Applications under Section 94 filed to frustrate SARFAESI enforcement constitute an abuse of process.

The appellant, a director and personal guarantor of M/s Veer Wires Private Limited, guaranteed credit facilities sanctioned by Abhyudaya Co-operative Bank Ltd. to the corporate debtor. The corporate debtor’s accounts were classified as NPA on 31 July 2021, following which the Bank issued a demand notice under Section 13(2) of the SARFAESI Act for approximately ₹3.84 crore and invoked the appellant’s personal guarantee.

Arbitration proceedings culminated in an award dated 23 June 2023 holding the corporate debtor and its guarantors jointly and severally liable for ₹4,20,94,708.73, with further interest.

The appellant filed an application under Section 94 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) on 1 November 2023. That application was withdrawn on 13 October 2025 because the guarantee deed had not been annexed.

After the withdrawal of the application and cessation of the interim moratorium under Section 96, possession proceedings against the appellant’s flat progressed, with physical possession fixed for 6 February 2026.

Section 94 of the IBC enables a personal guarantor in default to apply for initiation of insolvency resolution and submission of a repayment plan, while Section 96 provides an interim moratorium upon filing of such an application; Sections 99 and 100 govern the resolution professional’s report and the Adjudicating Authority’s decision on admission.

These provisions must be used for genuine insolvency resolution and not merely as a shield against lawful creditor enforcement.

In Getz Cables Private Limited v. State Bank of India, the Tribunal held that the existence of prior SARFAESI proceedings does not, by itself, extinguish a personal guarantor’s right to apply under Section 94, but each case must be assessed on its facts.

In Syed Sirajis Salikin Khadri v. Edelweiss Asset Reconstruction Co. Ltd., the Tribunal held that a Section 94 application filed immediately after possession proceedings, with the object of obtaining the Section 96 moratorium and delaying recovery, constituted an abuse of process.

The Tribunal found that the appellant had not demonstrated a genuine intention to repay or submit a viable repayment plan.

The first Section 94 application was filed when the court commissioner’s possession proceedings were imminent and remained pending for approximately two years, during which the appellant enjoyed the benefit of the interim moratorium under Section 96.

After that application was withdrawn and the moratorium ceased, the appellant filed the second application immediately after a fresh possession notice fixed the date for physical possession, and promptly informed the Bank that the interim moratorium had commenced.

This sequence showed that the applications were timed to obstruct possession rather than to resolve the appellant’s insolvency.

The Tribunal distinguished Getz Cables, where the Section 94 application followed SARFAESI proceedings in close proximity and was not otherwise shown to be mala fide, from the present case, where the appellant repeatedly sought to prevent enforcement after possession proceedings had substantially advanced.

The resolution professional’s recommendation did not compel admission because the Adjudicating Authority was entitled to examine the appellant’s conduct and the purpose behind invoking the statutory process.

The Adjudicating Authority had therefore correctly rejected the application under Section 100.

The appeal was dismissed for want of merit, without any order as to costs; pending interlocutory applications were also disposed of.