We use a session cookie and first-party analytics to run this site — no third-party trackers, no ads. Details in our Privacy Policy.
RESEARCH From the Research Desk — The sub-Rs 100 crore acquisition market, sized. Read it →

The Code, explained

Section 29A: who cannot bid for a company in insolvency.

Every resolution plan passes one gate before its price even matters: is this bidder eligible at all? Section 29A is the negative list — a set of disqualifications written to stop defaulting promoters buying their own company back at a discount. It reaches further than most first-time bidders expect, and it is tested across everyone standing behind the bid, not just the entity that signs it.

The ten disqualifications The acquisition playbook →

General information about the provision — not legal advice, and never an opinion on any particular person’s eligibility · glossary · report an error

The short answer

Three positions a prospective bidder can be in

1
Clear. Neither you nor anyone connected to you falls into any of the ten buckets below. Eligibility is affirmed on a 29A affidavit with the plan, and the professional, the committee and ultimately the tribunal test it.
2
Curable. The commonest disqualification — control of an account classified as an NPA for a year or more — falls away if all overdue amounts are cleared before the plan is submitted. That is a clause with a door in it, and the door closes when the plan goes in.
3
Barred. A disqualification with no cure route in the section, or one reached through the connected-person net. Bidding anyway is not merely refused — it is the recurring cause of challenge, delay and wasted diligence spend for everyone in the process.

The expensive mistake is testing the bidding entity alone. Clause (j) puts everyone connected to the applicant inside the gate. Consortium members, the holding company, persons who will manage the debtor under the plan — all of them. One ineligible party disqualifies the plan, however clean the rest of the structure is.

The gate itself

The ten disqualifications, in plain terms

and anyone acting jointly or in concert with them

(a)
Undischarged insolvent. Personally insolvent and not discharged.
(b)
Wilful defaulter under RBI guidelines.
(c)
The NPA test. Controls an account classified as a non-performing asset for a year or more — unless all overdue amounts are cleared before the plan is submitted. This is the clause that catches defaulting promoters, and the one with a cure.
(d)
Convicted of an offence punishable with two years’ imprisonment or more under the specified statutes, within the look-back period.
(e)
Disqualified as a director under the Companies Act.
(f)
Barred by SEBI from the securities markets.
(g)
Tainted transactions. Was a promoter of, or in the management of, a company found to have carried out a preferential, undervalued, fraudulent or extortionate transaction — the PUFE family — with an order passed against it.
(h)
A guarantor who did not pay. Gave a guarantee to a creditor of a company in insolvency, which was invoked and remains unpaid.
(i)
The same, abroad. Subject to any of the above under a foreign law.
(j)
The connected-person net. Connected to anyone disqualified above — promoters, management, holding and subsidiary companies, related parties, and persons who would manage the debtor under the plan. Eligibility is tested across the whole web, not the bidding entity alone.

Why the net is so wide. Without (j) a disqualified promoter could simply bid through a relative, an associate company or a fresh SPV. The connected-person clause is what gives 29A its teeth — and what makes eligibility diligence on every member of a consortium non-negotiable before any money is spent on a bid.

The exception that matters most in the small-ticket market

The MSME carve-out

section 240A

Where the corporate debtor is a registered micro, small or medium enterprise, section 240A disapplies the two harshest clauses: (c), the NPA test, and (h), the invoked guarantee. The practical effect is that an MSME’s own promoter can legitimately bid to keep the company — provided none of the other disqualifications bites: wilful default, conviction, a SEBI bar, a PUFE order, and the rest all still apply.

In the sub-Rs 100-crore market this is the single most consequential provision in the Code, because in that band the promoter is frequently the only bidder with any appetite for the asset at all. A rescue that would be impossible at scale is routine here, and it is this section that makes it lawful.

It is a carve-out, not a clean slate. Section 240A removes two clauses. It does not exempt an MSME promoter from 29A, and it does not exempt the connected persons behind them from the eight clauses that remain.

Where it bites

Test eligibility before you diligence the asset

Eligibility is examined when plans are evaluated. Resolution professionals require a 29A affidavit with every plan; rival bidders routinely challenge each other’s eligibility, and that challenge is a recurring source of litigation and delay in the process. The sequence that follows from it is not complicated, and it is the reverse of what most first-time bidders do:

Map the connected-person web first. Every consortium member, the holding and subsidiary chain, related parties, and whoever will actually run the company if the plan succeeds.
Run the ten clauses across all of them. Not across the bidding SPV. The SPV is almost never where the problem is.
Deal with anything curable before the plan goes in. Clause (c) is cured by clearing the overdue amounts, and only before submission.
Then diligence the asset. Diligence spend on a target you cannot lawfully bid for is the most avoidable loss in this market.

And the gate does not expire with the CIRP. A person barred from submitting a resolution plan is also barred from buying the company’s property in a liquidation sale, under section 35(1)(f). Waiting for the case to fail does not open a side door.

Common questions

The ones we are asked most

Can a promoter ever buy back their own company?

Two lawful routes exist. The MSME carve-out above, where the debtor is a registered MSME and no other clause applies; and clearing the overdue amounts that made the account an NPA, before submitting the plan, under clause (c). Outside those, a defaulting promoter bidding through connected persons is precisely what the section is written to stop.

Does 29A apply in liquidation sales too?

Yes — the ineligibility travels. A person barred from submitting a resolution plan is also barred from buying the company’s property in a liquidation sale under section 35(1)(f), so the gate cannot be waited out.

Who checks eligibility?

The resolution professional examines each plan and the accompanying 29A affidavit; the Committee of Creditors and ultimately the adjudicating authority rule on it, and competing bidders frequently litigate it.

What counts as a “connected person”?

Broadly: promoters and persons in management of the bidder, its holding, subsidiary and associate companies, related parties, and persons who will manage the debtor if the plan succeeds. The statutory definition is detailed — treat this as the shape, not the boundary, and take advice on the specifics.

I am a creditor. What should I be watching?

Whether an applicant is connected to the people who ran the company into insolvency, because that is the case 29A exists to catch, and because an eligibility challenge extends the process for everyone waiting to be paid. The orders in the case are where any such challenge becomes visible — every captured order →

Following a specific company?

Its record carries the admission, the professional, the captured orders and, where the case has concluded, the applicant whose plan was approved.

Check a borrower →
This page is general information, not legal advice. Section 29A is heavily litigated and has been amended repeatedly; the statutory text and the current case law govern, and this page states the shape of the provision rather than its full text. Nothing here is an opinion on any person’s eligibility, and nothing here creates a professional relationship. See also the glossary and the acquisition playbook →