High Courts Cannot Stay IBC Personal Insolvency Proceedings Vested In NCLT; Calcutta High Court Dismisses Debtor Writ Challenging Tribunal Process
Isabella Mariam
The High Court of Calcutta Single Bench of Justice Krishna Rao declined to interfere with personal insolvency proceedings initiated under the Insolvency and Bankruptcy Code and allowed them to continue before the National Company Law Tribunal. The matter arose from a petition by an individual debtor seeking to stop insolvency proceedings commenced by a creditor before the adjudicating authority designated under the Code. The Court held that where the statute vests jurisdiction in the National Company Law Tribunal, the High Court cannot halt or suspend such proceedings in exercise of its writ jurisdiction. The writ petition was accordingly disposed of, with all questions regarding the personal insolvency process left to be determined by the adjudicating authority.
The petitioners were guarantors who had executed personal guarantees securing credit facilities extended by Respondent No. 1, a non-banking financial company, to Respondent No. 3. Their grievance arose when Respondent No. 2, acting as Security Trustee, invoked jurisdiction under Section 95 of the Insolvency and Bankruptcy Code, 2016, despite the principal borrower allegedly clearing all outstanding dues along with penal interest and making advance payments for future instalments.
The petitioners contended that under the RBI Master Circular, an account becomes NPA only after interest remains unpaid for 90 consecutive days, and therefore no default existed. They submitted that as the majority of the credit facilities had been repaid, no claim survived against them as guarantors.
Respondent No. 1 asserted that two proceedings were already pending before the NCLT—one under Section 7 against the borrower and another under Section 95 against the guarantors—and that the issue of default must be determined by the adjudicating authority under the IBC.
The petitioners sought multiple writs, including mandamus directing the RBI to regulate respondents and to compel the NCLT to dismiss the Section 95 proceedings, alongside certiorari and prohibition against continuation of the insolvency petitions.
The Court recorded that the petitioners’ primary contention was that the borrower had “cleared the entire outstanding amount due and payable along with penal interest and has even made payment of the future quarterly installments” and that only “a meagre amount of Rs. 27.71 crores… remain outstanding”. It noted that Respondent No. 1 had recalled the loan for Rs. 92.83 crores and that proceedings under Sections 7 and 95 of the IBC were pending before the NCLT.
The Court stated that Clause 17.1.6 of the Loan Agreement expressly empowered the lender to proceed independently in insolvency situations, quoting that the lender’s claim would be “exclusive and independent of any other lenders”.
Regarding the statutory scheme, the Court recorded the Supreme Court’s exposition in Dilip B. Jiwrajka, including that the Resolution Professional’s function under Section 99 is “purely facilitative”, that the RP must “examine the application and ascertain that the application satisfies the requirement of Section 94 or Section 95”, and that the adjudicating authority must provide “a hearing” before admitting or rejecting the application.
The Court further quoted Bank of Baroda v. Farooq Ali Khan, stating that the High Court had “incorrectly exercised its writ jurisdiction” by interfering prior to the statutory process and that factual determinations of debt are “within the domain of the Adjudicating Authority under section 100”.
Applying these principles, the Court recorded that the petitioners’ challenge—based on alleged full repayment, violation of RBI Circulars, and infringement of Articles 14, 19(1)(g), and 21—must first be raised before the NCLT, since “the proceeding has not even reached the stage where the Adjudicatory Authority was required to make such determination.”
The Court also noted that except for the RBI, respondents were private companies not covered under Article 12, and that the RBI had been impleaded without substantive relief.
Finally, the Court stated: “The National Company Law Tribunal being the statutory forum under the Insolvency and Bankruptcy Code, 2016, is fully empowered to take all necessary measures within its jurisdiction. If the petitioners are aggrieved by any steps taken therein, the petitioners have an adequate remedy before the National Company Law Appellate Tribunal. The petitioners without taking appropriate steps before the appropriate forum, have filed the present writ petition which, in my view is not maintainable.”
The Court held: “In such view of the matter, the reliefs sought for by the petitioners in the present writ petition cannot be granted. Accordingly, WPA No. 27091 of 2025 is dismissed.”
Advocates Representing the Parties
For the Petitioners: Mr. Gopal Jain, Senior Advocate; Mr. Ratnanko Banerjee, Senior Advocate; Mr. Sankarsan Sarkar; Mr. Aditya Kanodia; Ms. Suparna Sardar.
For the Respondents: Mr. Tilak Kumar Bose, Senior Advocate; Mr. Krishnaraj Thaker, Senior Advocate; Mr. Somdutta Bhattacharyya; Ms. Kiran Sharma; Mr. Sagnik Aditya.
Case Title: Sanjay Jhunjhunwala & Ors. v. Piramal Finance Ltd. & Ors.
Case Number: W.P.A. No. 27091 of 2025
Bench: Justice Krishna Rao
