Section 29A(f) IBC | SEBI Delisting Order Bars Resolution Applicant Even During Moratorium as Ineligibility Ground : NCLAT

The National Company Law Appellate Tribunal has clarified that a promoter barred from accessing securities markets by a SEBI delisting order remains ineligible to submit a resolution plan under Section 29A(f) of the Insolvency and Bankruptcy Code, even if the corporate debtor is under moratorium. This ruling reinforces the principle that statutory disqualifications imposed by regulatory authorities are binding on insolvency proceedings without requiring re-adjudication by the Adjudicating Authority.

Background & Facts

The Dispute

The appellant, Carnet Elias Fernandes, a suspended director of the corporate debtor GEI Industries Systems Ltd. (CD), sought permission to submit a resolution plan during its Corporate Insolvency Resolution Process (CIRP). The Resolution Professional (RP) declared him ineligible under Section 29A(e) and 29A(f) of the IBC, citing his deactivated Director Identification Number (DIN) and a SEBI order prohibiting him from accessing securities markets. The Adjudicating Authority (NCLT, Indore) upheld this ineligibility. The appellant challenged this order before the NCLAT.

Key Facts

• The CD was admitted into CIRP on 22.01.2025 by order of the NCLT.
• The RP issued Form-G on 21.03.2025 inviting Expression of Interest (EoI); the last date for submission was 20.04.2025.
• The appellant did not submit any EoI by the deadline.
• On 16.05.2025, the Committee of Creditors (CoC) approved the appellant’s request to submit a resolution plan, subject to NCLT approval.
• The RP filed IA No.237/2025 seeking such approval, which was dismissed as withdrawn on 06.06.2025.
• The RP obtained an eligibility report from M/s Ujjawal Gupta & Company on 11.06.2025, concluding the appellant was ineligible under Section 29A(e) and 29A(f).
• The appellant’s DIN was reactivated on 19.06.2025.
• On 11.06.2025, the RP emailed the appellant informing him of ineligibility based on:
  • Deactivated DIN (Section 29A(e))
  • SEBI Circular No. CIR/CFD/CMD/12/2015 and NSE communication indicating frozen accounts (Section 29A(f))
• The appellant filed IA No.305/2025 on 12.06.2025 seeking to set aside the RP’s letter and direct the CoC and RP to consider his plan.
• The appellant submitted the SEBI order dated 26.06.2018, which compulsorily delisted GEI Industrial Systems Ltd. (GEISL), his promoter company, and barred him and other promoters from accessing securities markets for ten years under Regulation 24 of the Delisting Regulations, 2009.
• The appellant argued that the 26.06.2018 order was passed during a moratorium on GEISL (CIRP commenced 20.07.2017), and therefore should be ignored.

Procedural History

• 22.01.2025: NCLT admitted CIRP against GEI Industries Systems Ltd. (CP(IB)/49(MP)2024)
• 21.03.2025: RP issued Form-G inviting EoI
• 20.04.2025: Deadline for EoI submission
• 15.05.2025: Final list of PRAs published; appellant not included
• 16.05.2025: CoC approved appellant’s proposal to submit resolution plan, subject to NCLT approval
• 06.06.2025: NCLT dismissed IA No.237/2025 as withdrawn
• 11.06.2025: RP sent ineligibility letter to appellant
• 12.06.2025: Appellant filed IA No.305/2025 before NCLT
• 14.07.2025: NCLT directed RP and CoC to submit report
• 17.02.2026: NCLT rejected IA No.305/2025, upholding ineligibility
• 28.03.2026: Appeal filed before NCLAT (Company Appeal (AT) (Ins.) No.487 of 2026)
• 20.04.2026: NCLAT delivered judgment

Relief Sought

The appellant sought:

• Setting aside of the RP’s 11.06.2025 ineligibility letter
• Direction to the CoC and RP to consider his resolution plan
• Declaration that he is not ineligible under Section 29A(e) and 29A(f)

The Legal Issue

The central question was whether a person prohibited by SEBI from accessing securities markets under a delisting order, issued during a moratorium on a related entity, remains ineligible under Section 29A(f) of the IBC, and whether the Adjudicating Authority must re-examine the validity of such an order.

Arguments Presented

For the Appellant

The appellant contended that:

• The SEBI order dated 26.06.2018 was passed during the moratorium on GEISL (CIRP commenced 20.07.2017), rendering it void under Section 14 of the IBC.
• The moratorium under Section 14 bars any enforcement action against the corporate debtor, including regulatory penalties or delisting orders.
• The appellant had disclosed the moratorium to SEBI and the order was issued in disregard of it.
• The DIN was reactivated on 19.06.2025, removing any disqualification under Section 29A(e).
• Relied on M.K. Rajagopalan v. Dr. Periasamy Palani Gounder and Malharshanti Enterprises to argue that disqualifications must be formally declared by competent authorities and cannot be assumed.

For the Respondent

The respondents contended that:

• The SEBI delisting order dated 26.06.2018 is a valid, operative, and unchallenged prohibition under Regulation 24 of the Delisting Regulations, 2009.
• Section 29A(f) applies to any person prohibited by SEBI from accessing securities markets, regardless of whether the prohibition arose during a moratorium.
• The Adjudicating Authority is not empowered to review or set aside SEBI orders.
• The appellant had ample opportunity to challenge the 26.06.2018 order but did not.
• The moratorium under Section 14 protects the corporate debtor’s assets, not promoters from regulatory consequences.
• Relied on Bohar Singh Dhillon to affirm that SEBI may take action against promoters even during CIRP.

The Court's Analysis

The NCLAT examined the legislative intent behind Section 29A(f), which disqualifies any person "prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets." The Court emphasized that this provision is not a mechanism to re-evaluate the correctness of SEBI’s regulatory orders but to enforce their consequences within the insolvency framework.

"When an order prohibiting the Promoter exists, ineligibility under Section 29A(f) comes into operation and the RP and the Adjudicating Authority have not committed any error in declaring the Appellant ineligible under Section 29A(f)."

The Tribunal rejected the appellant’s argument that the SEBI order was void due to the moratorium on GEISL. It held that Section 14 of the IBC protects the corporate debtor’s assets and operations from enforcement actions, but does not shield promoters from personal regulatory consequences. The SEBI order was directed at the promoter personally, not the corporate debtor.

The Court distinguished Ms. Anju Agarwal, where SEBI was barred from recovering monetary penalties from the corporate debtor during moratorium. Here, the issue was not recovery of dues but a permanent personal disqualification under securities law.

The Tribunal also noted that the appellant had never challenged the 26.06.2018 order before any competent forum, and therefore could not now seek to have it ignored by the Adjudicating Authority. The Court reiterated that the Adjudicating Authority’s role under Section 29A is limited to verifying the existence of a prohibition, not adjudicating its validity.

Regarding Section 29A(e), the Court observed that while the DIN was reactivated, the appellant’s eligibility under Section 29A(f) remained unaffected and was the decisive ground for ineligibility.

The Verdict

The appeal was dismissed. The NCLAT upheld the Adjudicating Authority’s order dated 17.02.2026, confirming the appellant’s ineligibility under Section 29A(f) of the IBC due to the SEBI delisting order dated 26.06.2018. The Court held that the appellant is permanently barred from submitting a resolution plan as long as the SEBI prohibition remains in force. There shall be no order as to costs.

What This Means For Similar Cases

SEBI Orders Are Binding in IBC Eligibility Assessments

• Practitioners must verify whether any resolution applicant is subject to SEBI delisting, trading bans, or market access prohibitions, regardless of the corporate debtor’s insolvency status.
• A promoter’s personal regulatory disqualifications under SEBI law are sufficient grounds for rejection under Section 29A(f), even if the corporate debtor is under moratorium.
• The Adjudicating Authority is not required to review or set aside SEBI orders; its role is limited to confirming the existence of such orders.

Moratorium Does Not Shield Promoters from Regulatory Consequences

• The moratorium under Section 14 protects the corporate debtor’s assets and operations, not its promoters from regulatory penalties or disqualifications.
• SEBI may impose delisting, trading bans, or other sanctions on promoters even during CIRP, and such sanctions trigger Section 29A(f) automatically.
• Resolution Professionals must obtain and verify regulatory compliance reports from SEBI, stock exchanges, and other regulators as part of eligibility screening.

No Deemed Disqualification - Only Existing Orders Matter

• The NCLAT reaffirmed that Section 29A(f) requires an actual, operative prohibition, not a hypothetical or assumed one.
• However, unlike Section 29A(e), which requires a formal disqualification order under the Companies Act, Section 29A(f) applies to any SEBI prohibition, whether by order, circular, or notice.
• Practitioners must distinguish between "deemed" disqualifications (rejected in Rajagopalan) and "actual" regulatory prohibitions (upheld here).