NCLAT sets aside Dismissal of S. 95 IBC Pleas Filed by Canara Bank against Personal Guarantors[Read Order]

The Appellate Tribunal was dealing with three connected appeals filed by Canara Bank against orders passed by the NCLT. The orders sought to dismiss the bank’s applications regarding initiation of insolvency proceedings against personal guarantors of M/s Barmendra Agrotech Pvt. Ltd. The Section 7 application filed by the bank against the corporate debtor had already been admitted on October 14, 2022.

Subsequently, Canara Bank had filed applications under Section 95 of the Code against the personal guarantors. However, on the very first date of hearing, the NCLT dismissed the applications on the ground that they were barred by limitation.

Before the NCLAT, the bank contended that under Chapter III of the IBC, the Adjudicating Authority has no role at the stage of Section 95 and Section 97. The function at that stage is confined to appointing a resolution professional. The bank relied upon the Supreme Court’s decision in Dilip B. Jiwrajka v. Union of India, wherein it was held that no judicial adjudication is done at the pre-report stage under Sections 95 to 99 of the Code.

The personal guarantors, on the other hand, argued that if an application is barred by limitation, the Tribunal is competent to dismiss it without proceeding further.

After examining the record and hearing the parties, the NCLAT held that the Adjudicating Authority had committed an error in dismissing the Section 95 applications on the first date of hearing.

The Appellate Tribunal observed that the Supreme Court has categorically held that no judicial adjudication is involved at the stages contemplated under Sections 95 to 99 of the IBC.

The adjudicatory function of the Tribunal commences only after the resolution professional submits a report under Section 99 and the Tribunal proceeds under Section 100.

The Bench comprising Justice Rakesh Kumar Jain (Judicial Member), Justice Mohammad Faiz Alam Khan (Judicial Member), and Naresh Salecha (Technical Member), set aside the impugned orders and restored the applications filed by Canara Bank under Section 95 of the Code.

The matters were remanded to the NCLT for fresh consideration in accordance with law.

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