Section 95 IBC | Power of Attorney Holder Competent to Initiate Insolvency Proceedings if Authorised by Board Resolution: NCLAT

The National Company Law Appellate Tribunal has clarified that a financial creditor’s power of attorney holder may validly initiate personal insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, provided the delegation is backed by a board resolution. This ruling resolves a critical ambiguity in the authority of agents to act on behalf of financial creditors in insolvency triggers, with direct implications for guarantee enforcement and creditor remedies.

Background & Facts

The Dispute

The appellants, Kamlesh Keshavbhai Gondaliya and Parthil Kamleshbhai Gondaliya, are personal guarantors under an irrevocable personal guarantee deed dated 01.09.2020 executed in favour of IDBI Trusteeship Services Limited, the Debenture Trustee. The guarantee was given in respect of secured debentures issued by a corporate debtor. When the corporate debtor defaulted on its payment obligations, the Debenture Trustee issued a demand notice to the personal guarantors on 15.12.2025. As no payment was made, the Trustee filed Section 95 applications before the Adjudicating Authority on 05.01.2026 seeking initiation of personal insolvency resolution process against the guarantors.

Key Facts

• The personal guarantee deed, executed on 01.09.2020, contains Clause 15.2 which states: "Any Financial Indebtedness of the Company to the Guarantors... shall be collected, enforced and received by the Guarantors as trustee for the Debenture Holders and shall be paid over to the Debenture Trustee..."
• The Debenture Trustee is appointed by the borrower under the Debenture Trust Deed
• IDBI Trusteeship Services Limited filed the Section 95 application on 05.01.2026
• The application was signed by Ms. Gauri Nimkar, Senior Manager, acting under a Power of Attorney
• A Board Resolution dated 02.02.2021 authorised the execution of the Power of Attorney in favour of Ms. Gauri Nimkar
• The appellants did not file any written reply or objection to the Section 95 application prior to admission
• Written submissions were filed during hearing, challenging the authority of the applicant
• The Adjudicating Authority admitted the Section 95 application by order dated 16.03.2026
• The order directed the appellants to deposit Rs. 2,00,000 with the Resolution Professional

Procedural History

• 01.09.2020: Irrevocable personal guarantee deed executed by appellants in favour of IDBI Trusteeship Services Limited
• 15.12.2025: Demand notice issued by Debenture Trustee to personal guarantors
• 05.01.2026: Section 95 application filed by IDBI Trusteeship Services Limited through Ms. Gauri Nimkar
• 16.03.2026: Adjudicating Authority admits Section 95 application; directs appellants to deposit Rs. 2,00,000
• 16.04.2026: Appeals filed before NCLAT (CA(AT)(Ins.) No. 680 and 670 of 2026)
• 29.04.2026: NCLAT hears appeals and delivers judgment

The Parties' Positions

For the Appellants

• The Power of Attorney granted to Ms. Gauri Nimkar does not specifically authorise initiation of proceedings under Section 95
• No separate written authorisation was issued by the Debenture Holders to the Trustee to file the application
• The Adjudicating Authority erred in directing the personal guarantors to deposit Rs. 2,00,000
• Relied on Palogix Infrastructure Private Limited v. ICICI Bank Limited to argue that power of attorney holders are incompetent to file Section 95 applications

For the Respondents

• The Board Resolution dated 02.02.2021 conferred general authority to act on behalf of the financial creditor in all legal proceedings
• The Power of Attorney was validly executed pursuant to this resolution
• The appellants failed to raise any objection during the admission stage, thereby waiving the right to challenge authority
• Clause 15.2 of the guarantee deed explicitly permits the Trustee to enforce obligations on behalf of Debenture Holders
• The Supreme Court in Rajendra Narottamdas Sheth v. Chandra Prakash Jain has upheld the competence of such authorisations

Relief Sought

The appellants seek:

• Quashing of the Adjudicating Authority’s order dated 16.03.2026
• Declaration that the Section 95 application is incompetent due to lack of authorisation
• Setting aside of the direction to deposit Rs. 2,00,000
• Costs of litigation

The Legal Issue

The central question was whether a power of attorney holder, acting pursuant to a board resolution, is competent to file an application under Section 95 of the Insolvency and Bankruptcy Code on behalf of a financial creditor, and whether the failure to object to the application waives the right to challenge authorisation.

Arguments Presented

For the Appellant

The appellant’s counsel relied on Palogix Infrastructure Private Limited v. ICICI Bank Limited to argue that a power of attorney holder cannot initiate proceedings under Section 95 unless specifically authorised. He contended that the Power of Attorney granted to Ms. Gauri Nimkar was too general and did not expressly mention initiation of insolvency proceedings. He further argued that the Debenture Holders never provided written authorisation to the Trustee to file the application, rendering the petition incompetent. He also challenged the direction to deposit Rs. 2,00,000 as ultra vires.

For the Respondent

The respondent’s counsel submitted that the Board Resolution dated 02.02.2021 conferred broad authority to act in all legal matters, including initiation of proceedings under the IBC. Citing Rajendra Narottamdas Sheth v. Chandra Prakash Jain, he argued that the mere use of the term "Power of Attorney" does not invalidate an authorisation if it is backed by a board resolution. He further contended that the appellants’ failure to file any reply or objection to the Section 95 application amounted to acquiescence. He also conceded that the direction to deposit Rs. 2,00,000 was erroneous and should be shifted to the financial creditor.

The Court's Analysis

The NCLAT examined the interplay between board resolutions, power of attorney, and statutory competence under the IBC. It noted that while Palogix Infrastructure had previously held that a power of attorney holder could not file Section 7 applications, the Supreme Court in Rajendra Narottamdas Sheth had clarified that such a restriction does not apply where a general authorisation exists through board resolution.

"NCLAT was of the opinion that general authorisation given to an officer of the financial creditor by means of a power of attorney, would not disentitle such officer to act as the authorised representative of the financial creditor while filing an application under Section 7 of the Code, merely because the authorisation was granted through a power of attorney."

The Tribunal held that the Board Resolution dated 02.02.2021 constituted a valid general authorisation, and the Power of Attorney executed pursuant to it was merely the mechanism of delegation. The use of the term "Power of Attorney" did not negate the underlying authority conferred by the board. The Court further observed that the appellants had not filed any reply or objection to the Section 95 application, thereby forfeiting the right to raise the issue of authorisation at the appellate stage.

Regarding the authority of the Debenture Trustee, the Court relied on Clause 15.2 of the guarantee deed, which explicitly permits the Guarantors to act as trustees for the Debenture Holders and to pay over amounts to the Trustee. The Court held that the Trustee’s right to enforce the guarantee flows from this contractual arrangement, and no separate authorisation from Debenture Holders was required. The absence of any objection from the Debenture Holders further reinforced the legitimacy of the Trustee’s action.

The Court also noted that the direction in Para VI of the Adjudicating Authority’s order, requiring the personal guarantors to deposit Rs. 2,00,000, was legally unsustainable. The obligation to deposit funds under Section 95 lies with the financial creditor, not the guarantor, and the direction was therefore ultra vires.

The Verdict

The NCLAT dismissed the appeals on the merits of authorisation and competence, upholding the admission of the Section 95 application. However, it modified the order dated 16.03.2026 by deleting the direction to deposit Rs. 2,00,000. The financial creditor, IDBI Trusteeship Services Limited, is directed to deposit the amount of Rs. 2,00,000 with the Resolution Professional within 14 days. The remainder of the Adjudicating Authority’s order stands affirmed.

What This Means For Similar Cases

Authorisation Through Board Resolution Overrides Form

• Practitioners must now treat board resolutions as the primary source of authority, not the form of delegation (PoA, letter, or designation)
• A general authorisation to "conduct all legal proceedings" suffices for initiating IBC proceedings, even if the term "insolvency" is not explicitly mentioned
• The use of "Power of Attorney" as a label does not invalidate an otherwise valid delegation

Failure to Object at Admission Stage Is Fatal

• Any challenge to the competence of the applicant must be raised at the earliest opportunity - preferably in a written reply to the application
• Silence or non-filing of objections constitutes waiver of the right to challenge authorisation at appellate stages
• This principle applies equally to Section 7, 9, and 95 applications

Trustee Enforcement Rights Are Contractual, Not Statutory

• Debenture Trustees need not obtain separate authorisation from Debenture Holders if the guarantee deed explicitly permits enforcement on their behalf

• Clause 15.2-type provisions create a clear chain of authority: Guarantor → Trustee → Debenture Holders

• Such contractual mechanisms are enforceable under the IBC without additional statutory authorisation

• The financial creditor, not the guarantor, bears the obligation to deposit interim amounts under Section 95

• Any direction to the guarantor to deposit funds is legally invalid and must be corrected

• Practitioners should ensure that all authorisation documents (board resolutions, PoAs, deeds) are systematically archived and referenced in insolvency filings

• When drafting guarantee deeds, include explicit clauses permitting enforcement by trustees to avoid future challenges

• This judgment reinforces the IBC’s preference for procedural efficiency and discourages technical objections raised belatedly