{"id":12406,"date":"2021-05-28T19:28:27","date_gmt":"2021-05-28T13:58:27","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=12406"},"modified":"2025-03-01T13:56:08","modified_gmt":"2025-03-01T08:26:08","slug":"section-29a-of-ibc-2016","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/","title":{"rendered":"Critical analysis of Section 29A of IBC 2016"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d488d641f45\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d488d641f45\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#Critical_analysis_of_section_29a_of_ibc_2016\" title=\"Critical analysis of section 29a of ibc 2016\">Critical analysis of section 29a of ibc 2016<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#INTRODUCTION\" title=\"INTRODUCTION\">INTRODUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#INELIGIBILITY_Us_29A_OF_IBC\" title=\"INELIGIBILITY U\/s 29A OF IBC\">INELIGIBILITY U\/s 29A OF IBC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#IBC_Section_29A_%E2%80%93_Who_is_ineligible\" title=\"IBC Section 29A\u00a0\u2013 Who is ineligible?\u00a0\u00a0\">IBC Section 29A\u00a0\u2013 Who is ineligible?\u00a0\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#Critical_analysis_of_on_IBC_2016\" title=\"Critical analysis of on IBC 2016\">Critical analysis of on IBC 2016<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#LAYERS_OF_INELIGIBILITY\" title=\"LAYERS OF INELIGIBILITY\">LAYERS OF INELIGIBILITY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#ANALYSIS_OF_RELAXATION_US_29A_OF_IBC_ON_MSME\" title=\"ANALYSIS OF RELAXATION U\/S 29A OF IBC ON MSME\">ANALYSIS OF RELAXATION U\/S 29A OF IBC ON MSME<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#DILUTION_OF_US_29A_OF_IBC_A_MYTH_OR_REALITY\" title=\"DILUTION OF U\/S 29A OF IBC:\u00a0 A MYTH OR REALITY?\">DILUTION OF U\/S 29A OF IBC:\u00a0 A MYTH OR REALITY?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#APPLICABILITY_ON_MSMES\" title=\"APPLICABILITY ON MSMES\">APPLICABILITY ON MSMES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#PRE-PACKAGED_INSOLVENCY_VS_IMPLECATION_OF_SECTION_29A\" title=\"PRE-PACKAGED INSOLVENCY VS IMPLECATION OF SECTION 29A\">PRE-PACKAGED INSOLVENCY VS IMPLECATION OF SECTION 29A<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#APPROVAL_OF_RESOLUTION_PLAN\" title=\"APPROVAL OF RESOLUTION PLAN\">APPROVAL OF RESOLUTION PLAN<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#KEY_SUCCESS_FACTORS\" title=\"KEY SUCCESS FACTORS \">KEY SUCCESS FACTORS <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#SKILL_SET_FOR_DUE_DILIGENCE\" title=\"SKILL SET FOR DUE DILIGENCE\">SKILL SET FOR DUE DILIGENCE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/#IDENTIFICATION_OF_CONNECTED_PERSONS\" title=\"IDENTIFICATION OF CONNECTED PERSONS:\">IDENTIFICATION OF CONNECTED PERSONS:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-12407\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC.jpg\" alt=\"Detecting red flags and reporting \" width=\"994\" height=\"552\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC.jpg 994w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC-300x167.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC-768x426.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/29A-IBC-800x444.jpg 800w\" sizes=\"(max-width: 994px) 100vw, 994px\" \/><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Critical_analysis_of_section_29a_of_ibc_2016\"><\/span><strong>Critical analysis of section 29a of ibc 2016<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"INTRODUCTION\"><\/span><span style=\"color: #ffcc00;\"><strong>INTRODUCTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 29A\u00a0under the Insolvency and <a href=\"https:\/\/Suspension of Fresh IBC for 1 Year declared By FM\">Bankruptcy<\/a> Code, 2016, plays a key role in determining the eligibility of Resolution Applicant for <a href=\"https:\/\/carajput.com\/publications\/drafting-and-negotiating-of-resolution-plan-under-cirp-under-ibc.pdf\">providing resolution plan in the Corporate Insolvency Resolution Process<\/a>.<\/p>\n<p>Earlier, there were no provisions, restricting the defaulting promoters from participating in to CIRP of the corporate debtor, which would generally, occur potentially in an unfair manner.<\/p>\n<p>To overcome such problems, Section 29A was introduced, in retrospective effect, from November 23, 2017.<\/p>\n<p>Before the introduction of section 29A, any individual or corporate entity, be it the promoters, directors, key managers, or any other related person, can participate in the bidding process of Corporate Debtor under CIRP.<\/p>\n<p>As a result, the persons responsible for the failure of the company, or contributed to the default of the Corporate Debtor, could regain the control of the company by bidding at heavy discounts which the other bidders like banks and other financial institutes cannot afford to make.<\/p>\n<p>Thus, amendments were required in the IBC 2016, to provide a criterion for eligibility for a resolution applicant, submitting the <a href=\"https:\/\/carajput.com\/publications\/drafting-and-negotiating-of-resolution-plan-under-cirp-under-ibc.pdf\">resolution plan during CIRP<\/a>, and thereby restricting the persons, responsible for downfall of the corporate debtor or were unsuitable to run the company, from regaining their control.<\/p>\n<p>During CIRP, under IBC 2016, the Resolution Professional shall invite plans from eligible resolution applicants, and the said plan to be approved by the committee of creditors, and the same shall be based on the complexity and scale of operations of the business of the corporate debtor, along with any other conditions, as may be specified by the Board.<\/p>\n<p>For a person to qualify as a resolution applicant, is required to fulfil the following two conditions \u2013<\/p>\n<ol>\n<li>The said person shall fulfil any criteria laid down by the resolution professional with the approval of the committee of creditors.<\/li>\n<li>The said person shall not be disqualified under section 29A of IBC 2016.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"INELIGIBILITY_Us_29A_OF_IBC\"><\/span><span style=\"color: #000080;\"><strong>INELIGIBILITY U\/s 29A OF IBC<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-12408\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution.jpg\" alt=\"\" width=\"1162\" height=\"653\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution.jpg 1162w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution-300x169.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution-1024x575.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution-768x432.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Defaulting-Promoters-Insolvency-Resolution-800x450.jpg 800w\" sizes=\"(max-width: 1162px) 100vw, 1162px\" \/><\/a><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"IBC_Section_29A_%E2%80%93_Who_is_ineligible\"><\/span><span style=\"color: #000080;\"><strong>IBC Section 29A\u00a0\u2013 Who is ineligible?\u00a0\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"color: #000080;\"><strong><span style=\"color: #ffcc00;\">DISQUALIFICATION OF RESOLUTION APPLICANT :<\/span> <\/strong><\/span>A person shall be disqualified for being a resolution applicant &#8211;<\/p>\n<ol>\n<li>Any person who is an undischarged insolvent.<\/li>\n<li>The person is a wilful defaulter\u00a0in accordance with the guidelines of the RBI.<\/li>\n<li>It is having an account, or an account of a corporate debtor under his management or control or of whom such person is a promoter, provided a period of at least 1 year has not lapsed from the date of such classification.<\/li>\n<li>\u00a0Person has been convicted for any offence, with punishment involving imprisonment of 2 years and above.<\/li>\n<li>Such a person has been disqualified to act as a director\u00a0under the Companies Act, 2013.<\/li>\n<li>I has been debarred from accessing the capital market, by SEBI.<\/li>\n<li>A person has been a promoter or in the management or control of a corporate debtor, undertaking preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction, due to which insolvency order has been made by the Adjudicating Authority under this Code.<\/li>\n<li>Such a person has executed an enforceable guarantee in favour 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.<\/li>\n<\/ol>\n<p>It is to be noted that such disqualification shall apply to persons mentioned in the section acting individually or jointly or in concert with such persons.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Critical_analysis_of_on_IBC_2016\"><\/span><span style=\"color: #000080;\"><strong>Critical analysis of on IBC 2016<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-21943\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016-300x112.jpg\" alt=\"Critical analysis of IBC 2016\" width=\"731\" height=\"273\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016-300x112.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016-768x287.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016-800x299.jpg 800w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Critical-analysis-of-IBC-2016.jpg 843w\" sizes=\"(max-width: 731px) 100vw, 731px\" \/><\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"LAYERS_OF_INELIGIBILITY\"><\/span><span style=\"color: #000080;\"><strong>LAYERS OF INELIGIBILITY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><span style=\"color: #ffcc00;\"><strong>PERSONS ACTING IN CONCERT \u2013<\/strong><\/span>They are the persons having common objective\/purpose of acquisition of shares\/ voting rights in\/exercising control over a company, persisting with an agreement or understanding, either in formal or informal way, and directly or indirectly co-operate for acquisition of shares or exercise of control of the company.<\/li>\n<li><span style=\"color: #ffcc00;\"><strong>CONNECTED PERSONS \u2013<\/strong><\/span> They are the persons who are the promoter or in the management or control of the resolution applicant, or Holding company, Subsidiary company, Associate company or related party of a person referred in above.<\/li>\n<li><span style=\"color: #ffcc00;\"><strong>RELATED PARTY \u2013<\/strong><\/span> The person who is in relation with the defaulting promoter, like their spouse, any partner in a partnership firm or trustee in a trust in which the defaulter individual is associated, a private company where such person is a director or holds over 2% share capital in aggregate with the relatives.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"ANALYSIS_OF_RELAXATION_US_29A_OF_IBC_ON_MSME\"><\/span><span style=\"color: #000080;\"><strong>ANALYSIS OF RELAXATION U\/S 29A OF IBC ON MSME<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As we know that the Indian business environment is more a promoter-driven business, it becomes difficult to place a resolution for the revival of such businesses without involving promoters.<\/p>\n<p>To illuminate such aspect, a significant amendment is made in Section 29A, thereby relaxing the provisions of resolution applicant for micro, small and medium enterprises<\/p>\n<p>As discussed above, Section 29A lays down a multiple layered and comprehensive standard of disqualification for a resolution applicant. A certain amount of leniency has been provided by the courts in deciding the issue of disqualification.<\/p>\n<p>A middle path could be provided, thereby permitting promoters from becoming a resolution applicant, though proper safeguards to protect the other stakeholders be provided and thus, the CIRP process can be initiated much more economically.<\/p>\n<p>Certain relaxation is required in related party transactions, so that any excess payments that the competent companies\u2019 promoters are willing to make to the lenders cannot be debarred on the cost of morality.<\/p>\n<p>Thus, the ultimate aim should always be to revive the company and avoid liquidation to preserve the rights of both, the Corporate Debtors and Creditors.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"DILUTION_OF_US_29A_OF_IBC_A_MYTH_OR_REALITY\"><\/span><span style=\"color: #000080;\"><strong>DILUTION OF U\/S 29A OF IBC:\u00a0 A MYTH OR REALITY?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Earlier, IBC had no framework to prevent promoters from regaining control over their companies by default. Therefore, to avoid any irregularity, the legislator introduced Section 29A to disqualify such persons.<\/p>\n<p>Thus, the rationale behind this was to generate fear among promoters to take decisions wisely, to avoid failure of their companies.<\/p>\n<p>In the case of Andhra Bank v. Sterling Biotech, the promoters offered a onetime settlement proposal to creditors, in exchange of withdrawal of CIRP request application.<\/p>\n<p>NCLAT held that the promoters are allowed to withdraw the application under Section 12A as COC has given approval of more than 90%.<\/p>\n<p>Such a ruling was provided, as the main intention and objective of the code is the revival of the distressed corporate entities in a time bound manner.<\/p>\n<p>The introduction of Section 29A to disqualify certain persons, who should not take benefit of their own wrong, but, with the introduction of Section 12A, it can be clearly seen that the dilution of Section 29A is taking place.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"APPLICABILITY_ON_MSMES\"><\/span><span style=\"color: #000080;\"><strong>APPLICABILITY ON MSMES<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 29A\u00a0under the Insolvency and Bankruptcy Code, 2016, plays a key role in determining the eligibility of Resolution Applicant for providing resolution plan in the Corporate Insolvency Resolution Process.<\/p>\n<p>Earlier, there were no provisions, restricting the defaulting promoters from participating in to CIRP of the corporate debtor, which would generally, occur potentially in an unfair manner.<\/p>\n<p>This Section was included not only to disqualify persons responsible for the mismanagement of the corporate debtor who is facing CIRP, but also to prevent undischarged insolvents from participating in the resolution process and to ensure maximization of assets.<\/p>\n<p>Initially, the entire Section 29A applicable to Resolution Applicants submitting Resolution Plans for MSMEs. However, the Insolvency Law Committee, in 2018, submitted a\u00a0report\u00a0stating that since<a href=\"https:\/\/carajput.com\/blog\/msme-registration-role-of-ca-community\/\"> MSMEs<\/a> form the foundation of Indian economy, certain relaxations must be provided to them.<\/p>\n<p>As per the report, they wanted the promoter who is not a wilful defaulter, to be permitted to bid for an MSME in insolvency because it is believed that an MSME attracts mainly the interests of its promoters and disqualifying them will hinder the efficiency of the Resolution Process.<\/p>\n<p>After considering the recommendations, another section named Section 240A was inserted.\u00a0It thereby provides relaxation to promoters of MSMEs, who are not a wilful defaulter, to become a resolution applicant, and participate in CIRP of such MSMEs.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"PRE-PACKAGED_INSOLVENCY_VS_IMPLECATION_OF_SECTION_29A\"><\/span><span style=\"color: #000080;\"><strong>PRE-PACKAGED INSOLVENCY VS IMPLECATION <\/strong><strong>OF SECTION 29A<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>With the increasing distress caused by the pandemic on the MSMEs, IBC Ordinance, 2021 was proposed by the President, to include the Pre-Packaged Insolvency Resolution Process for corporate persons classified as MSME having default of up to Rs 1 Crore. Pre-Packaged Insolvency is a system or an arrangement between the Corporate Debtor, buyer and creditors of the Corporate Debtor, wherein the resolution of the Corporate Debtor\u2019s business is negotiated between the buyer and the creditors before the appointment of an Insolvency Professional.<\/p>\n<p>Coming on to the provide sure and conditions for pre-packed insolvency, an application to initiate Pre-Packaged Insolvency is to be made only if the eligibility requirement provided under Section 29A of IBC is fulfilled.<\/p>\n<p>A confusion persists because, on one hand, the\u00a0report in 2021 provides that where all the conditions enumerated under Section 29A are fulfilled, an application be for initiation of the Pre-Packaged Insolvency.<\/p>\n<p>However, on the other hand, the judicial pronouncements prior to the Ordinance emphasized the importance of diluting certain disqualifications provided under Section 29A to Insolvency of MSMEs.<\/p>\n<p>It was believed that the law pertaining to applicability of Section 29A to CIRP is well settled and evolved over the course of years, but the same cannot be applied to Pre-Packaged Insolvency of MSMEs.<\/p>\n<p>Since, the Pre-Packaged Insolvency Process is at its initial stage, it is important for the Legislature to notice such confusion and provide a clarity on the effect of Section 29A to Pre-Packaged Insolvency Process.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"APPROVAL_OF_RESOLUTION_PLAN\"><\/span><span style=\"color: #000080;\"><strong>APPROVAL OF RESOLUTION PLAN<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Resolution-Applicant-Eligibility-under-Section-29A-of-IBC.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-12409\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Resolution-Applicant-Eligibility-under-Section-29A-of-IBC.jpg\" alt=\"\" width=\"834\" height=\"438\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Resolution-Applicant-Eligibility-under-Section-29A-of-IBC.jpg 628w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/05\/Resolution-Applicant-Eligibility-under-Section-29A-of-IBC-300x158.jpg 300w\" sizes=\"(max-width: 834px) 100vw, 834px\" \/><\/a><\/p>\n<p>As per the Supreme Court judgment, it is proposed that the Resolution Professional shall be very careful in taking up and approving the resolution plan in a CIRP. They need to confirm that a resolution plan, among other things, does not contravene the provisions of Section 29A.<\/p>\n<ul>\n<li>Resolution Professional needs to examine and confirm that a resolution plan does not contravene Section 29A of the Code and provide the due diligence report.<\/li>\n<li>The Committee of Creditors constituted by the resolution professional, shall approve or disapprove the proposed resolution plan.<\/li>\n<li>The Adjudicating Authority, if satisfied that the resolution plan as approved by the Committee of Creditors meets the requirements under the Code, shall pass an order to approve the resolution plan.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"KEY_SUCCESS_FACTORS\"><\/span><span style=\"color: #000080;\"><strong>KEY SUCCESS FACTORS <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>The Resolution Professional is responsible to conduct due diligence under Section 29A. It is to be noted that any affidavit received by any prospective Resolution Applicant, providing the information that such person is eligible and submitting the resolution plan, will not be sufficient. Adequate due diligence is required to be performed on the prospective Resolution Applicants and its connected persons.<\/li>\n<li>The Resolution Professional while performing due diligence, shall ask for any clarifications or additional information or document from the prospective Resolution Applicants.<\/li>\n<li>And the COC is also required to review the due diligence report submitted by the Resolution Professional at the time of approving or disapproving a resolution plan.<\/li>\n<li>It is to be noted, that the due diligence process is not restricted to simple public domain searches but also entails conducting an extensive public record review and research in India and globally by deploying advanced research techniques and accessing multiple global proprietary databases.<\/li>\n<li>Apart from this, independent interaction and communication across various stakeholders can also be made under due diligence process.<\/li>\n<li>The main purpose of providing such an Ordinance was to promote continuity of the businesses, and ensure cost effective and timely resolution of the MSMEs.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"SKILL_SET_FOR_DUE_DILIGENCE\"><\/span><span style=\"color: #000080;\"><strong>SKILL SET FOR DUE DILIGENCE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>The Resolution Professional is required to leverage the right skill sets and expertise to conduct due diligence on the application of Resolution Applicants and their Connected Persons.<\/li>\n<li>The scale of the due diligence exercise may vary and range from hundreds, or thousands of connected persons, entities or individuals, spread across multiple geographies and jurisdictions.<\/li>\n<li><span style=\"color: #000000;\">Due care be taken to ensure timely completion of due diligence. Depending on the complexity faced during the due diligence exercise, the Resolution Professional may choose to engage a separate independent advisor to assist him with such due diligence.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"IDENTIFICATION_OF_CONNECTED_PERSONS\"><\/span><span style=\"color: #000080;\"><strong>IDENTIFICATION OF CONNECTED PERSONS:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Each and every Resolution Applicant, is required to provide an affidavit stating the list of all of their connected persons. During the due diligence process, the RP may come across some entities and individuals that were not specified as connected persons by the Resolution Applicants in their affidavit. In such a case, it is important to perform due diligence on such entities and they be considered as connected persons.<\/p>\n<p>The RP is required to conduct effective public domain research including media, regulatory, litigation, bankruptcy, credit default and other relevant checks across jurisdictions, subject to the extent of information available in the public domain.<\/p>\n<p>They also need to identify, review, and report any red flags relevant to Section 29A. and where any significant reg flag is found, leading to ineligibility of a Resolution Applicant under Section 29A, the same be reported to COC.<\/p>\n<p class=\"x_MsoPlainText\">We take this opportunity to introduce IFCCL as a leading consulting firm engaged in providing Assurance, Tax &amp; Advisory services having offices across 10 locations in India. In forensic services, we are a 10 members team consisting of partners &amp; directors having varied domain &amp; industry experience.<\/p>\n<p class=\"x_MsoPlainText\">We would like to highlight that IFCCL has elaborate experience of performing Transaction and Forensic Audits for IRP\u2019s \/ RP\u2019s and we had conducted certain key transaction audits including cases from top 3 accounts listed by RBI for IBC proceedings. Additionally, we have worked extensively for forensic audit on behalf of lenders where we have conducted forensic audit of key accounts in few companies. We also have experience in Section 29 A Due diligence and Asset tracing assignments.<\/p>\n<p><strong>You may also know more about\u00a029A certificate\u00a0<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/carajput.com\/learn\/section-29a-certification-services-under-ibc.html\" data-cke-saved-href=\"https:\/\/carajput.com\/learn\/section-29a-certification-services-under-ibc.htmlA\">29A Cerificate under the IBC law<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/\" data-cke-saved-href=\"https:\/\/carajput.com\/blog\/section-29a-of-ibc-2016\/\">Related party under section 29a of ibc Code<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/publications\/ibc-laws-critical-analysis-of-section-29a-of-the-code.pdf\" data-cke-saved-href=\"https:\/\/carajput.com\/publications\/ibc-laws-critical-analysis-of-section-29a-of-the-code.pdf\">Section 29A of IBC act<\/a><\/li>\n<\/ul>\n<p><strong>Other Popular blog:-<\/strong><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><a href=\"https:\/\/carajput.com\/blog\/overviews-of-principles-of-avoidable-preferential-transactions-ibc-2016\/\">Overviews of Principles of Avoidable Preferential Transactions IBC-2016<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/services\/how-does-the-role-of-resolution-professional-help.php\">How does the Role of Resolution Professional help under IBC<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/learn\/quick-review-on-insolvency-and-bankruptcy-code.html\">quick overview of IBC<\/a><\/li>\n<li><strong><a href=\"https:\/\/carajput.com\/archives\/ip-hand-book-on-best-practices-during-cirp-process-under-ibc-code.pdf\" data-cke-saved-href=\"https:\/\/carajput.com\/archives\/ip-hand-book-on-best-practices-during-cirp-process-under-ibc-code.pdf\">IP Hand book on Best Practices during CIRP Process under IBC Code<\/a><\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Critical analysis of section 29a of ibc 2016 INTRODUCTION Section 29A\u00a0under the Insolvency and Bankruptcy Code, 2016, plays a key role in determining the eligibility of Resolution Applicant for providing resolution plan in the Corporate Insolvency Resolution Process. Earlier, there were no provisions, restricting the defaulting promoters from participating in to CIRP of the corporate &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8789],"tags":[9915,8626,7452],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12406"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=12406"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12406\/revisions"}],"predecessor-version":[{"id":28805,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12406\/revisions\/28805"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=12406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=12406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=12406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}