NCLAT New Delhi Says SEBI Order Cannot Be Tested In IBC, Upholds Ineligibility Under Section 29A(f)

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 20 April dismissed an appeal filed by Carnet Elias Fernandes, suspended director of GEI Industrial Systems Ltd., challenging the National Company Law Tribunal (NCLT) Indore Bench order dated 17 February 2026.

The NCLT had rejected his application seeking a declaration that he was not ineligible under Section 29A(e) and 29A(f) of the Insolvency and Bankruptcy Code (IBC).

A Bench comprising Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey observed:

“We are of the considered opinion that while examining the eligibility of the Resolution Applicant under Section 29A sub-section (f), the Adjudicating Authority is not to enter into correctness or validity of order of the SEBI, prohibiting a person from dealing with securities markets”

GEI Industrial Systems entered the Corporate Insolvency Resolution Process (CIRP) on 22 January 2025. Jagdish Kumar Parulkar was appointed Interim Resolution Professional and later confirmed as Resolution Professional.

The RP issued Form-G on 21 March 2025, inviting Expressions of Interest (EoIs). The last date for submission was 20 April 2025, and the final list of Prospective Resolution Applicants (PRAs) was published on 15 May 2025.

Three applicants were shortlisted. Fernandes expressed interest in submitting a resolution plan at the fourth CoC meeting on 16 May 2025. The CoC approved this, subject to NCLT's permission. The RP's application seeking approval was later withdrawn on 6 June 2025.

The RP then obtained an eligibility report from Ujjawal Gupta & Company, which found Fernandes ineligible under Sections 29A(e) and 29A(f). On 11 June 2025, the RP informed him that he could not submit a resolution plan.

The ineligibility rested on two grounds: first, his Director Identification Number (DIN) was deactivated, attracting Section 29A(e); second, a Securities and Exchange Board of India (SEBI) order dated 26 June 2018 had compulsorily delisted GEI Industrial Systems and barred its promoters and directors from accessing the securities market for ten years, attracting Section 29A(f).

Fernandes reactivated his DIN on 19 June 2025 and moved the NCLT to set aside the RP's communication and permit consideration of his plan. The NCLT rejected the application, leading to the present appeal.

On appeal, Fernandes argued that the SEBI delisting order was void as the company was under CIRP and protected by the Section 14 moratorium. He also contended that reactivation of his DIN removed the disqualification under Section 29A(e).

The RP and respondents argued that the SEBI order remained valid and unchallenged, and that Fernandes, as a promoter of the holding company, was expressly barred from accessing the securities market. They also submitted that reactivation of DIN did not cure ineligibility and that Fernandes had neither submitted an EoI within time nor featured in the final list of PRAs.

On Section 29A(e), the NCLAT noted that although the DIN was reactivated, the bar under Section 29A(f) continued to apply.

The Tribunal held that Section 29A(f) disqualifies a person prohibited by SEBI from accessing the securities market. Since the SEBI order remained in force, Fernandes could not claim eligibility by ignoring it. The Bench held:

“The legislative scheme and intendment for prohibition under Section 29A(f) is not to examine the decision taken by SEBI, prohibiting from trade in securities or accessing securities markets, that is not the jurisdiction vested with the Adjudicating Authority. 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 distinguished the precedents cited by Fernandes, noting that those cases involved presumed disqualifications without formal orders, unlike the present case where a specific SEBI order was in force.

Accordingly, the NCLAT dismissed the appeal.