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NCLAT Rules Section 94 Insolvency Pleas Can Be Rejected Without RP Appointment
A Guarantor's Last-Ditch Bid Fails
The has shut the door on a 's attempt to initiate her own insolvency proceedings nearly a decade after her guarantees were invoked, holding that the can reject a Section 94 application at the threshold—without first appointing a (RP).
The appellate bench, comprising Justice Mohd. Faiz Alam Khan alongside Technical Members Arun Baroka and Indevar Pandey, dismissed the appeal of Prabhaben Ravjibhai Harkani , of , against the 's rejection of her C.P(IB) No. 38 of 2025 as barred by limitation.
The Decade of Debt Behind the Petition
The dispute traces back to , when ) sanctioned credit facilities worth Rs. 15 crore to A second sanction letter of Rs. 20 crore followed in from for the principal borrower. Harkani executed deeds of guarantee on and , standing as for the facilities.
The 's account was declared on , and invoked the personal guarantee on via a notice under . What followed was a grinding, multi-forum recovery saga: an Original Application before the in 2016, possession proceedings under SARFAESI, auction notices issued as late as November 2024, and two Section 94 applications filed by Harkani—the first dismissed on with liberty to file afresh, and the second filed on , days after the Bank successfully auctioned the Jasdan property to a third-party bidder.
The Core Contest: Does Limitation Bind the Debtor?
Harkani's counsel advanced a spirited argument that the , has no application to debtor-initiated insolvency proceedings under . Relying on the Insolvency Law Committee Report of 2018 and the 's decision in , the appellant contended that Section 94, being to (-initiated ), should similarly escape limitation constraints. She further invoked several NCLT Benches' rulings—including and —to argue that the Limitation Act does not govern Section 10 or Section 94 filings.
The NCLAT was unpersuaded. It pointed to its own precedent in , which had squarely held that the Limitation Act applies to Section 94 proceedings. Notably, the Tribunal observed that although Suyog Jain has been challenged before the , no stay has been granted —rendering it binding.
RP Appointment: A Mandatory Precondition or a Discretionary Step?
The appellant's second pillar rested on the 's decision in , arguing that the NCLT was statutorily obliged to appoint a under and obtain a report under before adjudicating—or dismissing—the application.
The NCLAT, however, distinguished Jiwrajka on its facts. That case arose from a creditor-initiated application under , not a debtor-filed petition under Section 94. More critically, the Tribunal relied on its own recent decision in , which had affirmed that an NCLT may decide a Section 94 petition at the stage itself without appointing an RP:
"Appointment of a is not an essential requirement in every case under Section 94. The , where it finds, on the admitted facts and the applicable law, that the application is not maintainable, it can reject an application under Section 94 before appointing the RP. The order cannot be said to be invalid merely because a was not appointed."
The precedent cited by the appellant was brushed aside, as it too concerned a creditor application rather than a Section 94 debtor petition.
A Case of Obstruction, Not Resolution
Perhaps the most telling aspect of the NCLAT's ruling was its scrutiny of Harkani's conduct. The Tribunal catalogued the sequence: the guarantee was invoked in September 2016; the first Section 94 application was dismissed in November 2023 with liberty to re-file; no fresh application followed for over a year; the Bank issued a fresh auction notice on and conducted the e-auction on , where emerged successful bidder and deposited the EMD along with 25% of the sale consideration. Only then—on —did Harkani file her second Section 94 petition, invoking the under to stall the Bank's recovery.
Citing its earlier decision in , the Tribunal found the timing dispositive:
"Initiation of proceeding under Section 94 by the was not with object of resolution of insolvency of the rather it was only with the intent to somehow create hurdles in the conclusion of the proceedings initiated by the Bank for recovery of its debts."
The Verdict: and
Dismissing the appeal with no order as to costs, the NCLAT concluded that the had rightly rejected the Section 94 application. The guarantee was invoked on , meaning any petition had to be filed on or before . Harkani's January 2025 filing was hopelessly out of time—and, in the Tribunal's assessment, transparently aimed at derailing a recovery process that had already concluded against the borrower. The order also disposed of pending interlocutory applications.
The ruling reaffirms that personal guarantors cannot weaponize the insolvency framework as a shield against long-pending SARFAESI recoveries, and that adjudicating authorities retain the power to weed out patently petitions without being compelled to first appoint a .
