The Code, explained
Section 29A: who cannot bid for a company in insolvency.
Every resolution plan under the IBC passes one gate before its price even matters: is this bidder eligible at all? Section 29A is the negative list — a set of disqualifications designed to stop defaulting promoters buying their own company back at a discount, and it reaches further than most first-time bidders expect.
General information about the provision — not legal advice, and never an opinion on any particular person’s eligibility.
The disqualifications, in plain terms
A person cannot submit a resolution plan if they — or anyone acting jointly or in concert with them — fall into any of these buckets:
(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.
(d)
Convicted of an offence punishable with two years' imprisonment or more (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 or in management of a company found to have done a preferential, undervalued, fraudulent or extortionate transaction (the PUFE family) with an order passed against it.
(h)
Guarantor who didn't 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 foreign law.
(j)
The connected-person net. Connected to anyone disqualified above — promoters, management, holding and subsidiary companies, related parties. 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 new 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 spending on a bid.
The MSME exemption
Section 240A carves MSMEs out of the harshest clauses. Where the corporate debtor is a registered micro, small or medium enterprise, clauses (c) (the NPA test) and (h) (the invoked guarantee) do not apply — which means an MSME's own promoter can legitimately bid to keep the company, provided none of the other disqualifications (wilful default, conviction, SEBI bar, and the rest) bite. In the sub-₹100-crore market this is the single most consequential carve-out in the Code.
Where it bites in practice
Eligibility is examined when plans are evaluated — resolution professionals require a 29A affidavit with every plan, and rival bidders routinely challenge each other's eligibility, which is a recurring source of litigation and delay. The safe sequence for any bidder: run the eligibility test across your entire connected-person web first, then diligence the asset. The reverse order wastes the diligence spend.
Common questions
Can a promoter ever buy back their own company?
Two lawful routes exist: the MSME exemption 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 exactly 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.
This page is general information, not legal advice. Section 29A is heavily litigated and amended; the statutory text and current case law govern. Nothing here is an opinion on any person’s eligibility. See also
the glossary and
the acquisition playbook →