NCLAT Sets Aside NCLT Order Applying Corporate Insolvency Threshold To Personal Insolvency Plea

The National Company Law Appellate Tribunal (NCLAT) in Delhi has set aside an order of the National Company Law Tribunal (NCLT) that dismissed a personal insolvency application after applying the minimum default threshold applicable to corporate insolvency proceedings.

The appellate tribunal has remanded the matter to the NCLT Chandigarh for fresh consideration.

A bench of Judicial Member Justice N. Seshasayee and Technical Member Barun Mitra held that the application must be reconsidered in light of the threshold prescribed for insolvency proceedings involving individuals and partnership firms.

“In view of the same, we find merit in the submission of the learned Counsel for the appellant. The impugned Order dated 17.04.2026 is set aside and the matter is remanded back to the Adjudicating Authority to consider the matter afresh in the light of Section 78 of the Code and its implications conjoined with other facts of the case.”, the tribunal noted.

Mukesh Kumar had executed a personal guarantee in favour of Baba Shri Chand Alloys to secure dues owed by Rajdhani Iron Products Pvt. Ltd. He later filed an application seeking commencement of personal insolvency proceedings, stating that he was unable to honour his guarantee obligation of ₹5 lakh.

On April 17, the NCLT dismissed the application after holding that the amount was below the threshold prescribed under Section 4 of the Insolvency and Bankruptcy Code.

Before the appellate tribunal, Kumar argued that the NCLT had relied on the wrong statutory provision. He contended that the threshold applicable to corporate insolvency proceedings could not govern an application relating to an individual.

According to him, the threshold prescribed for individuals and partnership firms ought to have been applied instead.

The tribunal found merit in the submission. Referring to Section 78 of the Insolvency and Bankruptcy Code, it noted that the provision applies to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of default is not less than ₹1,000. It also noted that the Central Government may notify a higher threshold, subject to the statutory limit.

The appellate tribunal accordingly set aside the NCLT's order. It directed the tribunal to reconsider the matter afresh in light of Section 78 of the Code and the other facts of the case.