Section 29A ineligibility bars promoters from using Section 230 compromise schemes during liquidation to regain control of the debtor.

A person disqualified under Section 29A of the Insolvency and Bankruptcy Code, 2016 cannot, during liquidation, use a compromise or arrangement under Section 230 of the Companies Act, 2013 to regain control of the corporate debtor or benefit from its assets. The liquidator is the proper statutory conduit for any such proposal, and a scheme moved by promoters or ex-directors behind the liquidator's back is not sustainable. MSME registration obtained without the liquidator's involvement did not cure the ineligibility or create any enforceable right to pursue the scheme.

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Issues: (i) whether a promoter or ex-director who is ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 can propose a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013 during liquidation; (ii) whether the compromise proposal submitted without the liquidator's involvement and the MSME registration obtained by the promoters could be acted upon.

Issue (i): whether a promoter or ex-director who is ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 can propose a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013 during liquidation.

Analysis: The liquidation order had already been passed, and the scheme was proposed by the ex-directors/promoters after the commencement of liquidation. The legal position applied was that Section 29A disqualifies ineligible persons from participating in a process that would allow them to regain control of the corporate debtor through a compromise or arrangement. The liquidator's duties under Sections 34 and 35 of the Insolvency and Bankruptcy Code, 2016 and Regulation 2B(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 were treated as governing the process, and the subsequent amendment and regulatory proviso reinforced the ineligibility of such persons to be party to the scheme.

Conclusion: The scheme proponent was ineligible, and the proposed compromise and arrangement under Section 230 could not be maintained by the promoters.

Issue (ii): whether the compromise proposal submitted without the liquidator's involvement and the MSME registration obtained by the promoters could be acted upon.

Analysis: The Tribunal treated the liquidator as the proper statutory conduit for any proposal under Section 230 and held that actions taken by the promoters behind the liquidator's back were not sustainable. The MSME registration obtained without the liquidator's knowledge was also treated as legally ineffective in the context of the liquidation process. The requirement of an affidavit regarding eligibility under Section 29A was upheld as part of the procedure directed by the adjudicating authority.

Conclusion: The proposal and the MSME registration did not confer any right on the promoters to pursue the scheme.

Final Conclusion: The appeal failed because the proposed scheme by ineligible promoters could not displace the statutory consequences of liquidation and the disqualification under Section 29A.

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

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