Section 94: Application by Debtor to Initiate Insolvency Resolution Process

Section 94 of the Insolvency and Bankruptcy Code, 2016 permits a debtor who has committed a default to apply, personally or through a resolution professional, to the Adjudicating Authority for initiation of the insolvency resolution process, subject to the statutory conditions and disqualifications.

Current application: The Part III insolvency resolution framework has been brought into force for personal guarantors to corporate debtors. Applications by such personal guarantors are governed by the applicable 2019 Rules and IBBI Regulations.

Section 94 - Statutory Provision

(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.

Who May Apply under Section 94?

A debtor who commits a default may initiate the process personally or through a resolution professional. In the presently operational personal guarantor framework, a personal guarantor to a corporate debtor may use Section 94 subject to the Code and the applicable rules and regulations.

Excluded Debts

Section 94(3) permits an application only in respect of debts that are not excluded debts. Section 79 defines "excluded debt" for Part III. The statutory definition includes specified categories of liabilities that are kept outside the relevant individual insolvency relief framework.

Statutory Disqualifications

A debtor cannot make a Section 94 application while an undischarged bankrupt or while undergoing a fresh start process, an insolvency resolution process or a bankruptcy process. A further 12-month restriction applies where an application under Chapter III has already been admitted in respect of that debtor.

Application by a Partner of a Firm

Where the debtor is a partner and the application concerns the firm, Section 94(2) requires all or a majority of the partners to file jointly.

Personal Guarantors to Corporate Debtors

For personal guarantors to corporate debtors, the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 prescribe the application procedure. A debtor's application under Section 94 is made in the prescribed form and manner with the prescribed fee. The related IBBI regulations govern the insolvency resolution process for this notified class.

Interim Moratorium after Filing

Section 96 provides for an interim moratorium beginning on the date of the application under Section 94 or Section 95 in accordance with its terms. The subsequent statutory process includes appointment of a resolution professional, examination and report, and admission or rejection by the Adjudicating Authority.

Meaning of Important Terms

Debtor: Section 79 defines "debtor" for Part III as an individual who owes a debt.

Default: Section 3 defines default as non-payment of debt when the whole or any part or instalment has become due and payable and is not paid by the debtor or corporate debtor, as applicable.

Resolution professional: Section 79 defines the resolution professional for Part III as an insolvency professional appointed under that Part for conducting the fresh start process or insolvency resolution process.

Adjudicating Authority: For personal guarantors to corporate debtors, the applicable jurisdiction is governed by Section 60 and the notified Part III framework.

Related Provisions

Check the official Code, commencement notifications, applicable rules and IBBI regulations for the relevant category of debtor and proceeding.