Calcutta High Court Rules: Writ Petitions Cannot Halt Personal Insolvency Proceedings Under IBC
NCLT Is the Proper Forum for Insolvency Disputes, Says Justice Krishna Rao
Judgment Reinforces Boundaries Between Constitutional Powers and Statutory Tribunals
By Our Correspondent
New Delhi: December 05, 2025:
In a significant ruling, the Calcutta High Court has held that a writ petition cannot be used to halt personal insolvency proceedings initiated under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016. The judgment, delivered by Justice Krishna Rao, underscores the principle that specialized statutory mechanisms like the National Company Law Tribunal (NCLT) must be approached first, and constitutional remedies under Article 226 should not be misused to bypass statutory forums.
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This case, Sanjay Jhunjhunwala vs Piramal Finance, has far-reaching implications for personal guarantors and borrowers facing insolvency proceedings, as it clarifies the jurisdictional boundaries between High Courts and statutory tribunals under the IBC.
Background of the Case
The petitioner, Sanjay Jhunjhunwala, sought to challenge insolvency proceedings initiated against him under Section 95 of the IBC. He filed a writ petition before the Calcutta High Court, arguing that the proceedings were unlawful and should be halted.
However, the Court noted that the IBC provides a specialized adjudicatory framework through the NCLT, with appellate remedies available before the National Company Law Appellate Tribunal (NCLAT). The High Court emphasized that questions relating to default, recall notices, and compliance with Reserve Bank of India (RBI) norms must be decided exclusively by the NCLT.
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Key Observations by the Court
- Specialized Mechanism: The IBC establishes a complete statutory mechanism for insolvency adjudication, including appeals.
- No Substitution of Tribunals: High Courts cannot substitute statutory tribunals by entertaining writ petitions in matters where specialized forums exist.
- Adequate Remedies: Aggrieved parties must first exhaust remedies before the NCLT and NCLAT.
- Jurisdictional Discipline: Constitutional powers under Article 226 are not meant to bypass statutory procedures unless there is a clear lack of jurisdiction or violation of fundamental rights.
Justice Krishna Rao observed: “This Court finds that a proceeding under Section 95 of the IBC is pending before the Adjudicating Authority. 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.”
Implications of the Ruling
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This ruling has several important implications:
- For Personal Guarantors: Individuals who have given personal guarantees for corporate loans cannot escape insolvency proceedings by filing writ petitions in High Courts.
- For Borrowers: Borrowers facing insolvency must approach the NCLT for relief rather than seeking constitutional remedies prematurely.
- For Creditors: Creditors gain clarity that insolvency proceedings will not be stalled by writ petitions, ensuring faster resolution.
- For Judicial Discipline: The ruling reinforces the principle that High Courts should not interfere in matters where specialized tribunals have jurisdiction.
Legal Context
The Insolvency and Bankruptcy Code (IBC), 2016 was enacted to consolidate and amend laws relating to insolvency resolution. Section 95 specifically deals with insolvency applications against personal guarantors.
The Supreme Court in Lalit Kumar Jain v. Union of India (2021) upheld the validity of insolvency proceedings against personal guarantors, reinforcing their liability. The Calcutta High Court’s ruling builds on this framework by clarifying that writ petitions cannot be used to derail such proceedings.
Expert Reactions
Legal experts have welcomed the ruling, noting that it strengthens the IBC’s framework and prevents misuse of constitutional remedies.
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- Corporate Lawyers: “This judgment ensures that insolvency proceedings remain streamlined and prevents unnecessary delays caused by writ petitions.”
- Banking Sector Analysts: “Creditors will benefit from faster resolution, as borrowers cannot stall proceedings by approaching High Courts.”
- Academics: “The ruling reinforces the doctrine of exhaustion of remedies, a cornerstone of administrative law.”
Broader Impact on Insolvency Jurisprudence
The ruling is expected to influence similar cases across India, particularly in states where personal guarantors have attempted to use writ petitions to delay insolvency proceedings.
It also strengthens the role of the NCLT as the primary adjudicating authority under the IBC, ensuring that insolvency matters are handled by specialized forums with expertise in financial law.
Conclusion
The Calcutta High Court’s ruling that writ petitions cannot be used to halt personal insolvency proceedings under the IBC is a landmark judgment that reinforces judicial discipline and statutory boundaries. By directing aggrieved parties to first approach the NCLT and NCLAT, the Court has ensured that insolvency proceedings remain efficient and effective.
For borrowers, guarantors, and creditors alike, this ruling provides clarity and strengthens confidence in India’s insolvency framework.
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