IBC Section 94: Application by debtor to initiate insolvency resolution process

Section 94 of Insolvency and Bankruptcy Code, 2016: Application by debtor to initiate insolvency resolution process

Official Bare Act Text

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

(1) A debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application.

(2) Where the debtor is a partner of a firm, such debtor shall not apply under this Chapter to the Adjudicating Authority in respect of the firm unless all or a majority of the partners of the firm file the application jointly.

(3) An application under sub-section (1) shall be submitted only in respect of debts which are not excluded debts.

(4) A debtor shall not be entitled to make an application under 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.

Legal Commentary & Landmark Judgments: Section 94

Section 94 enables individual debtors, including personal guarantors to corporate debtors, to voluntarily apply for the initiation of an insolvency resolution process before the Adjudicating Authority.

Statutory Relief & Application: A personal guarantor may file an application under Section 94 either personally or through a Resolution Professional.
Core Legal Standard: Upon filing, an immediate interim-moratorium under Section 96 automatically attaches, staying all debt-enforcement actions against the guarantor.

The debtor is disqualified from filing if already undergoing an insolvency resolution process, an undischarged bankrupt, or if an earlier application was admitted within the preceding 12 months.

Key Landmark Precedents:

Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: The Supreme Court upheld the Central Government notification enforcing Part III provisions against personal guarantors to corporate debtors, establishing that resolving corporate debtors and personal guarantors before the NCLT forms a unified, cohesive statutory scheme.

Legal Commentary:

Section 94 provides an orderly statutory framework for personal guarantors seeking debt restructuring, ensuring that individual liabilities linked to corporate borrowings are resolved in tandem with corporate restructuring.