Adjudicating Authority under Insolvency and Bankruptcy Code 

The Insolvency and Bankruptcy Code, 2016 (IBC) revolutionised the insolvency and bankruptcy landscape in India. It introduced a comprehensive and time-bound mechanism to resolve insolvency and bankruptcy cases involving corporates, individuals, and partnership firms. 

Central to the successful implementation of this framework is the role played by the Adjudicating Authority—the statutory body entrusted with the responsibility of adjudicating insolvency proceedings, admitting or rejecting insolvency applications, overseeing resolution processes, and ensuring adherence to the Code’s provisions.

Statutory Framework and Definition of Adjudicating Authority under the Insolvency and Bankruptcy Code 

The concept of the Adjudicating Authority is central to the IBC’s structure. The Code defines the Adjudicating Authority as the tribunal or court specified for the adjudication of insolvency and bankruptcy proceedings.

• For corporate persons (companies, LLPs), the National Company Law Tribunal (NCLT) is the Adjudicating Authority (as per Sections 5(1)(c) and 60(1) of the IBC).
• For individuals and partnership firms, the Debt Recovery Tribunal (DRT) is designated as the Adjudicating Authority under Section 79 of the IBC. However, provisions relating to insolvency resolution of individuals and partnership firms are yet to be notified, rendering DRT’s role prospective at present.

The Adjudicating Authority has jurisdiction to adjudicate applications relating to insolvency commencement, resolution, and liquidation. It also has appellate powers in certain cases.

National Company Law Tribunal (NCLT) as Adjudicating Authority for Corporate Persons

Establishment and Composition

The NCLT was constituted under Section 408 of the Companies Act, 2013. It is a specialised tribunal with both judicial and technical members, established to handle company law matters including insolvency proceedings under the IBC.

• The members include retired High Court judges or equivalent judicial officers as Judicial Members.
• Technical Members are experts in finance, corporate affairs, banking, or related fields.
• The President heads the Tribunal and is appointed by the Central Government.

Jurisdiction and Territorial Bench

Each NCLT bench has territorial jurisdiction over specific geographic regions. Insolvency applications must be filed before the bench having jurisdiction over the registered office of the Corporate Debtor.

To maintain procedural consistency, if insolvency proceedings are ongoing before an NCLT bench, all related applications, including those against guarantors of the corporate debtor, must be filed before the same bench.

Powers and Functions

The NCLT exercises wide powers under the IBC, including:

• Admitting or rejecting insolvency applications: Sections 7, 9, and 10 of the IBC empower financial creditors, operational creditors, and corporate applicants, respectively, to initiate insolvency proceedings. The NCLT must examine whether the application meets statutory requirements, including the existence of a default.
• Moratorium: Once proceedings commence, the NCLT imposes a moratorium (Section 14) to stay all pending suits, recovery actions, and enforcement proceedings against the corporate debtor.
• Extension of CIRP timeline: The resolution process must be completed within 330 days, including any extensions granted by the NCLT upon application by the Resolution Professional (Section 12).
• Approval or rejection of resolution plans: After the Committee of Creditors (CoC) approves a resolution plan, the NCLT sanctions it under Section 31. If no plan is approved, the NCLT orders liquidation.
• Liquidation oversight: The NCLT appoints liquidators and supervises the liquidation process to ensure fair distribution of assets.
• Transfer of cases: The NCLT can transfer cases to other benches for convenience or in the interest of justice.

Admissibility Criteria and Threshold Tests

The NCLT must scrutinise the following before admitting an application:

• Existence of Debt and Default: The applicant must prove the existence of debt (minimum default ₹1 lakh) and that a default has occurred.
• Pre-existing dispute: Section 9(5)(ii)(d) of the IBC permits the NCLT to reject an application if there is a genuine dispute existing before the issuance of the demand notice or invoice.
• Compliance with procedural formalities: Applications must be filed in prescribed formats, with necessary supporting documents, including demand notices and proof of default.

Debt Recovery Tribunal (DRT) as Adjudicating Authority for Individuals and Partnership Firms

The DRT is designated as the Adjudicating Authority for insolvency proceedings relating to individuals and partnership firms (Section 79 IBC). However, since the relevant chapters in the IBC are yet to be notified, the DRT’s role as an Adjudicating Authority under the IBC remains prospective.

Once notified, the DRT will be responsible for:

• Admitting and managing insolvency petitions relating to individuals and partnership firms.
• Supervising moratorium, resolution, and liquidation proceedings.
• Exercising powers to adjudicate disputes related to insolvency.

Appellate Hierarchy: NCLAT and Supreme Court

National Company Law Appellate Tribunal (NCLAT)

The NCLAT is the first appellate authority for orders passed by the NCLT under the IBC. It hears appeals against admission, rejection, extension of resolution periods, approval or rejection of resolution plans, and liquidation orders.

• Appeals to the NCLAT must be filed within 30 days of the NCLT order.
• The NCLAT has benches across India, ensuring regional access.

Supreme Court of India

Further appeals on questions of law lie with the Supreme Court under Section 62 of the IBC.

• The appeal must be filed within 45 days from the date of the NCLAT order.
• The Supreme Court’s decisions are final and binding.

Adjudicating Authority’s Role in Disputes Involving Forgery and Fabrication

One of the challenging issues faced by the Adjudicating Authority, particularly the NCLT, is dealing with disputes involving allegations of forgery and fabrication of documents.

Legislative Silence on Forgery Claims

The IBC does not specifically provide procedures or powers for the Adjudicating Authority to adjudicate disputes concerning forged or fabricated documents.

Sections 7 and 9 primarily focus on the existence of a debt and default, and the presence of a genuine dispute. However, claims of forgery and fabrication require detailed investigation and trial, which are beyond the scope of the summary insolvency proceedings under the IBC.

Judicial Precedents on Forgery Disputes

• Radha Exports v. K.P. Jayaram (2020): The Supreme Court reiterated that CIRP is triggered by a default, and the existence of a claim is enough even if it is contested. However, the application must comply with procedural requirements and not be barred by limitation.
• Jaginder Singh Lather v. AU Small Finance Bank Ltd. (2018): The Appellate Tribunal held it is not within the NCLAT’s jurisdiction to decide whether a document is forged. Allegations of forgery should be pursued under Section 65 of the IBC, which deals with false statements.
• Shelendra Kumar Sharma v. DSC Ltd. (2019): The NCLAT held that the NCLT and NCLAT cannot decide the authenticity of documents within CIRP. If an applicant’s intent is only to recover debt rather than genuine resolution, the application may be rejected.
• Satori Global Ltd. v. Shailja Krishna (2023): The NCLAT observed that the NCLT has no power under the IBC to decide validity of certain deeds when fraud or coercion is alleged.
• Abdul Hannan v. Jai Jute & Industries Ltd. (2024): The NCLT Kolkata dismissed the CIRP petition where allegations of forged inspection reports and fabricated documents existed. The Adjudicating Authority held that such disputes are unsuitable for summary adjudication under IBC.

Conclusion

The Adjudicating Authority under the IBC is the cornerstone of India’s insolvency resolution architecture. For corporate insolvency, the NCLT plays a pivotal role in managing time-bound proceedings to balance the interests of creditors and debtors. The DRT, once empowered, will perform a similar function for individuals and partnerships.

While the Authority is empowered to reject applications where genuine disputes exist, its power to adjudicate complex forgery and fabrication disputes is limited. Judicial pronouncements reinforce that such disputes fall outside the scope of summary insolvency proceedings and should be pursued in appropriate civil or criminal courts.