NCLT Barred from Adjudicating on Limitation in S. 95 Applications before Appointment of Resolution Professional: NCLAT allows appeal filed by Canara Bank [Read Order]

While allowing appeal filed by Canara Bank, the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that the Adjudicating Authority, National Company Law Tribunal (NCLT) cannot perform judicial adjudication or dismiss applications under Section 95 of the Insolvency and Bankruptcy Code (IBC) on grounds of limitation at the initial stage before appointing a Resolution Professional (RP), as such premature adjudication violates the statutory scheme established by the Supreme Court in Dilip B Jiwrajka vs. Union of India.

Canara Bank , the Appellant had advanced loans to M/s Barmendra Agrotech Pvt. Ltd. , the Corporate Debtor, secured by personal guarantees from the Respondents. After the Bank’s Section 7 application against the Corporate Debtor was admitted on 14.10.2022, it filed Section 95 applications against the Personal Guarantors. These applications were dismissed by the National Company Law Tribunal (NCLT) on the first day of hearing on the ground of limitation.

The Appellant argued that the NCLT erred by prematurely adjudicating the limitation issue without first appointing an RP under Section 95(7) of the IBC. Relying on the Supreme Court’s decision in Dilip B Jiwrajka, it was submitted that no judicial adjudication is permissible at the stages under Sections 95 to 99 of the IBC.

The Supreme Court in the said ruling clarified that: “(i) The RP’s role under Section 97 is purely facilitative, involving fact-finding and submission of a recommendatory report under Section 99;

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(ii) The Adjudicating Authority’s adjudicatory function commences only under Section 100 after receiving the RP’s report;

(iii) Preemptive adjudication of jurisdictional facts (including limitation) at the RP appointment stage would rewrite the statute and disrupt the statutory timeline.”

The Respondents contended that the NCLT was justified in dismissing the applications on limitation at the threshold since the applications were time-barred.

The NCLAT bench of Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan, and Mr. Naresh Salecha (Technical Member) observed that the NCLT’s dismissal of the Section 95 applications on limitation at the initial hearing stage was impermissible. The Tribunal emphasized that the Supreme Court’s judgment in Dilip B Jiwrajka unequivocally prohibits judicial adjudication before the RP’s appointment and report. The NCLT’s action short-circuited the statutory process under Sections 95–100 of the IBC.

The NCLAT held that the Adjudicating Authority is barred from adjudicating limitation (or any jurisdictional issue) until after the RP submits a report under Section 99. The appeals were accordingly allowed, the NCLT’s orders were set aside, and the Section 95 applications were restored. The matters were remanded to the NCLT for fresh consideration in accordance with law. The Respondents were permitted to raise the limitation issue when the NCLT exercises its adjudicatory jurisdiction under Section 100.

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