bankruptcy law
Major changes are likely to take place in the country’s Insolvency and Bankruptcy Code (IBC) during this winter session. Many reforms have been made in IBC since its implementation in 2016, but the IBC Amendment Bill 2025 is considered to be the most important amendment so far. Industry and legal experts say that this change can prove to be important in implementing Ease of Doing Business. Especially because of the provisions related to Section 29A.
What is Section 29A and where is the dispute?
Section 29A of the IBA decides which person or entity can participate in the bidding process for an insolvent company. Under this rule, the promoters of the company and their blood relatives have been barred from bidding. So that they cannot directly or indirectly regain control over the company. But the industry says that this rule is extremely broad. Many times, such relatives also get trapped in this rule who do not have any transaction, investment or management relationship with the company, they only have family relationship.
Industry’s opinion – business links, not kinship, should matter.
Many industry bodies and legal experts believe that Section 29A should now be reformed. G.P., Managing Partner of Madan Law Offices. Madan says, the definition of related party in IBC is very broad. It is not right to keep someone out of the bidding process just because of family ties. The real investigation should be whether he has a financial relationship with the company or not.
For the first time the suggestions before the Select Committee were so clear.
The IBC Amendment Bill is currently being examined by the Parliamentary Select Committee headed by Baijayant Panda. Stakeholders have given suggestions to the committee that. The definition of blood relation part should be changed and the meaning of related party should be limited to business relation only. The bid should be stopped only when a direct link of the promoter is found in the bidder’s fund.
Corporate expert Pawan Vijay says IBC disputes often involve family differences. In such a situation, stopping someone on the basis of mere kinship without any business link weakens the resolution process.
Supreme Court also has the same stance
In an earlier decision, the Supreme Court had also clearly said that the identity of the related party will be decided by business relationship and not just by family relationship. Therefore, if the government makes changes in Section 29A, then this decision will also be considered strong from the judicial point of view.
What will change if the amendment passes?
- Relatives of many big companies will also be able to bid in IBC cases.
- Number of bidders will increase, competition will intensify
- Resolution process will be fast and effective
- Ease of Doing Business will get a big boost
6 major amendments in IBC till now
IBC has been changed six times since 2016. The aim of every change has been to make the bankruptcy process transparent and faster. But the blood relation part of Section 29A is now being considered outdated according to the new business environment.