Section 29A ineligibility blocks ex-directors from using Section 230 compromise proceedings to regain corporate debtor control.

Ex-directors and promoters ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 cannot use Section 230 of the Companies Act, 2013 during liquidation to regain control of the corporate debtor through a compromise or arrangement. The tribunal applied the bar on ineligible resolution applicants and noted that Section 35(f) also prevents sale of assets to a person not eligible to be a resolution applicant. The claimed MSME status was rejected because the certificate was obtained after commencement of CIRP and the circumstances indicated an attempt to obtain a backdoor entry to the debtor's assets. The proposed compromise and arrangement was therefore rejected, and the liquidator was not required to proceed with creditor meeting steps.

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Issues: Whether ex-directors and promoters, being ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016, could propose a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013 during liquidation, and whether the claim of MSME status could override that ineligibility.

Analysis: The scheme placed before the Liquidator was submitted by the ex-directors and promoters of the corporate debtor. The governing position applied was that liquidation does not permit the corporate debtor to be restored through a compromise or arrangement at the instance of persons who are ineligible to act as resolution applicants. The prohibition in Section 35(f) of the Insolvency and Bankruptcy Code, 2016 also barred sale of the corporate debtor's assets to a person not eligible to be a resolution applicant. The asserted MSME status was not accepted, as the certificate relied upon was obtained after commencement of CIRP and the surrounding circumstances showed that the plea was being used to secure a backdoor entry to the debtor's assets.

Conclusion: The ex-directors and promoters were held not entitled to file or pursue a scheme under Section 230 of the Companies Act, 2013 because of their ineligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016, and the MSME plea did not save the application.

Final Conclusion: The proposed compromise and arrangement was rejected, and the liquidator was not required to proceed with a creditor meeting or other steps on that basis.

Ratio Decidendi: A person ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 cannot, during liquidation, use Section 230 of the Companies Act, 2013 to regain control of the corporate debtor's assets through a compromise or arrangement.

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