Writ Petition Not a Substitute for Statutory Remedy in Personal Insolvency Cases, Rules Calcutta High Court

The landscape of insolvency law in India has undergone a transformative shift following the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC). With the introduction of personal guarantor insolvency proceedings under Part III of the Code, the Indian judiciary has repeatedly emphasised adherence to the statutory insolvency framework rather than invoking writ jurisdiction in premature or parallel attempts to block proceedings before the National Company Law Tribunal (NCLT).

A recent and significant reiteration of this principle came from the Calcutta High Court in Sanjay Jhunjhunwala & Ors. v. Piramal Finance Ltd. & Ors. (WPA No. 27091 of 2025), where the Court categorically held that High Courts cannot be approached to stall personal insolvency proceedings when a complete statutory remedy is already available under the IBC. The judgment reinforces judicial restraint under Article 226 of the Constitution when Parliament has created a specialised adjudicatory mechanism.

Background of the Case

Petitioners in the writ were personal guarantors who secured loan facilities for a corporate borrower (Respondent No. 3). According to them, the borrower had cleared all dues, including penal interest, and had even prepaid future instalments. On this premise, they argued that no claim against guarantors survived and, therefore, the personal insolvency petitions filed under Section 95 of the IBC by the lender (Respondent No. 2 acting as Security Trustee) were unwarranted and malicious.

Respondents opposed the maintainability of the writ on the ground that:

• Section 95 proceedings were already pending before the NCLT.
• IBC provides a complete procedural mechanism, including adjudication based on the report of the Resolution Professional.
• High Courts cannot exercise writ power to short-circuit statutory jurisdiction.

The central question before the Calcutta High Court was therefore not about the debt itself, but whether the writ jurisdiction under Article 226 could be used to terminate or prevent pending personal guarantor insolvency proceedings.

Writ Jurisdiction and Statutory Remedy: The Core Issue

The petitioners sought multiple writs, including mandamus, certiorari and prohibition, to either quash or restrain insolvency proceedings initiated under Section 95 IBC. One of the prayers also sought directions to the RBI to enforce fairness in dealing with guarantees. However, the Court found that no substantive relief had been sought against RBI, rendering even that prayer unsustainable.

At the heart of the judgment lies a clear judicial stance:

When specialised tribunals exist and are empowered to adjudicate questions of fact and law, the High Court will not function as a supervisory appellate forum by entertaining writ petitions prematurely.

The Court grounded its reasoning in two seminal Supreme Court precedents:

IBC Structure and Why Statutory Process Must Prevail

Section 95 Procedure for Insolvency of Personal Guarantors

The Court laid out the statutory flow precisely:

1. Creditor files an application under Section 95.
2. Interim moratorium automatically begins (Section 96).
3. NCLT appoints a Resolution Professional (Section 97).
4. RP examines the claim and prepares a Recommendation Report (Section 99).
5. Only thereafter, NCLT considers admission or rejection under Section 100.

This means insolvency proceedings were at a preliminary stage and not even ripe for judicial interference. By approaching the High Court, the guarantors attempted to bypass steps statutorily designed to determine debt validity and repayment capacity.

The Court emphasised that the role of Resolution Professional is only administrative/collative, not judicial—actual adjudication lies exclusively with the NCLT. Interference at this stage would render Sections 97–100 “otiose”, defeating legislative policy.

Why the Writ Petition Was Held Not Maintainable

The judgment highlights several crucial reasons for rejecting the writ:

1. NCLT is the Proper Forum

The petitioners could raise every legal and factual contention—including repayment, misuse of guarantee, and alleged violation of RBI Circulars—before the NCLT itself. There was no exceptional circumstance warranting extraordinary constitutional intervention.

2. Insolvency Process Not Completed Yet

Proceedings had not even reached the RP report stage, let alone adjudication under Section 100. Interference now would disrupt statutory flow and substitute High Court for NCLT—something the Constitution does not permit.

3. Private NBFC Respondents Are Not ‘State’

Respondents 1–3 were private entities, not the State under Article 12. A writ remedy cannot be invoked against purely private commercial parties unless a public law element exists, which it did not.

Conclusion

Calcutta High Court's ruling in Sanjay Jhunjhunwala v. Piramal Finance Ltd. crystallises a critical principle of modern insolvency jurisprudence: Writ petitions cannot be used to quash or stall personal guarantor insolvency proceedings when statutory mechanisms exist for adjudication. The Court rightly held that the petitioners had an adequate remedy before the NCLT, and interference under Article 226 was neither necessary nor legally sustainable.

The decision reinforces judicial consistency following Dilip B. Jiwrajka and Farooq Ali Khan, and further solidifies the doctrinal shift toward non-interference at the pre-adjudication stage of insolvency proceedings. With the increasing enforcement of personal guarantees under the IBC, this judgment will guide courts and litigants alike, preserving the integrity of insolvency resolution, preventing process-avoidance litigation, and ensuring that the IBC operates with the efficiency and finality envisaged by Parliament.

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