In Brief
The Supreme Court held that persons ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 (including promoters responsible for corporate defaults) cannot propose a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 during liquidation proceedings under the IBC. The Court found that such schemes during IBC liquidation are facets of the liquidation process and must comply with the Code's prohibition on ineligible persons controlling corporate debtors. This principle protects the debtor from its management and prevents circumvention of the IBC's revival process. The Court rejected contentions that the ineligibility applies only to resolution plans, not to compromise schemes, and upheld Regulation 2B of the Liquidation Process Regulations as clarificatory. Appeals dismissing ineligible promoters' compromise schemes were upheld.
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