IBBI Issues New Directive to Strengthen Section 29A Due Diligence: Resolution Professionals Now Required to Place Mandatory Eligibility Note Before CoC

In a significant regulatory intervention aimed at reinforcing the transparency and integrity of India’s insolvency resolution ecosystem, the Insolvency and Bankruptcy Board of India (IBBI) has issued a detailed circular dated 18 November 2025, calling for strengthened due diligence procedures under Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC). The circular mandates Resolution Professionals (RPs) to adopt a more rigorous and documented approach toward verifying the eligibility of prospective resolution applicants, ensuring that the Corporate Insolvency Resolution Process (CIRP) remains insulated from individuals or entities who are legally disqualified from regaining control of defaulting businesses.

Section 29A has long stood as one of the most critical safeguards within the IBC framework. Introduced to prevent wilful defaulters, tainted promoters, and persons with adverse financial or criminal histories from misusing the resolution mechanism, it sets out a comprehensive list of disqualifications that bar certain persons from submitting resolution plans. Over the years, judicial precedent has repeatedly underscored the importance of ensuring strict compliance with these exclusionary conditions, as the consequences of accepting an ineligible resolution applicant can be severe and far-reaching, often derailing the resolution process altogether.

Recognising the centrality of Section 29A to a fair, credible, and legally defensible resolution outcome, the IBBI noted that multiple layers of statutory and regulatory checks are already embedded in the CIRP framework. These checks require both RPs and prospective resolution applicants (PRAs) to declare, verify, and certify eligibility at various stages. For instance, Regulation 36A(4) requires that the ineligibility criteria under Section 29A be explicitly mentioned in Form G—the public announcement inviting Expressions of Interest. Regulation 36A(7) mandates the PRA to submit an undertaking confirming that it is not ineligible, while Section 30 read with Regulation 39 requires a formal affidavit of eligibility to accompany every resolution plan submitted.

Further, Regulation 36A(8) places substantive responsibility on the RP to conduct due diligence to verify that every PRA complies with the statutory criteria. The RP must also confirm the accuracy of such due diligence in the Compliance Certificate (Form H), supported by a separate Due Diligence Certificate.

However, the IBBI observed that despite these frameworks, the documentation and transparency surrounding Section 29A verification were often insufficient, leading to post-approval litigation where objections were raised regarding the eligibility of resolution applicants. Such challenges frequently resulted in delays, uncertainty, or even invalidation of approved resolution plans—outcomes that undermine the stability and predictability of the insolvency ecosystem.

To address these gaps, the Board has now introduced an important procedural safeguard. The circular directs all Resolution Professionals to prepare and place a comprehensive note on Section 29A compliance before the Committee of Creditors (CoC) whenever resolution plans are being evaluated. This note must clearly outline the due diligence steps undertaken, supporting documents verified, and the findings arrived at. Just as crucially, the CoC’s discussions, concerns, and observations on eligibility must be clearly recorded in the minutes, creating a formal record that the decision-makers have consciously applied their minds to this critical legal requirement.

This shift from implicit compliance to explicit and thoroughly documented scrutiny reflects the regulator’s aim to reduce ambiguity and enhance accountability at every stage of the CIRP. By requiring a written diligence note and formal CoC deliberation, the IBBI seeks to ensure that any future challenge regarding the eligibility of a resolution applicant can be promptly addressed with a clear and contemporaneous documentary trail.

The circular has been issued under the authority of Section 196 of the IBC, which empowers the Board to issue guidelines and directions to safeguard the integrity of the insolvency resolution framework. It reinforces the message that the CIRP must be conducted not only with procedural correctness but also with heightened transparency, diligence, and prudence in matters that lie at the heart of the Code’s objectives.

In practical terms, the circular is expected to elevate the standards of diligence performed by Resolution Professionals. It will also likely encourage greater caution and preparedness among prospective resolution applicants, who must now anticipate deeper scrutiny and more structured evaluation of their eligibility. For the Committee of Creditors, the directive ensures that its decision-making process, especially with respect to selecting a resolution plan, rests on a more robust and defensible foundation.

With this development, the IBBI has underscored its continuing commitment to strengthening governance in the insolvency landscape. By prioritising transparency, thoroughness, and statutory compliance in Section 29A verification, the Board aims to build greater confidence in the resolution process and reduce the risk of avoidable disputes that often arise at later stages. The circular represents another decisive step in advancing a resolution regime that is not only technically sound but also fair, credible, and legally resilient.