NCLAT Delhi rules that retrospective NPA classification does not activate IBC Section 29A disqualification.
Backdated NPA Classification Does Not Invoke Section 29A
The Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) has ruled that a backdated classification of an account as Non-Performing Asset (NPA), even if effective from an earlier date, does not automatically trigger insolvency disqualification under Section 29A of the Insolvency and Bankruptcy Code (IBC).
The tribunal held that disqualification under Section 29A(h) requires a substantive default established at the time of submission of resolution plans. A retrospective internal marking, without formal enforcement action or admission in financial records at the relevant time, does not constitute a disqualifying event. The decision protects promoters from disqualification based solely on ex-post classification.
This clarification is critical for resolution applicants under IBC. Legal teams must assess whether the default was formally crystallized at the time of plan submission, not merely flagged in hindsight. The ruling promotes fairness in eligibility assessments during the resolution process.