Section 29A: promoter, PE fund and a cured NPA
Nova Retail Ltd, a listed company, entered CIRP on 1 May 2025. Three resolution applicants emerge. Applicant A is the existing promoter, Ravi Menon, acting through the Menon Family Trust. His personal loan account with a bank has been classified NPA for 16 months as on the CIRP date; he also guaranteed a group company’s loan that is NPA. Applicant B is Aster PE Fund, which holds 26% of Delta Finance Ltd, whose account has been NPA for 22 months. Aster has one board nominee in Delta but no right to appoint the majority or veto board decisions. Applicant C is a strategic buyer whose subsidiary’s account was classified NPA 14 months ago and was upgraded after full payment two weeks before the CIRP date. The RP must decide which applicants are eligible under section 29A. Applicant A offers to pay all overdue amounts before submitting its plan.
1. Assess each applicant’s eligibility under section 29A. Does A’s offer to pay overdue amounts cure everything?
Read the worked answer
Applicant A is ineligible. As promoter, A is a related party of the corporate debtor, attracting section 29A(i). The offer to pay overdue amounts may cure the section 29A(c) NPA disability under the proviso, but it does not cure 29A(i). Applicant B is eligible: Aster is not a promoter of Delta and, on the facts, 26% plus one board nominee without majority appointment or veto does not amount to control under section 2(27) of the Companies Act, 2013. Delta’s NPA is therefore not an account of a corporate debtor under Aster’s management or control. Applicant C is eligible if it has paid all overdue amounts with interest and charges before submitting its plan: the proviso to section 29A(c) is satisfied even though the account had been NPA for 14 months. The RP must verify the payment covers all overdue amounts, not merely principal.
2. What difference would it make if Aster had a veto over Delta’s annual budget and the right to appoint two of five directors?
Read the worked answer
If Aster had a veto over Delta’s annual budget and the right to appoint two of five directors, the answer changes. Those rights can amount to control over Delta’s management or policy decisions under section 2(27). Delta’s NPA would then be an account of a corporate debtor under Aster’s control, and section 29A(c) would bar Aster because the account has been NPA for more than one year and no payment cure is stated. The RP should look at the shareholders’ agreement and board rights, not only the 26% shareholding.
3. Can the RP reject A at the threshold, or must the CoC decide?
Read the worked answer
The RP must apply section 29A when the plan is submitted; the CoC cannot waive a statutory ineligibility. If A is ineligible, its plan cannot be put to vote. The RP should record the verification and, if necessary, seek legal advice. A contrary view would allow a related party to regain control contrary to the Code’s scheme.