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Original Article | Volume 2 Issue 4 (ACR, 2025) | Pages 3454 - 3463
The Doctrine of 'Clean Slate' and the Ineligibility of Promoters: A Study of Section 29A of IBC
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1
Research Scholar, Birla School of Law, Birla Global University
2
Associate Professor, Birla School of Law, Birla Global University
3
Birla School of Management, Birla Global University
Under a Creative Commons license
Open Access
Abstract

The Insolvency and Bankruptcy Code, 2016 (IBC) introduced a creditor-led, time-bound resolution framework aimed at value maximization and business revival. Central to its design is the clean slate doctrine, ensuring that resolution applicants acquire debt-free entities insulated from past liabilities. With the 2017 insertion of Section 29A, promoters of defaulting companies were barred from submitting resolution plans to prevent moral hazard and strengthen governance. While upheld in ArcelorMittal, Essar Steel, and Swiss Ribbons, this disqualification has been criticized as overly broad, particularly for promoter-driven sectors and MSMEs, where it often restricts bidder participation and risks liquidation. A comparative analysis with U.S. and U.K. insolvency regimes reveals India’s uniquely stringent stance. This article argues for a calibrated approach that targets willful defaulters while allowing flexibility in genuine cases, thereby harmonizing Section 29A with the IBC’s objectives of revival, creditor confidence, and economic efficiency

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