explanation I(iii)
| Clause | Ground | Key exception |
|---|---|---|
| (a) | Undischarged insolvent | None |
| (b) | Wilful defaulter under RBI guidelines | None |
| (c) | At plan submission, has an account (or controls or promotes a corporate debtor with an account) classified NPA, where at least one year passed from classification to the CIRP commencement date | Eligible if all overdue amounts with interest and charges are paid before submitting the plan. Does not apply to a financial entity that is not a related party, or for three years to an NPA acquired under an earlier approved plan |
| (d) | Convicted of an offence punishable with 2 years or more under a Twelfth Schedule Act, or 7 years or more under any law | Lapses two years after release from imprisonment; does not apply to a connected person under Explanation I(iii) |
| (e) | Disqualified to act as a director under the Companies Act, 2013 | Does not apply to a connected person under Explanation I(iii) |
| (f) | Prohibited by SEBI from trading in or accessing the securities markets | None |
| (g) | Promoter or in management or control of a corporate debtor in which a preferential, undervalued, extortionate or fraudulent transaction took place and the NCLT has made an order | Does not apply if the transaction preceded the applicant's acquisition of that company under an approved plan or scheme and the applicant did not contribute to it |
| (h) | Executed a guarantee for a corporate debtor whose CIRP was admitted on that creditor's application, and the guarantee was invoked and remains unpaid | None in the section; see MSMEs below |
| (i) | A disability corresponding to (a)-(h) under a foreign law | None |
| (j) | Has a connected person ineligible under (a)-(i) | Financial entities that are not related parties are carved out of Explanation I(iii) |
Who Counts as a Connected Person (Explanation I)
- (i)
- Any promoter of, or person in management or control of, the resolution applicant.
- (ii)
- Any person who will be the promoter or in management or control of the corporate debtor's business while the plan is implemented.
- (iii)
- The holding company, subsidiary, associate company or related party of anyone in (i) or (ii).
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Where Else Section 29A Applies
- check_circleExpression of interest: the prospective applicant undertakes that it is not ineligible and will report if it becomes so (reg. 36A(7) of the CIRP Regulations)
- check_circleResolution plan: filed with an affidavit of eligibility under section 29A (reg. 39(1)(a))
- check_circleLiquidation sale: the liquidator cannot sell assets to a person not eligible to be a resolution applicant (proviso to s. 35(1)(f))
- check_circleCompromise or arrangement during liquidation: an ineligible person cannot be a party to it (proviso to reg. 2B, Liquidation Regulations, as at the cut-off)
- check_circlePre-pack: the corporate debtor itself must be eligible under section 29A to apply (s. 54A(2)(d))
- check_circleMSMEs: clauses (c) and (h) do not apply to resolution applicants in the CIRP or pre-pack of a micro, small or medium enterprise (s. 240A(1)), so its own promoters can bid
How the Limited Insolvency Examination Tests This
A typical case: Mr R is a director of Alpha Ltd, the resolution applicant. Mr R is also the promoter of Beta Ltd, whose bank account was classified NPA on 10 January 2023. The CIRP of the target company commenced on 20 March 2024. Is Alpha eligible?
Mr R is a connected person of Alpha under Explanation I(i), so clause (j) imports Beta's position. Beta's account had been NPA for more than one year at the CIRP commencement date, so clause (c) is triggered. Alpha can still bid if the overdue amounts on Beta's account, with interest and charges, are paid before the plan is submitted. In ArcelorMittal (2018) the Supreme Court looked through corporate layers to the people in control, and held that selling a stake shortly before submitting the plan, solely to avoid clause (c), did not make the applicant eligible. It then gave the bidders one further chance to pay off the NPA dues. The common trap is measuring the one-year period to the date of the plan rather than to the CIRP commencement date.
FAQs
Who is not eligible to submit a resolution plan under section 29A?expand_more
Undischarged insolvents, wilful defaulters, persons linked to accounts NPA for over a year before the CIRP (unless the dues are cleared), certain convicts, disqualified directors, persons barred by SEBI, promoters of companies with avoidance orders, guarantors whose invoked guarantees are unpaid, foreign equivalents, and anyone with a connected person in these categories.
Can a promoter submit a resolution plan for its own company?expand_more
Only if no clause of section 29A applies. In practice clause (c) or clause (h) usually bars a promoter of a large company. For an MSME, section 240A switches those two clauses off, so promoters can bid if no other clause applies.
Can NPA ineligibility under section 29A(c) be cured?expand_more
Yes. The applicant becomes eligible if it pays all overdue amounts, with interest and charges on the NPA accounts, before submitting the resolution plan.
Does section 29A apply in liquidation?expand_more
Yes. The proviso to section 35(1)(f) bars the liquidator from selling assets to anyone ineligible to be a resolution applicant.
Next steps
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