Tribunal confirms wilful defaulter ineligible under Section 29A IBC; revised resolution plan treated as fresh submission

The appellate tribunal upheld the impugned order and rejected the appeals as devoid of merit. It held that the eligibility criteria under section 29A of the IBC, as incorporated in the RFRP, had to be satisfied at three stages: submission of the resolution plan, consideration by CoC, and approval by the Adjudicating Authority. Since the resolution applicant had been declared a wilful defaulter before submission of the plan, it was ineligible under section 29A on the filing date. The revised plan was treated as a fresh plan, and the tribunal noted it could be considered afresh by the CoC along with other eligible plans, causing no prejudice to stakeholders.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the resolution applicant's eligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016 must subsist only on the date of the first submission of a resolution plan, or at all three stages - submission, consideration by the Committee of Creditors, and approval by the Adjudicating Authority - in light of Clause 1.15 of the Request for Resolution Plan (RFRP) and Regulation 39 of the CIRP Regulations.

1.2 Whether the subsequent plans submitted on 11.11.2022 and 20.01.2023 by the resolution applicant were merely "revised" plans relatable to the original plan dated 21.01.2021 or were, in substance, fresh plans attracting a fresh and continuing obligation of eligibility and disclosure under Section 29A and the RFRP.

1.3 Whether, in view of Clause 1.15 of the RFRP, Regulation 39, and the applicant's own affidavit and undertakings, the failure to file fresh affidavits of eligibility under Section 29A with each subsequent plan, coupled with the applicant's status as a wilful defaulter as on 30.10.2022, rendered the plans non-compliant and ineligible for consideration and approval.

1.4 Whether, in the absence of any challenge to the RFRP conditions and in light of the applicant's express unconditional acceptance of those conditions, the applicant could subsequently contend that Section 29A eligibility was relevant only at the initial plan-submission stage.

1.5 Whether, having regard to subsequent issuance of a fresh Form G, fresh EoIs, and the applicant's participation in the fresh process with a new plan, the appeals warranted interference with the impugned order rejecting the earlier plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Continuity of eligibility under Section 29A at all three stages

Legal framework

2.1 The Court examined Section 29A of the Code, particularly clause (b) which renders a "wilful defaulter" ineligible to be a resolution applicant. It also considered Section 30(2) and (3) (duty of the resolution professional to present only plans compliant with law), Regulation 39(1)(a) (mandating an affidavit of Section 29A eligibility along with the resolution plan), and Regulation 39(1B)(c) (CoC not to consider non-compliant plans).

2.2 Clause 1.15 of the RFRP was reproduced and emphasised. It expressly provided that the resolution applicant "has to be eligible under section 29A of the IBC ... as on the date of submission of the Resolution Plan, consideration of its Resolution Plan by the CoC and its sanction by the Adjudicating Authority" and that each applicant "shall" submit an affidavit of eligibility under Section 29A along with the resolution plan.

Interpretation and reasoning

2.3 The Court held that, by virtue of Clause 1.15, all prospective resolution applicants, including the appellant, were required to remain eligible under Section 29A at three distinct stages: (a) date of submission of the plan; (b) date of consideration by the CoC; and (c) date of sanction by the Adjudicating Authority.

2.4 The obligation to submit an affidavit under Section 29A with the plan was characterised as mandatory, both under Regulation 39(1)(a) and Clause 1.15 of the RFRP. The word "shall" in Clause 1.15 was noted as indicative of compulsion, not discretion.

2.5 The undertaking/affidavit filed by the appellant on 30.11.2020 was specifically considered. In it, the appellant unconditionally (i) accepted the terms of the RFRP, (ii) undertook to disclose any subsequent change that rendered him ineligible under Section 29A at any stage of the process, and (iii) agreed to forthwith inform the resolution professional and CoC if he became ineligible before approval of his plan.

2.6 The Court found that the appellant's own affidavit clearly recognised and accepted a continuing obligation of eligibility under Section 29A, extending beyond the initial submission date, and encompassing later stages up to approval.

Conclusions

2.7 The Court concluded that eligibility under Section 29A was required at all three stages: submission, consideration, and sanction of the resolution plan, in accordance with Clause 1.15 of the RFRP, Regulation 39, and the appellant's own undertaking.

2.8 The appellant could not limit the applicability of Section 29A to the date of initial submission only and could not avoid the continuing eligibility requirement that he had expressly accepted.

Issue 2 - Nature of subsequent plans (revised vs fresh) and impact of wilful defaulter status

Legal framework

2.9 The Court referred to the chronology of events: initial plan dated 21.01.2021; declaration of the appellant as wilful defaulter by Indiabulls Housing Finance Limited on 30.10.2022; submission of a new/revised plan on 11.11.2022; and final plan on 20.01.2023.

2.10 It also relied on Regulation 36B (regulating contents and procedure of RFRP) and Regulation 39 (submission of plan with affidavit of Section 29A eligibility), along with Clause 1.15 of the RFRP.

Interpretation and reasoning

2.11 The appellant argued that the plans of 11.11.2022 and 20.01.2023 were only "revised plans" emanating from the original plan dated 21.01.2021, and therefore his eligibility ought to be tested only as of 21.01.2021, when he was not a wilful defaulter.

2.12 The Court noted the factual position that the plan dated 21.01.2021 was neither deliberated upon nor put to vote in any CoC meeting. It had not been considered or approved, and no Section 29A eligibility verification was carried out at that stage.

2.13 Owing to lapse of time, cost escalations, change in claims, and other material changes, the CoC resolved in its 11th meeting (01.10.2022) to invite revised plans. The plans filed on 11.11.2022 in sealed cover were opened only in the 13th CoC meeting (17.12.2022), with a clear statement that eligibility under Section 29A and compliance with the Code would be examined before placing them for voting.

2.14 On these facts, the Court treated the plan dated 11.11.2022 as, in substance, a new or fresh plan for the purposes of Section 29A and the RFRP, independent of the earlier unconsidered plan of 21.01.2021.

2.15 By 30.10.2022, i.e., prior to submission of the 11.11.2022 plan, the appellant had already been declared a wilful defaulter. Therefore, as on the date of submission of the 11.11.2022 plan, and on the subsequent date of the final plan (20.01.2023), the appellant did not satisfy Section 29A(b).

2.16 The Court rejected the plea that lack of knowledge about being declared a wilful defaulter or subsequent repayment could insulate the appellant from ineligibility under Section 29A, particularly in view of the RBI-guideline-based statutory regime and the appellant's own undertaking to disclose any event making him ineligible.

Conclusions

2.17 The plan dated 11.11.2022 (and the final plan of 20.01.2023) could not be automatically tied to the original plan of 21.01.2021 to freeze the relevant date of eligibility; the 11.11.2022 plan was, in effect, a fresh plan subject to full Section 29A scrutiny at that time.

2.18 Since the appellant had been declared a wilful defaulter on 30.10.2022, he was ineligible under Section 29A(b) on the date of submission and subsequent consideration of the 11.11.2022 and 20.01.2023 plans. Accordingly, he was not eligible to be a resolution applicant for those plans.

Issue 3 - Non-filing of fresh Section 29A affidavits with subsequent plans and validity of the CoC-approved plan

Legal framework

2.19 Regulation 39(1)(a) requires that each prospective resolution applicant "submit resolution plan ... along with (a) an affidavit stating that it is eligible under section 29A".

2.20 Clause 1.15 of the RFRP reiterates that each resolution applicant "is required to submit an Affidavit of eligibility under 29A of IBC ... along with the Resolution Plan."

2.21 Section 30(2) and (3) obligate the resolution professional to place before the CoC only such plans as comply with the Code and applicable regulations, and Regulation 39(1B)(c) directs the CoC not to consider non-compliant plans.

Interpretation and reasoning

2.22 The Court recorded that the only Section 29A affidavit filed by the appellant was dated 30.11.2020, i.e., before submission of the first plan on 21.01.2021. No fresh affidavit of eligibility was filed with the subsequent plans dated 11.11.2022 and 20.01.2023.

2.23 Thus, the mandatory requirement under Regulation 39(1)(a) and Clause 1.15 - to submit an affidavit of eligibility "along with the resolution plan" - was not complied with in respect of any of the later plans.

2.24 The Court held that it was the duty of the erstwhile resolution professional, under Regulation 36A(8), Section 30(2) and (3), and the RFRP clauses, to conduct due diligence regarding Section 29A and to ensure that only compliant plans reached the CoC. The erstwhile resolution professional failed to perform this obligation adequately.

2.25 The Court accepted that a pure question of law relating to ineligibility under Section 29A can be raised at any stage of proceedings, without the need to plead new facts, and that such ineligibility, once established, bars approval of the plan irrespective of the stage it has reached.

Conclusions

2.26 The absence of fresh Section 29A affidavits accompanying the plans dated 11.11.2022 and 20.01.2023, combined with the appellant's wilful defaulter status as of 30.10.2022, rendered those plans non-compliant with Regulation 39 and Clause 1.15 of the RFRP.

2.27 A resolution plan submitted by an ineligible person cannot be approved, irrespective of CoC approval, and in light of the statutory mandate the Adjudicating Authority correctly rejected the CoC-approved plan.

Issue 4 - Effect of unconditional acceptance of RFRP and subsequent challenge to its conditions

Legal framework

2.28 The Court considered the appellant's affidavit/undertaking under the RFRP, wherein he gave "unconditional acceptance of the terms and conditions of the RFRP" and undertook to submit plans strictly as per the prescribed forms "without any deviations or conditions."

2.29 The Court referred to precedent holding that where RFRP terms are not challenged, their binding effect is enforced, and non-challenge can be fatal to a resolution applicant's case.

Interpretation and reasoning

2.30 It was noted that Clause 1.15 of the RFRP, mandating eligibility at all three stages and submission of Section 29A affidavits, was never challenged before the Adjudicating Authority or otherwise.

2.31 On a pointed query, the appellant conceded that he had not challenged Clause 1.15 at any stage. Instead, by his affidavit dated 30.11.2020, he had unequivocally accepted the RFRP terms, including Clause 1.15, and specifically undertook to disclose any subsequent ineligibility under Section 29A.

2.32 The Court applied the principle that where an applicant participates in a process on the basis of prescribed terms and conditions, accepts them unconditionally, and does not challenge them in time, he is estopped from later seeking to resile from or contradict those terms to avoid consequences of non-compliance.

Conclusions

2.33 Having unconditionally accepted Clause 1.15 and undertaken to abide by it, the appellant could not later assert that Section 29A eligibility was relevant only at the initial plan submission stage or that the subsequent ineligibility should be ignored.

2.34 The absence of any challenge to the RFRP and the appellant's affirmative acceptance of its terms were held to be fatal to his attempt to dilute or re-interpret the eligibility requirements.

Issue 5 - Subsequent process (fresh Form G, new plan) and necessity of interference with the impugned order

Legal framework

2.35 The Court noted subsequent developments: rejection of the earlier plan by the Adjudicating Authority; extension of CIRP; issuing of fresh Form G; receipt of new EoIs; reconstitution and functioning of the CoC; and submission of a new plan by the appellant after due diligence declared him eligible under Section 29A.

Interpretation and reasoning

2.36 The current resolution professional (Respondent No. 2) pointed out that a fresh Form G was published on 22.10.2024; twelve EoIs were received, eleven applicants were found eligible; and the appellant again participated, submitted his EoI (31.10.2024), was freshly found eligible under Section 29A, and submitted a new resolution plan dated 17.03.2025.

2.37 The appellant also requested that earlier EMDs be adjusted towards the EMD for the new plan, evidencing that he had effectively shifted to the new bidding round, thereby treating the earlier plan as abandoned in practice.

2.38 On these facts, it was observed that the plan under challenge effectively stood superseded/withdrawn by the appellant's own conduct in participating in the fresh process after curing earlier ineligibility.

Conclusions

2.39 The Court held that no prejudice would be caused to the appellant or any stakeholder by allowing the resolution process to proceed on the basis of the fresh Form G and the new round of plans, in which the appellant has already participated.

2.40 Coupled with the substantive ineligibility under Section 29A for the earlier plan, the subsequent developments reinforced the conclusion that there was no ground to interfere with the impugned order rejecting that plan.

Overall Conclusion

2.41 The Court held that the resolution applicant was required to be, and was not, eligible under Section 29A at the relevant later stages; that he failed to comply with the mandatory affidavit and disclosure requirements under Regulation 39 and Clause 1.15 of the RFRP; that he could not resile from the RFRP conditions he had unconditionally accepted; and that, in any event, the subsequent fresh bidding process in which he participated negated any basis for interfering with the impugned order.

2.42 The impugned order rejecting the CoC-approved plan and directing continuation of CIRP was found to be legally correct and free from error. The appeals were dismissed as devoid of merit, with no order as to costs.

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