NCLAT: Section 94 IBC Application Can Be Rejected Without First Appointing RP

Decision in brief

The NCLAT dismissed the appeal and upheld the NCLT Ahmedabad order rejecting the personal guarantor's Section 94 IBC application. The guarantee in favour of Bank of Baroda had been invoked on 19 September 2016, while the application under Section 94 came much later.

The Tribunal noted its existing decision in Suyog Jain, which had taken the view that the Limitation Act applies to Section 94 proceedings. Although that decision was stated to be under challenge before the Supreme Court, the NCLAT recorded that it had not been stayed.

The NCLAT also held that appointment of a Resolution Professional is not mandatory before every threshold rejection under Section 94. If the admitted facts and applicable law show that an application is not maintainable, the Adjudicating Authority may reject it before appointing an RP.

Background of the case

The appellant was a personal guarantor for credit facilities granted to Shubham Ginning Pressing Pvt. Ltd. Dena Bank, later Bank of Baroda, had sanctioned credit facilities, and the appellant executed guarantee deeds in 2013 and 2015.

The NCLAT recorded guarantee deeds dated 30 October 2013 for Rs. 15 crore and 19 March 2015 for Rs. 20 crore. Bank of Baroda invoked the guarantee on 19 September 2016 through a notice under Section 13(2) of the SARFAESI Act.

Recovery proceedings continued before the DRT and under the SARFAESI framework. Bank of Baroda later issued auction notices concerning the secured properties.

Why the Section 94 application was rejected

The personal guarantor filed proceedings under Section 94, which allows a debtor to seek initiation of the insolvency resolution process against herself or himself, subject to the Code and applicable rules.

NCLT Ahmedabad rejected CP (IB) No. 38 of 2025 as barred by limitation. The impugned order treated the guarantee invocation on 19 September 2016 as important and recorded that the limitation period relied upon by the NCLT had expired on 18 September 2019.

The NCLAT found no factual or legal infirmity requiring interference with that rejection.

Does the Limitation Act apply to Section 94 IBC

A major argument before the NCLAT was that the Limitation Act, 1963 should not apply to a debtor's own Section 94 application. The appellant relied on the structure of the Code and decisions concerning other insolvency provisions.

The NCLAT noted that its earlier decision in Suyog Jain v. Arvind Kumar had taken the view that the Limitation Act applies to Section 94 proceedings. The Tribunal said that, even though the earlier judgment was stated to be under challenge, there was no stay of that judgment.

On the facts before it, the NCLAT did not accept the argument that the Section 94 application could proceed despite the limitation objection.

Was appointment of an RP compulsory before rejection

The appellant also argued that the NCLT could not reject the Section 94 application before appointing a Resolution Professional under Section 97 and obtaining the RP's report under Section 99.

The NCLAT rejected a blanket rule requiring RP appointment in every case. Relying on its earlier treatment of a debtor-filed Section 94 matter, the Tribunal held that an RP need not be appointed where admitted facts and applicable law already show that the application is not maintainable.

The Tribunal added that the validity of such a threshold rejection must still be examined on the facts of the particular case. The ruling therefore does not remove the statutory RP process from properly maintainable applications.

Why Section 94 and Section 95 were treated differently

The appellant relied on the Supreme Court decision in Dilip B. Jiwrajka v. Union of India concerning the personal guarantor insolvency framework. The NCLAT examined the context in which that decision was delivered.

The Tribunal noted that Dilip B. Jiwrajka arose from proceedings initiated by a creditor under Section 95, whereas the present appeal arose from a debtor's own application under Section 94.

Because the issues and procedural setting were different, the NCLAT did not accept the proposition that Dilip B. Jiwrajka required appointment of an RP before the NCLT could decide the maintainability issue presented in this Section 94 case.

Timing of the application also mattered

The NCLAT examined the sequence of recovery and auction events while considering the bona fides of the proceedings. The appellant had been aware of recovery action for years and an earlier Section 94 application had been dismissed on 20 November 2023 with liberty to file afresh after furnishing complete particulars.

A fresh auction notice was issued on 28 November 2024 and an e-auction took place on 24 December 2024. The successful bidder had deposited the EMD and a further amount towards the required sale consideration.

The present Section 94 application was filed on 3 January 2025, after the auction stage had substantially progressed. The NCLAT treated this timing and conduct as relevant when examining whether the insolvency process was being used for its intended purpose or to obstruct recovery.

NCLAT on use of insolvency process after auction

The Tribunal referred to its decision in Ashwani Kumar Oberoi v. State Bank of India and Ors. on applications filed after recovery proceedings had substantially matured.

NCLAT held that where an insolvency application comes after an auction has progressed and third-party rights have begun to arise, the timing and conduct of the personal guarantor can be relevant to bona fides.

In Prabhaben Harkani, these circumstances supported the NCLT's rejection rather than providing a basis for appellate interference.

Final decision of NCLAT

The NCLAT Principal Bench held that the NCLT had rightly rejected the Section 94 application. It found no factual or legal infirmity in the order dated 21 April 2025 that required interference.

Accordingly, on 7 August 2026, Company Appeal (AT) (Insolvency) No. 1002 of 2025 was dismissed, with no order as to costs. Pending interlocutory applications were also disposed of.

The result leaves the NCLT rejection intact and gives useful guidance on limitation, threshold maintainability and RP appointment in a debtor-filed Section 94 proceeding.

Practical impact for personal guarantors

A personal guarantor should not assume that filing under Section 94 automatically requires the NCLT to appoint an RP before examining any maintainability problem. Clear limitation or maintainability defects can become decisive at the threshold.

The timing of the application also matters. Filing only after SARFAESI recovery or auction proceedings have substantially progressed can invite close scrutiny of the purpose and bona fides of the insolvency filing.

Before filing, the guarantor and advisers should map the guarantee invocation date, recovery history, earlier proceedings, auction events and limitation position in one clear chronology.

Practical checklist before a Section 94 filing

• Identify the exact date on which the personal guarantee was invoked and preserve the invocation notice.
• Prepare a complete chronology of DRT, SARFAESI, recovery, possession and auction proceedings.
• Check the limitation position under Section 238A of the IBC and the Limitation Act, 1963 before filing.
• Disclose earlier Section 94 applications and the exact terms of any liberty granted to file afresh.
• Do not wait until an auction has substantially progressed without assessing how the delay may affect the court's view of bona fides.
• Keep guarantee deeds, loan sanctions, notices, DRT records, auction notices and payment records together.
• Take case-specific advice on whether the application is maintainable before relying on the interim moratorium under Section 96.

What banks and creditors should check

Banks opposing a Section 94 application should place the complete recovery chronology before the NCLT, including the guarantee invocation, DRT proceedings, possession steps, auction notices and any third-party auction rights.

Where limitation is raised, the relevant dates and legal basis should be presented precisely. A general allegation of delay is weaker than a documented chronology tied to the applicable statutory provisions.

Creditors should also distinguish between a debtor-filed Section 94 application and a creditor-filed Section 95 proceeding when relying on earlier personal guarantor decisions.

Important caution

This judgment does not mean that every Section 94 application can be rejected without an RP. The NCLAT expressly tied the threshold power to cases where admitted facts and applicable law show that the application is not maintainable.

It also does not mean that every application filed during SARFAESI proceedings is abusive. The conclusion on bona fides depends on the actual chronology, stage of recovery, prior litigation and surrounding facts.

Because limitation questions can depend on acknowledgements, exclusions, court orders and other case-specific events, businesses and guarantors should review the complete record before applying this decision to another matter.

Key takeaway

The central takeaway from Prabhaben Ravjibhai Harkani v. Bank of Baroda and Anr. is that a debtor-filed Section 94 case can fail at the maintainability stage where the record shows a clear legal defect. RP appointment is not an automatic prerequisite to every threshold rejection.

For personal guarantors, the safest approach is to examine limitation and recovery history early, rather than treating Section 94 as a last-minute method to stop a substantially completed enforcement process.

Conclusion

The 7 August 2026 NCLAT decision is an important recent ruling on personal guarantor insolvency under the IBC. It reinforces careful attention to limitation, the distinction between Sections 94 and 95, and the role of bona fides where recovery and auction proceedings are already advanced.

For professionals, the case is a reminder that procedural chronology can be as important as the underlying debt. A Section 94 filing should be supported by a clear limitation analysis, complete disclosure and a genuine insolvency-resolution purpose.