2026 Supreme(Online)(NCLT) 2696

NATIONAL COMPANY LAW TRIBUNAL
Prabhat Kumar, Member (Technical), Sushil Mahadeorao Kochey, Member (Judicial)
Pankaj Chhabildas Sheth – Appellant
Versus
Abhyudaya Co-operative Bank Ltd. – Respondent
C.P. (IB) 185(MB) 2026

Filing a Section 94 IBC application immediately before scheduled SARFAESI possession, after a previous deficient application was withdrawn, indicates an intent to stall recovery rather than pursue genuine insolvency resolution, constituting an abuse of process.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 94, 96, 99, 100, 101, 102 - Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 - Rule 6 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - Sections 13(2), 14 - Personal Guarantor - Insolvency resolution process - Abuse of process - Moratorium - The court held that the filing of an application under Section 94 of the Code, immediately before the scheduled date for taking physical possession of secured assets under the SARFAESI Act, after a previous deficient application had been withdrawn, demonstrated an intent to stall recovery proceedings rather than to pursue genuine insolvency resolution; such conduct constitutes an abuse of the legal provisions of the Code and warrants dismissal of the application.

(B) SARFAESI Act - Recovery proceedings - Possession notice - The court noted that the personal guarantor had filed the Section 94 application on 01.02.2026, just four days before the date fixed for taking physical possession (06.02.2026) of the secured asset, and had previously filed a deficient application on 01.11.2023 just before an earlier possession date, which was later withdrawn; this pattern indicated a misuse of the insolvency process to frustrate lawful recovery action.

Facts of the case:
The personal guarantor to a corporate debtor filed an application under Section 94(1) of the Insolvency and Bankruptcy Code, 2016, seeking to initiate insolvency resolution process against himself. The corporate debtor had defaulted on credit facilities from a financial creditor, and the personal guarantor had executed a personal guarantee. The financial creditor had initiated proceedings under the SARFAESI Act, obtained an arbitral award against the guarantor, and issued possession notices for secured assets. The applicant filed the present application shortly before the scheduled date for taking physical possession of the property, following a previous deficient application that had been withdrawn.

Findings of Court:
The court found that the personal guarantor's actions, including filing a deficient application just before a scheduled possession date and then filing another application immediately before a second possession date, demonstrated an intent to frustrate the taking over of possession of the mortgaged properties. The court held that the application was not made for genuine insolvency resolution but was an abuse of the legal provisions of the Code. The court distinguished the case from precedents where proceedings under Section 94 were filed in close proximity to SARFAESI proceedings, noting the long period of recovery proceedings and the repeated attempts to stall them.

Issues: The main issues were whether the personal guarantor's application under Section 94 of the Code was filed with a genuine intent for insolvency resolution or as an abuse of process to stall recovery proceedings under the SARFAESI Act.

Ratio Decidendi: The court ruled that where a personal guarantor files an application under Section 94 of the IBC immediately before the date fixed for taking possession of secured assets under the SARFAESI Act, after having previously filed and withdrawn a deficient application on the eve of an earlier possession date, such conduct indicates an intent other than insolvency resolution. The filing of such an application to repeatedly obtain the benefit of the moratorium under Section 96 of the Code to frustrate and delay recovery proceedings constitutes an abuse of the legal provisions of the Code.

Result: Application dismissed under Section 100 of the IBC, 2016.