TaxTMI 
TaxTMI 
2026 (6) TMI 770
X X X X Extracts X X X X
X X X X Extracts X X X X
....CP (IB) No. 240/BB/2025; c. Pass any such further orders as may be deemed just and expedient in the facts and circumstances of the present case, in the interest of justice and equity. 2. The Petitioner had instituted proceedings before the National Company Law Tribunal, Bengaluru Bench, in CP(IB) No. 240/BB/2025 under Section 94(1) of the Insolvency and Bankruptcy Code, 2016. The case of the Petitioner before the Tribunal was that he had furnished a personal guarantee in favour of M/s. Aditya Birla Capital Limited in respect of credit facilities extended by the said financial creditor to Ace Embedded Intensive Care Units Private Limited. According to the Petitioner, the personal guarantee was invoked pursuant to a notice dated 20.05.2025 issued by M/s. Aditya Birla Capital Limited under Section 13(2) of the SARFAESI Act, 2002. On that basis, the Petitioner asserted that he was entitled to invoke Section 94 of the Insolvency and Bankruptcy Code, 2016 and seek initiation of the insolvency resolution process in his capacity as a personal guarantor. 3. Upon issuance of notice and after hearing the parties, the National Company Law Tribunal, by its order dated 30.03.2026,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in favour of Ace Embedded Intensive Care Units Private Limited as the principal borrower and certain other persons associated with the transaction. He contended that the said sanction letter was also addressed to the Petitioner, who is described therein as a co-borrower. 9. Learned counsel further relied upon the Facility Agreement dated 11.11.2023 and, in particular, the recital relating to the parties thereto. Referring to the said recital, he submitted that the agreement distinguishes between "borrowers", who are described in Schedule I, Part A, and "co-borrowers", who are described in Schedule I, Part B. The name of the Petitioner finds place in Schedule I, Part B. However, neither the recital nor the schedules make any reference to the Petitioner as a personal guarantor. 10. Learned counsel also referred to the deed evidencing the creation of an equitable mortgage by deposit of title deeds, under which properties belonging to the borrower as well as certain properties belonging to the Petitioner were offered as security. On that basis, he contended that the demand and enforcement measures initiated by M/s. Aditya Birla Capital Limited are, in substance, referable to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion process requiring the appointment of a Resolution Professional. The provisions contained in Sections 94 to 100 of the Code contemplate a structured process involving scrutiny by the Adjudicating Authority at different stages, and the Tribunal is not expected to function as a mere post office mechanically forwarding every application for appointment of a Resolution Professional. 15.2. Learned Senior Counsel submitted that every judicial or quasi-judicial forum is required, at the threshold, to satisfy itself that the person invoking its jurisdiction possesses the requisite legal standing to do so. The requirement of locus standi is a foundational jurisdictional requirement and constitutes the minimum threshold that must be crossed before any statutory process can be set in motion. Unless the applicant demonstrates that he falls within the category of persons entitled to invoke the particular provision, the question of proceeding further under the statute would not arise. 15.3. It was submitted that Section 94 can be invoked only by a person who answers the description of a debtor entitled to seek initiation of the insolvency resolution process under the statutory framework....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld constitute adjudication on merits. The inquiry undertaken by the Tribunal in the present case is qualitatively different and precedes the commencement of such adjudicatory functions. 15.8. Learned Senior Counsel submitted that acceptance of the Petitioner's contention would lead to an anomalous situation whereby any person, irrespective of whether he possesses the status claimed by him, could invoke the jurisdiction of the Adjudicating Authority and compel the commencement of statutory proceedings merely by making a bald assertion. Such an interpretation would render the threshold scrutiny by the Tribunal wholly redundant and would be contrary to the scheme and object of the Code. 15.9. Learned Senior Counsel also contended that the Tribunal, being a creature of statute entrusted with the administration of the insolvency regime, necessarily possesses incidental and ancillary powers to ascertain whether the jurisdictional facts required for invocation of its authority exist. The determination of such jurisdictional facts cannot be equated with an adjudication of the substantive dispute between the parties. 15.10. It was therefore submitted that the finding recorded b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sub-section (1) if he is- (a) an undischarged bankrupt; (b) undergoing a fresh start process; (c) undergoing an insolvency resolution process; or (d) undergoing a bankruptcy process. (5) A debtor shall not be eligible to apply under sub-section (1) if an application under this Chapter has been admitted in respect of the debtor during the period of twelve months preceding the date of submission of the application under this section. (6) The application referred to in sub-section (1) shall be in such form and manner and accompanied with such fee as may be prescribed. 19. A perusal of Section 94 of the Insolvency and Bankruptcy Code, 2016 makes it clear that the right to initiate an insolvency resolution process is not conferred upon every person who approaches the Adjudicating Authority. The provision specifically enables a debtor who has committed a default to initiate the insolvency resolution process by filing an application before the Adjudicating Authority. Thus, the very invocation of jurisdiction under Section 94 is predicated upon the existence of certain foundational requirements. The applicant must demonstrate, at lea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the determination of substantive rights, liabilities and entitlements of the parties. The former necessarily precedes the latter. 25. Thus, when the National Company Law Tribunal examines whether an applicant possesses the requisite locus standi to maintain an application under Section 94, it is not adjudicating the insolvency claim itself. It is merely determining whether the applicant has crossed the threshold necessary for the invocation of the statutory mechanism. 26. Such an exercise is akin to a civil court examining whether a suit is maintainable, whether the plaintiff possesses locus standi, whether the action is barred by limitation, or whether the court possesses jurisdiction to entertain the proceedings. The determination of such preliminary issues cannot be equated with adjudication of the substantive dispute. 27. Therefore, this Court is of the considered opinion that the power to determine whether an applicant satisfies the threshold requirements of Section 94 inheres in the jurisdiction of the Adjudicating Authority itself. Such a determination neither amounts to adjudication on merits nor constitutes an impermissible exercise of jurisdiction. 28. As not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 99 and 100 is set in motion, the Tribunal is necessarily entitled to satisfy itself that the foundational jurisdictional facts exist. 35. If the contention advanced on behalf of the Petitioner were to be accepted, the Adjudicating Authority would be compelled to appoint a Resolution Professional even in cases where the application is filed by a person who is demonstrably not entitled to invoke Section 94. Such an interpretation would render the threshold scrutiny inherent in every exercise of judicial power wholly redundant. 36. The consequences flowing from an application under Section 94 are neither procedural nor insignificant. Upon filing of such an application, the interim moratorium contemplated under Section 96 comes into operation. Such moratorium affects the rights and remedies of creditors and places legal restraints on proceedings relating to the debt concerned. The legislature could not have intended that such consequences should follow merely upon a self-serving assertion made by an applicant without any scrutiny whatsoever by the Adjudicating Authority. 37. The requirement of a preliminary examination by the Adjudicating Authority therefore serves an importa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a personal guarantor. Such status must arise from a valid contractual instrument creating obligations of guarantee and not from a unilateral description contained in a subsequent notice. 46. Whether a person is a guarantor must be established from the contractual documents governing the transaction. In the absence of any document evidencing the execution of a personal guarantee, the demand notice by itself cannot establish the jurisdictional fact upon which the maintainability of the application depends. 47. Thus, even assuming that the creditor has proceeded on the footing that the Petitioner is a personal guarantor, such an assertion cannot substitute for proof of the underlying guarantee. The Petitioner's claim ultimately rests upon a unilateral description contained in the demand notice, which is wholly insufficient to establish the foundational fact necessary to invoke Section 94. 48. The National Company Law Tribunal was therefore fully justified in concluding that the Petitioner had failed to establish the foundational requirement necessary for invocation of Section 94. The impugned order represents a determination of maintainability based on the absence of jur....