Appeals allowed: dismissal of limitation applications at first hearing set aside; Section 95 and 99 stages not judicial adjudication

NCLAT (LB) held that the Tribunal erred in dismissing the applications for limitation at the first hearing because the SC has ruled that stages under Sections 95 and 99 do not involve judicial adjudication. The appeals are allowed; the impugned orders in all three matters are set aside, the Section 95 applications are restored to their original numbers, and the matters are remanded to the Tribunal to be decided in accordance with law. Parties are directed to appear before the Tribunal on 23.09.2025.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the adjudicating authority / Tribunal may perform a judicial adjudicatory function at the stage of Sections 95-99 of the Insolvency & Bankruptcy Code (i.e., prior to receipt of the resolution professional's report), including dismissing an application under Section 95 on the ground of limitation at the first hearing.

2. The legal effect and character of the resolution professional's role and report under Sections 97-99: whether that role is adjudicatory or facilitative and whether the report is binding on the adjudicating authority.

3. Whether an application under Section 95 filed beyond the period of limitation can be dismissed by the Tribunal at the initial hearing before the constitution of the resolution professional's report, and whether the limitation defence can be raised and decided later when the Tribunal exercises its adjudicatory jurisdiction under Section 100.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Adjudicatory function at the stages of Sections 95-99 (Legal framework)

Legal framework: The statutory scheme of Chapter III (Sections 94-100) contemplates a process where an application for initiation of CIRP against personal guarantors (Section 95) proceeds through appointment of a resolution professional (Sections 97-99) who prepares a report, following which the adjudicating authority decides under Section 100 within prescribed timelines.

Precedent treatment: The highest court's authoritative exposition holds that no judicial adjudication is envisaged at the stages falling within Sections 95-99; the role of the adjudicating authority at the appointment stage is limited to appointing a resolution professional and not to conduct final adjudication.

Interpretation and reasoning: The statutory scheme differentiates between a facilitative fact-gathering stage (appointment and inquiry by the resolution professional) and the adjudicatory stage (decision under Section 100 upon receipt of the report). Permitting full adjudicatory intervention at the appointment stage would subvert the statutory timelines and the distinct procedural roles conferred by Parliament. Questions characterized as "jurisdictional" often involve mixed questions of law and fact that require the full adjudicatory process; inserting such adjudication prematurely would effectively rewrite the statute.

Ratio vs. Obiter: The holding that Sections 95-99 do not involve judicial adjudication is ratio - it is dispositive of the permitted scope of Tribunal action at that stage.

Conclusions: The Tribunal is not empowered to undertake final adjudication at the Section 95-99 stage; its function at that stage is limited to appointing a resolution professional and allowing the facilitative inquiry to proceed.

Issue 2 - Character of the resolution professional's role and report (Legal framework)

Legal framework: Sections 97-99 empower appointment of a resolution professional and enable that professional to seek information and examine the application, culminating in a report recommending acceptance or rejection of the application.

Precedent treatment: The Court delineated the resolution professional's role as facilitative and fact-collating, not adjudicatory; the report is recommendatory and does not bind the adjudicating authority.

Interpretation and reasoning: The resolution professional's investigative powers are designed to produce a report that canvasses relevant facts and material for the adjudicating authority's subsequent independent determination under Section 100. The adjudicating authority must independently consider arguments and material and observe principles of natural justice when making its decision; hence the report cannot be mechanically accepted.

Ratio vs. Obiter: The proposition that the report is recommendatory and the adjudicating authority must independently adjudicate under Section 100 is ratio concerning the decision-making process under the Code.

Conclusions: The resolution professional exercises a facilitative investigatory function; the resultant report is recommendatory and does not supplant the adjudicating authority's independent adjudicatory duty under Section 100.

Issue 3 - Dismissal on limitation at first hearing and the right to raise limitation later (Legal framework)

Legal framework: Limitation is a substantive defence available to respondents; Sections 95-100 set out procedural stages culminating in adjudication under Section 100 where principles of natural justice must be observed.

Precedent treatment: The Court held that dismissal of an application at the stage falling within Sections 95-99 on grounds such as limitation is impermissible since those stages are non-adjudicatory. However, the respondent retains the right to raise limitation at the adjudicatory stage.

Interpretation and reasoning: Because the early stages are designed for facilitative inquiry and fact-gathering, a summary dismissal on limitation at the first hearing circumvents the statutory process and denies the applicant the benefit of the resolution professional's inquiry and report. The proper course is to allow the process to continue and permit limitation to be agitated and determined when the Tribunal performs its adjudicatory function under Section 100, observing principles of natural justice and examining relevant material.

Ratio vs. Obiter: The determination that dismissal on limitation at the pre-report stage is erroneous is ratio as it governs the permissible scope of Tribunal action; the affirmation that respondents can nevertheless raise limitation later and that the Tribunal must decide it in accordance with law is also ratio in directing subsequent procedure.

Conclusions: Summary dismissal of a Section 95 application on limitation at the initial hearing (pre-report) is an error. The limitation defence remains available and may be raised and adjudicated when the Tribunal exercises its jurisdiction under Section 100 after receipt of the resolution professional's report.

Remedial and consequential conclusions

The impugned orders dismissing the Section 95 applications at the first hearing on the ground of limitation are erroneous and are to be set aside. The applications are to be restored to their original numbers and remanded to the Tribunal for fresh consideration in accordance with the statutory scheme (allow the resolution professional's facilitative inquiry and thereafter adjudicate under Section 100 observing natural justice). The respondent retains the right to raise the issue of limitation at the adjudicatory stage; if so raised, the Tribunal shall decide it in accordance with law. Costs were directed to be borne by the parties.

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