IBC Section 179: Adjudicating authority for individuals and partnership firms

Section 179 of Insolvency and Bankruptcy Code, 2016: Adjudicating authority for individuals and partnership firms

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person.

(2) The Debt Recovery Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain or dispose of-

(a) any suit or proceeding by or against the individual debtor;

(b) any claim made by or against the individual debtor;

(c) any question of priorities or any other question whether of law or facts, arising out of or in relation to insolvency and bankruptcy of the individual debtor or firm under this Code.

(3) Notwithstanding anything contained in the Limitation Act, 1963 (14 of 1963) or in any other law for the time being in force, in computing the period of limitation specified for any suit or application in the name and on behalf of a debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

Legal Commentary & Landmark Judgments: Section 179

Section 179 designates the Debt Recovery Tribunal (DRT) as the Adjudicating Authority for individual and partnership insolvency, subject to the corporate nexus exception in Section 60(2).

Default Individual Forum: The Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor resides or carries on business is the primary Adjudicating Authority.
Appellate Hierarchy: Appeals against orders of the DRT lie before the Debt Recovery Appellate Tribunal (DRAT) under Section 181.
Statutory Transfer under Section 60(2): Where a CIRP or liquidation proceeding is pending against a corporate debtor, the National Company Law Tribunal (NCLT) exercises exclusive jurisdiction over its personal guarantors, overriding Section 179.

Key Landmark Precedents:

Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: The Supreme Court upheld the constitutional validity of Section 60(2) as a carve-out to Section 179, holding that NCLT has exclusive jurisdiction over personal guarantors to corporate debtors to achieve unified resolution.
State Bank of India v. V. Ramakrishnan (2018) 17 SCC 394: Held that the DRT handles non-corporate individual insolvencies, whereas NCLT handles personal guarantors connected to corporate debtors.

Courtroom Practice & Strategic Litigation Guidance:

Before filing an individual insolvency petition, counsel must check whether a Section 7, 9, or 10 proceeding is active against the principal corporate borrower; if active, the petition must be filed before the NCLT and not the DRT.