CIIRP, Section 29A and the Eligibility Paradox under the IBC (Amendment) Act, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘Amendment Act’) received Presidential assent on 6 April 2026. It introduces the most structurally significant change to India’s insolvency framework since the Insolvency and Bankruptcy Code, 2016 (‘Code’) was enacted. Its centrepiece is the Creditor-Initiated Insolvency Resolution Process (‘CIIRP’), a new resolution track under Chapter IV-A (Sections 58A to 58K) that allows specified financial creditors holding at least fifty-one percent of the financial debt by value to commence insolvency proceedings while existing management remains in possession of the corporate debtor, subject to the oversight of a resolution professional (‘RP’). CIIRP has been celebrated as India’s first genuine debtor-in-possession mechanism, drawing comparisons to Chapter 11 of the United States Bankruptcy Code. This piece examines a question that the Amendment Act, as enacted, does not squarely answer: what happens to the eligibility of incumbent promoters and management under Section 29A of the Code when a CIIRP that has kept them in possession converts into a regular Corporate Insolvency Resolution Process (‘CIRP’)?

CIIRP: A Creditor-Led, not Fully Out-of-Court, Track

CIIRP is sometimes described as a process that can be initiated without any petition before the National Company Law Tribunal (‘NCLT/tribunal’), and is therefore called an 'out-of-court' process. This is only partially correct; although CIIRP can be initiated without a petition, the RP must apply to the NCLT for a moratorium, which takes effect only on the tribunal's order and the process can be converted into a complete CIRP by the NCLT order. CIIRP is better described as a creditor-led process with limited, but not absent, NCLT involvement at its edges.

During CIIRP, the existing board or partners of the corporate debtor continue to manage its affairs, but not unsupervised. Section 58F(2) of the Code entitles the RP to attend every meeting of the members, board of directors or partners, and to reject any resolution passed at such a meeting; once rejected, that resolution cannot be approved. The process is time-bound to one hundred and fifty days under Section 58D, extendable once by forty-five days. Where no resolution plan is approved within that period, or the corporate debtor or its personnel fail to cooperate with the RP, or the resolution plan is itself rejected, Section 58H obliges the NCLT to convert the CIIRP into an ordinary CIRP. So, for up to one hundred and ninety-five days, incumbent management remains in effective control of the company, talking to creditors, renegotiating debt and, perhaps, participating in the design of the resolution plan that may come to fruition.

Section 29A and the Premise of Discontinuity

Section 29A was inserted with retrospective effect from 23 November 2017, formalised by the Amendment Act, 2018, following the controversy surrounding the resolution proceedings of Essar Steel India Limited and Bhushan Steel Limited, where erstwhile promoters sought to regain control of the very companies whose default had triggered insolvency. Section 29A does not disqualify every promoter or every member of incumbent management as a class. In general terms, Section 29A bars nine specified categories of persons, and those connected to them, from submitting a resolution plan: undischarged insolvents; wilful defaulters; persons whose accounts, or the accounts of entities they control, have been classified as non-performing for at least one year and remain unpaid when the plan is submitted; persons convicted of specified offences; disqualified directors; persons prohibited by the Securities and Exchange Board of India from accessing the securities market; persons implicated in a preferential, undervalued, extortionate or fraudulent transaction; guarantors whose invoked guarantee remains unpaid; and persons subject to an equivalent disability under foreign law, in each case subject to limited statutory exceptions. For incumbent promoters and management specifically, the provision that matters most is Section 29A(c), the non-performing-asset category just described. A promoter with no disqualifying non-performing asset, no wilful-default finding and no relevant connected-person or related-party problem is not disqualified merely because he or she happened to be a promoter.

In ArcelorMittal India Private Limited v. Satish Kumar Gupta, the Supreme Court explained that the provision exists to prevent those responsible for a company’s descent into insolvency from re-entering through the resolution process without consequence, and to ensure that the persons who take over a distressed company are not connected with the persons who brought it to that state. The provision rests on a premise of discontinuity: insolvency is meant to be the moment at which control changes hands.

The Conversion Puzzle: Where Section 29A falls Silent

CIIRP undermines this premise of discontinuity, because incumbent management remains in effective control of the corporate debtor throughout the CIIRP period rather than being displaced by a resolution professional exercising independent control. Section 58K applies the provisions of Sections 21, 24, 25A, 26, 27, 28, 28A, 29, 32, 32A and 43 to 51, and also Chapters VI and VII of Part II of the Code to CIIRP proceedings in the same manner as they apply to ordinary CIRP proceedings (applied mutatis mutandis). That does not include Section 29A. This silence could be interpreted as an indication that the role of Section 29A would not be relevant in the life of a corporate debtor within CIIRP. That is not a straightforward inference to draw: Section 58E(1)(c) expressly requires the RP to certify compliance with Section 29A (applied mutatis mutandis to the CIIRP) before making an application for the resolution plan to be approved. There is no need to make a separate listing in Section 58K. Its absence from Section 58K's list reflects an intentional choice to avoid a redundant cross-reference, given that Section 58E(1)(c) already requires it, not substantive exclusion.

What happens on conversion is harder to settle. Where the NCLT orders a CIIRP's conversion into a CIRP under Section 58H, that order is treated as an order of admission under Section 7 of the Code and the process of resolution is conducted in the regular manner under Chapter II of the Code. From then on, Section 29A applies not merely because of the conversion itself, but because the resolution plan must satisfy Section 29A like any other resolution plan filed in an ordinary CIRP. For the incumbent management that was “in possession” during the CIIRP, this cuts two ways, and neither is entirely comfortable.

Reading One: Full-Force Application, Correctly Qualified

The first reading extends the logic of ArcelorMittal to incumbent management with even greater force: a conversion triggers ordinary Section 29A scrutiny of the persons in management or control of the corporate debtor at the time of conversion. In any case, disqualification would depend on whether the person meets a specific disqualification criterion under Section 29A, such as a non-performing asset or a wilful-default finding, which may arise from conduct that predates the CIIRP rather than from how the company was managed during it.

Even on this qualified basis, the reading leaves a one-way filter that has real incentive consequences for creditors. If there is any such group of financial creditors, then they take the risk that their own natural, best-informed counterparty (the promoter group) will not be allowed to bid in any CIRP proceeding, since by definition, they have been in possession or management during the CIIRP proceeding. This automatic exposure on conversion exists somewhat awkwardly parallel to the stated purpose of the Select Committee, which recommends CIIRP for “genuine business failures”.

It also establishes something of an asymmetry to note. A creditor group that skips CIIRP and goes directly to CIRP has a pre-filing scenario to conduct evaluation of promoter group's conduct which is to be done based on ordinary Section 29A records. A creditor group that first attempts CIIRP generates a materially thicker record on the same underlying facts: board participation, RP-supervised decisions and information-memorandum disclosures. This does not change what the provision tests for, but it does mean that the choice of forum can affect how much evidence exists to support, or contest, a Section 29A objection against the same group.

Reading Two: CIIRP as a Statutory Safe Harbour

The second reading treats possession during CIIRP as fundamentally different from the unsupervised possession that Section 29A was designed to police, because Section 58F(2) subjects every board decision to the RP's oversight and veto. On this view, conduct during the CIIRP period should not, by itself, found a disqualification on conversion, since that conduct was never truly unsupervised in the way Section 29A contemplates. The safe-harbour logic also sits more easily with management than with promoters as such: Section 58F(2)'s veto reaches board decisions, but a promoter who holds no board seat and merely directs the board informally is not obviously brought within that supervised space, so identical conduct could be treated differently depending on whether it is attributed to the board or to the promoter standing behind it. This reading preserves CIIRP's stated collaborative purpose, but it creates its own detour: a promoter group facing an eventual CIRP could, in principle, prefer to let a CIIRP fail, secure in the knowledge that its CIIRP-period conduct will not itself found a disqualification on conversion, while using that period to restructure related-party arrangements in its own favour.

The Regulatory Gap and Three Suggested Safeguards

No regulations have yet been issued, and there has been no notification of eligible classes of financial creditors or corporate debtors, though the Insolvency and Bankruptcy Board of India released a discussion paper on the CIIRP Regulations on 15 April 2026. These regulations remain the most direct, if not the only, route to clarify how Chapter IV-A, Section 29A and the avoidance provisions interact before the first CIIRP conversion reaches the NCLT.

Three clarifications would help. First, the regulations should confirm the central argument of this piece: that mere participation by incumbent management in a CIIRP does not, by itself, lead to disqualification on conversion; that turns on conduct independent of the CIIRP, such as a qualifying NPA or a wilful-default finding. Second, they should clarify how continuing avoidance proceedings during this extended look-back period interact with the clean-slate protection a successful resolution applicant otherwise receives, so that creditors and resolution applicants are not left to infer the answer from silence. Third, they should specify what the RP's Section 29A certification duty under Section 58E(1)(c) requires on conversion: whether it must be repeated afresh against the persons in control at the point of conversion, or whether the CIIRP-stage certification continues to hold good, since the Act is silent on which.

Conclusion

In the meantime, financial creditors who are considering CIIRP are left with an uncertainty which is more structural than it seems. The choice to litigate the cooperative, debtor-in-possession route that Parliament has just provided comes with an implicit price. Either the incumbent promoter group's Section 29A exposure will be different, and quite possibly worse documented, than if the CIRP had been filed directly, or the avoidance regime's interaction with the clean-slate principle will remain untested at the very time CIIRP was conceived to be used. Resolving that uncertainty does not require reopening Chapter IV-A. Sections 58E, 58F(2), 58H and 58K already supply most of the necessary architecture; what remains is for the CIIRP Regulations, and in time, the judicial interpretation, to state plainly how that architecture operates when a CIIRP fails.

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This article has been authored by Tanishka Mishra and Tanay Salwe, students at Gujarat National Law University, Gandhinagar. This blog is part of RSRR's Rolling Blog Series.