Primacy of NCLT and Limits of Writ Jurisdiction over Personal Guarantor Insolvency under Section 95 IBC: Commentary on Sanjay Jhunjhunwala & Ors. v. Piramal Finance Ltd. & Ors.

Primacy of NCLT and Limits of Writ Jurisdiction over Personal Guarantor Insolvency under Section 95 IBC

I. Introduction

A. Background of the Dispute

The decision in Sanjay Jhunjhunwala & Ors. v. Piramal Finance Limited & Ors. (W.P.A. No. 27091 of 2025, Calcutta High Court, judgment dated 03.12.2025, per Krishna Rao, J.) arises from a familiar but increasingly contentious intersection: the personal guarantor insolvency regime under the Insolvency and Bankruptcy Code, 2016 (IBC) and the writ jurisdiction of High Courts under Article 226 of the Constitution. Key factual elements:
  • The petitioners are individual personal guarantors to credit facilities extended by respondent no. 1 (Piramal Finance Ltd., an NBFC) to respondent no. 3 (the principal borrower, a corporate entity).
  • Respondent no. 1 (Piramal Finance) is a non-banking financial company (NBFC) engaged in lending activities across India.
  • Respondent no. 2 is the security trustee, appointed to hold security on behalf of respondent no. 1 and empowered by contract to initiate enforcement actions, including IBC proceedings, against guarantors.
  • Respondent no. 4 is the Reserve Bank of India (RBI), impleaded largely to invoke RBI’s Master Circulars and Fair Lending Practices guidelines.
The controversy stems from the initiation of personal insolvency proceedings under Section 95 IBC against the guarantors, even though, according to them, the principal borrower had substantially repaid its dues (including penal interest) and had even paid advance instalments.

B. Parallel Proceedings and Procedural Context

Two sets of proceedings under the IBC are crucial:
  1. Section 7 IBC proceeding (Part II – Corporate Insolvency Resolution Process)
    Respondent no. 1 (financial creditor) initiated a Section 7 application before the National Company Law Tribunal (NCLT) against the principal borrower (respondent no. 3), a corporate debtor.
  2. Section 95 IBC proceeding (Part III – Insolvency Resolution of Individuals)
    Respondent no. 2 (security trustee), acting under contractual authority (Clause 17.1.6 of the loan agreement), filed a Section 95 application initiating the personal insolvency resolution process against the petitioners (personal guarantors).
Further, prior to the writ petition:
  • The borrower (respondent no. 3) had filed a commercial suit (C.S. (Com) No. 93 of 2025) in the Calcutta High Court, challenging, inter alia, the loan recall notices.
  • A learned Single Judge granted interim relief restraining the lender and trustee from giving effect to the recall notices.
  • On appeal, a Division Bench on 03.11.2025 modified the order, expressly allowing the lender to press its Section 7 IBC application and clarifying that:
    • The NCLT would decide the Section 7 application in accordance with law; and
    • The legality, validity and sufficiency of the recall notice and follow-up notices could also be examined by the NCLT, if raised.
Against this backdrop, the guarantors approached the High Court by way of a writ petition seeking to quash and interdict the Section 95 proceedings before NCLT and to invoke RBI Master Circulars as a shield.

C. Core Issues Before the High Court

The High Court was essentially called upon to decide:
  1. Maintainability of the writ petition under Article 226:
    • Can a High Court, in writ jurisdiction, quash or stay pending Section 95 IBC proceedings against personal guarantors?
    • Are the NBFC (respondent no. 1) and security trustee (respondent no. 2) amenable to writ jurisdiction as "State" or public authorities?
  2. Appropriate forum to decide the existence of “default” and alleged breach of RBI Master Circulars:
    • Do alleged violations of RBI’s NPA classification and fair lending norms justify High Court interference, or must such issues be decided by the NCLT within the IBC framework?
  3. Interplay between borrower’s repayments and guarantor liability:
    • Does substantial repayment by the principal borrower (including penal interest and future instalments) extinguish the creditor’s right to proceed under Section 95 against personal guarantors?

II. Summary of the Judgment

The High Court dismissed the writ petition as not maintainable. Key conclusions:
  1. Primary forum is NCLT: Where proceedings under Section 95 IBC are already pending, questions about existence of debt, default, and alleged violations of RBI Master Circulars must be raised and adjudicated before the NCLT, not via writ petition.
  2. Writ cannot short-circuit IBC’s statutory mechanism: Relying on the Supreme Court’s interpretations in Dilip B. Jiwrajka v. Union of India and Bank of Baroda v. Farooq Ali Khan, the Court held that:
    • The scheme of Sections 95–100 IBC envisages a defined role for the Resolution Professional (RP) and the Adjudicating Authority (NCLT).
    • High Courts should not, in writ jurisdiction, pre-empt this process by deciding mixed questions of fact and law, like the existence of debt or default.
  3. Private parties not “State” or public authorities: Respondents 1–3 are private companies and not “State” within Article 12. Applying the Supreme Court’s test in S. Shobha v. Muthoot Finance Ltd., the Court held:
    • An NBFC, although regulated by the RBI, is not performing a public duty in its lending operations in the sense required to attract a writ of mandamus.
    • Thus, a writ for mandamus cannot ordinarily lie against such purely private entities in respect of their private commercial transactions.
  4. Role of RBI is incidental, not substantive: Although RBI was impleaded, the petitioners:
    • Had not made any prior representation to RBI; and
    • Sought no real, direct relief against RBI beyond a general direction to enforce its own circulars against respondents 1 and 2.
    The Court found no independent cause of action against RBI and held that mere impleadment of a statutory regulator does not by itself justify writ intervention.
  5. No fundamental right violation demonstrated: The Court held that no fundamental or legal right of the petitioners had been violated that would justify the exercise of extraordinary writ jurisdiction, particularly when a specialised alternative remedy exists under the IBC framework.
  6. Deference to prior Division Bench order: In light of the Division Bench’s earlier direction that the NCLT should rule on the legality and sufficiency of recall notices, the Single Judge emphasised that the NCLT is already seized of core disputes regarding default and recall. Interdicting Section 95 proceedings in writ would be inconsistent with this judicial posture.
Result: WPA No. 27091 of 2025 was dismissed, leaving the petitioners to pursue their remedies before the NCLT (and thereafter NCLAT, if needed).

III. Detailed Analysis

A. Statutory Context: Part II vs Part III of the IBC

A crucial foundation of the Court’s reasoning is the distinction between:
  • Part II of IBC – Corporate Insolvency Resolution Process (CIRP), and
  • Part III of IBC – Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms.
Key structural points (as drawn from Dilip B. Jiwrajka and applied here):
  1. Section 7 (Part II) – Corporate Debtor:
    • When a financial creditor initiates CIRP against a corporate debtor under Section 7, the NCLT is immediately in an adjudicatory role on whether to admit or reject the application.
    • The Resolution Professional in Part II plays an active role in running the corporate debtor as a going concern, managing its affairs, and facilitating resolution or liquidation.
  2. Sections 94–100 (Part III) – Individual / Personal Guarantor:
    • Section 94: Application by the debtor (individual).
    • Section 95: Application by the creditor for initiating the insolvency resolution process.
    • On filing under Sections 94 or 95, an interim moratorium automatically commences under Section 96.
    • Section 97: The Adjudicating Authority appoints a Resolution Professional.
    • Section 99: The Resolution Professional:
      • Examines the application
      • Collects information and explanations from debtor/creditor
      • Submits a reasoned report recommending either acceptance or rejection of the application
      This role is “purely facilitative”, not adjudicatory.
    • Section 100: Only after the RP’s report does the NCLT’s adjudicatory function commence, to admit or reject the application, necessarily complying with principles of natural justice and affording a hearing to the debtor.
    • On admission under Section 100, Section 101 imposes a statutory moratorium on legal actions regarding the debt.
By emphasising this scheme, the Court underlined that the very design of Part III contemplates an orderly, staged decision-making process, starting with a limited inquiry and recommendation by the RP, and culminating in adjudication by NCLT. High Court intervention at the threshold would disrupt this carefully calibrated framework.

B. Precedents Cited and How They Shape the Judgment

1. Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 435

This Supreme Court judgment is central. It upheld the constitutional validity of Sections 95–100 IBC and clarified:
  • The RP’s role under Section 99 is “purely facilitative”, restricted to examining the application, gathering information, and submitting a reasoned recommendation.
  • The RP does not adjudicate on disputes; adjudication is the remit of the NCLT under Section 100.
  • Even though Section 100 does not explicitly mention a hearing, a right of hearing is read into the provision in keeping with principles of natural justice.
  • The powers given to the RP (to seek information, etc.) are proportionate and consistent with Articles 14 and 21 of the Constitution.
  • There is a clear and valid legislative distinction between:
    • CIRP under Part II (corporate debtors) and
    • Individual/partnership insolvency under Part III, particularly in the timing and scope of adjudicatory intervention and moratorium.
In Sanjay Jhunjhunwala, Justice Krishna Rao picks up two key strands from Jiwrajka:
  1. The staged nature of the Section 95–100 process: first, RP’s recommendatory report; second, NCLT’s adjudication.
  2. The limited, non-adjudicatory nature of the RP’s inquiry, which makes it inappropriate for a High Court to interfere before NCLT has applied its mind under Section 100.
The High Court thus aligns itself with the Supreme Court’s view that the integrity of the statutory framework must be preserved, and courts should not short-circuit it through writ jurisdiction.

2. Bank of Baroda v. Farooq Ali Khan, 2025 SCC OnLine SC 374

This case (as described in the judgment) directly addresses the very question raised here: can a High Court in writ jurisdiction interdict Section 95 proceedings? The Supreme Court held:
  • The High Court erred in using Article 226 to:
    • Preclude the statutory mechanism and procedure under the IBC; and
    • Arrive at findings about the existence of debt—a mixed question of fact and law properly within NCLT’s domain under Section 100.
  • When specialised tribunals like NCLT are constituted to decide such issues, High Courts should not substitute themselves for the statutory adjudicator.
  • The High Court in Farooq Ali Khan intervened even before the RP’s report under Section 99, thereby preventing the NCLT from performing its adjudicatory function.
  • Though judicial review is not excluded, High Courts must exercise restraint, especially where:
    • The issues are squarely within the legislative and regulatory framework of IBC; and
    • There is an in-built statutory process to examine the existence of debt and default.
Justice Krishna Rao applies these principles almost directly:
“In light of this statutory scheme… we are of the view that the High Court incorrectly exercised its writ jurisdiction… The High Court should have permitted the statutory process through the resolution professional and the Adjudicating Authority to take its course.”
Accordingly, in Sanjay Jhunjhunwala, the Court refuses to intervene in the pending Section 95 proceedings, emphasising that the appropriate process (RP’s report followed by NCLT’s decision under Section 100) must play out.

3. Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17

The petitioners relied on Swiss Ribbons to argue, via RBI’s Master Circular, that:
  • An account becomes a Non-Performing Asset (NPA) only if:
    • Interest/instalments are overdue for more than 90 days; and
    • Thereafter, remains substandard for a further period (12 months) before being classified as a doubtful asset.
  • Within the “grace period” discussed in Swiss Ribbons, the debtor is not yet in such default as to be irretrievably disqualified; this idea is used there in the context of eligibility to be a resolution applicant.
The petitioners attempted to transpose this framework to argue:
  • That no “default” within the meaning of IBC exists so long as the account is not classified as NPA, or at least until the NPA period matures; and
  • That any delay had been cured by payment of penal interest and future instalments, so creditor’s recourse against guarantors is extinguished.
The High Court does not directly accept or reject this reading on merits. Instead, it takes a jurisdictional stance:
  • Whether the invocation of IBC is contrary to RBI circulars, and whether default actually exists, are issues for the NCLT to decide under the IBC framework.
  • The High Court, in writ, will not transform itself into a fact-finding forum on such contested issues while Section 95 proceedings are pending.
Thus, Swiss Ribbons is acknowledged but effectively confined to its context; the petitioners are directed to raise their RBI-based arguments before NCLT.

4. K.K. Banijya Pvt. Ltd. v. Union of India, 2023 SCC OnLine Cal 1964

This coordinate bench decision of the Calcutta High Court is cited to support the proposition that:
  • Where the principal respondents are private entities (here, an NBFC and a security trustee), and
  • They are not discharging statutory public duties of the kind justiciable under writ,
a writ petition is generally not maintainable against them. Although the facts of K.K. Banijya are not elaborated in this judgment, the principle it underlines is reiterated and strengthened through S. Shobha v. Muthoot Finance.

5. S. Shobha v. Muthoot Finance Ltd., 2025 SCC OnLine SC 177

This is a key authority on the “public function” test and the amenability of private financial entities to writ jurisdiction. From the extracted passages:
  • The Supreme Court summarised that a writ under Article 226 may lie against:
    1. State Government
    2. Authority
    3. Statutory body
    4. Instrumentality or agency of the State
    5. Company financed and owned by the State
    6. Private body substantially funded by the State
    7. Private body discharging public duty or positive public obligation
    8. Person/body under statutory liability to discharge some public function
  • Merely being heavily regulated (e.g., by RBI) does not convert a private NBFC into a public authority.
  • An NBFC’s engagement in lending on commercial terms is not a public function of the type that attracts writ jurisdiction.
Justice Krishna Rao applies this to hold that:
  • Respondents 1–3 (NBFC, security trustee, borrower) are not “State” nor public authorities.
  • They are not shown to be discharging public duties in their lending/guarantee enforcement, as distinct from private commercial obligations.
  • Thus, mandamus or prohibition

6. Archana Wani v. Indian Bank, 2025 SCC OnLine Bom 4069

This Bombay High Court decision is invoked primarily for the proposition that:
  • Where orders sought in writ would directly impact or interfere with ongoing NCLT proceedings, High Courts should exercise restraint.
Again, specifics are not set out in detail, but the case supports the general theme: avoid parallel supervisory control over IBC proceedings via writs.

C. The Court’s Legal Reasoning

1. On Interdicting Section 95 Proceedings via Writ

The Court’s central holding is that the writ petition is not maintainable primarily because:
  • A Section 95 IBC proceeding is already pending before the NCLT.
  • The petitioners have a clear statutory pathway:
    • Participate in the RP’s examination under Section 99, and
    • Challenge the initiation and existence of debt/default before the NCLT under Section 100.
  • If aggrieved by the NCLT’s decision, they have an adequate appellate remedy before the National Company Law Appellate Tribunal (NCLAT).
In line with Jiwrajka and Farooq Ali Khan, the Court reiterates that:
“It is well settled that when statutory Tribunals are constituted to adjudicate and determine certain questions of law and fact, the High Courts do not substitute themselves as the decision making authority while exercising ‘judicial review’.”
Given that the Section 95 process had not yet even reached the stage of adjudication by NCLT, the High Court considered any intervention premature and unwarranted.

2. On the Petitioners’ Defence Based on RBI Master Circulars

The petitioners’ substantive argument was:
  • Under RBI’s Master Circular, a loan becomes NPA only if interest/instalments remain unpaid for more than 90 days.
  • Until NPA classification, there is arguably no “default” in the sense relevant for IBC.
  • Here, the borrower had:
    • Cleared all outstanding dues with penal interest, and
    • Even prepaid future quarterly instalments.
    Hence, the creditor had no subsisting claim against the principal borrower or guarantors.
  • Therefore, initiation of Section 95 proceedings is mala fide, contrary to RBI guidelines, and infringes Articles 14, 19(1)(g), and 21.
The Court’s approach is procedural rather than substantive:
  • It does not decide whether Section 95 was correctly invoked or whether the RBI Master Circular was breached.
  • Instead, it holds that such questions must be raised before NCLT, the “adjudicating authority” designated by the IBC.
  • The Court emphasises that:
    • The legality of the recall notice, and
    • Whether default exists despite repayments,
    are already left by the Division Bench to be considered by NCLT in the Section 7 proceeding.
This reinforces a key principle: substantive defences based on RBI guidelines and repayment facts are to be determined within the IBC framework, not via writs bypassing NCLT.

3. On Amenability of Respondents 1–3 to Writ Jurisdiction

The Court then addresses the nature of the respondents:
  • Respondents 1 and 2: Private companies (NBFC and security trustee).
  • Respondent 3: The principal borrower, also a company registered under the Companies Act.
Applying S. Shobha, the Court holds:
  • These entities are not “State” within Article 12.
  • No case is made out that they are discharging public duties of a nature amenable to writ control; they are engaged in private commercial activity (lending, securing and recovering private debts).
  • Mere RBI regulation does not convert them into public authorities or impose on them a public law duty enforceable by mandamus.
This substantially undercuts the petitioners’ attempt to frame a private lending dispute as a public law matter.

4. On the Role of RBI (Respondent No. 4)

The RBI is a statutory body and undoubtedly amenable to writ. However, the Court finds:
  • The petitioners had not approached RBI with any representation before filing the writ.
  • The only prayer involving RBI is a direction to it to issue directions to respondents 1 and 2 to follow RBI Master Circulars in dealing with personal guarantees.
  • No direct breach of any statutory duty by RBI is alleged; its impleadment is more in the nature of an attempt to anchor jurisdiction rather than assert a substantive cause of action against RBI.
The Court concludes that RBI has been unnecessarily impleaded, and its presence does not cure the underlying problems of maintainability and alternative remedy.

5. Effect of Prior Division Bench Order

The Division Bench in the borrower’s commercial suit specifically:
  • Allowed the lender to pursue its Section 7 IBC application.
  • Clarified that NCLT may decide the legality, validity and sufficiency of the recall notice to the extent of recalling.
  • Recorded that the borrower (respondent no. 3) does not object to NCLT deciding the Section 7 application in accordance with law.
In this context:
  • The Single Judge notes that the borrower and guarantors are integrally connected to the same lending transaction.
  • Questions about recall, default, and repayment are already left for NCLT’s determination in Section 7 proceedings.
  • It would be inappropriate and inconsistent for the High Court, in a writ, to simultaneously pre-empt the Section 95 proceeding against guarantors based on the same underlying disputes.
This reinforces the principle of institutional coherence and respect for prior judicial directions, favouring NCLT as the proper forum.

D. Relationship Between Corporate Debtor (Section 7) and Personal Guarantors (Section 95)

The judgment also clarifies the co-existence of proceedings:
  • Section 7 IBC (Part II): Against the corporate debtor (respondent 3), initiated by respondent 1.
  • Section 95 IBC (Part III): Against the personal guarantors (petitioners), initiated by respondent 2 under contractual authority.
The Court highlights:
  • The statutes expressly permit parallel proceedings against corporate debtors and their personal guarantors.
  • Clause 17.1.6 of the loan agreement authorises the lender/security trustee to take IBC steps against borrower, obligors and any other security provider, and treats the lender’s security enforcement as “exclusive and independent.”
Thus:
  • The existence of a Section 7 proceeding does not bar a Section 95 proceeding.
  • Any contention that guarantor liability has been extinguished by repayment is a substantive defence to be examined under the IBC process, not via writ.

IV. Complex Concepts Simplified

A. Corporate Debtor vs Personal Guarantor

  • Corporate Debtor: A company (like respondent 3) which has taken loans and allegedly defaulted. Proceeded against under Part II IBC, usually through a Section 7 application (filed by a financial creditor).
  • Personal Guarantor: An individual (like the petitioners) who promises to pay the debt of the corporate debtor if the debtor defaults. Their insolvency and bankruptcy are governed by Part III IBC, particularly Sections 94–100.
Both can be proceeded against simultaneously under the IBC.

B. “Default”, NPA and RBI Master Circulars

  • Default (IBC): Non-payment of debt when it has become due and payable. IBC focuses on existence of default, which is a factual and contractual question.
  • NPA (Non-Performing Asset): Under RBI’s prudential norms, an asset becomes an NPA when interest or instalment of principal is overdue for a specified period (typically 90 days). This is an accounting/regulatory classification for banks’ balance sheets, but often overlaps with default.
  • RBI Master Circulars: Regulatory directions to banks/NBFCs on asset classification, income recognition, and fair lending practices. They:
    • Guide how lenders treat overdue accounts.
    • Do not by themselves confer or extinguish substantive rights under private contracts, but can be invoked to show arbitrariness or regulatory non-compliance.
In this case, whether RBI norms permit the actions taken is a question to be tested in the IBC forum.

C. NCLT and NCLAT

  • NCLT (National Company Law Tribunal): The Adjudicating Authority under the IBC for:
    • Corporate insolvency (Part II), and
    • Bankruptcy of personal guarantors of corporate debtors (Part III, via Section 60 IBC).
  • NCLAT (National Company Law Appellate Tribunal): The statutory appellate forum against NCLT orders under IBC.
The IBC is designed as a self-contained code where these specialised tribunals decide insolvency issues.

D. Part II vs Part III of IBC & Moratorium

  • Part II: Deals with corporate persons. Once CIRP is admitted, a moratorium under Section 14 bars certain proceedings against the corporate debtor.
  • Part III: Deals with individuals and partnership firms. Two levels:
    • Section 96 interim moratorium: Starts from the date of filing the application (Sections 94/95); stays pending actions in respect of debt.
    • Section 101 moratorium: Starts from admission of the application under Section 100.
The Court underscores that in Part III, adjudication by NCLT comes only after the RP’s report.

E. Writs: Mandamus, Certiorari, Prohibition, Rule Nisi

  • Mandamus: A writ directing a public authority to perform a public or statutory duty. In private commercial disputes, it is usually not available unless a statutory public duty is shown.
  • Certiorari: A writ to quash an order of a lower court/tribunal for jurisdictional error or violation of natural justice.
  • Prohibition: A writ preventing a court/tribunal from proceeding further when it lacks jurisdiction or is acting contrary to law.
  • Rule Nisi: A “show cause” order calling upon respondents to explain why the writ prayed for should not be made absolute.
In this case, the petitioners sought all three core writs (mandamus, certiorari, prohibition) to effectively stop the Section 95 process. The Court declined, given the statutory scheme and lack of public law element.

F. “State” Under Article 12 and the Public Function Test

  • Article 12 “State”: Includes the Government, Parliament/Legislature, and any authority or body under the control of the Government that performs public functions.
  • Public Function Test: Even a private body may be amenable to writ jurisdiction if:
    • It performs functions traditionally associated with the State; or
    • Its functions are of significant public importance or fundamental to the lives of the people.
  • NBFCs and banks: While they handle public funds and are heavily regulated, their primary lending activity, in bilateral commercial arrangements, is treated as private commercial activity, not a sovereign or public duty, unless special circumstances exist.
The Court, following S. Shobha, places respondent NBFC and trustee squarely in the private category.

V. Impact and Implications

A. For Personal Guarantors and Borrowers

  • Guarantors cannot easily resort to writ petitions to strike down or stall Section 95 proceedings merely by invoking RBI circulars or alleging repayment.
  • Arguments that:
    • No default exists,
    • Loans have been regularised or pre-paid, or
    • RBI norms have been violated,
    must be urged within the IBC framework before NCLT/NCLAT.
  • The decision emphasises that the personal insolvency regime for guarantors is now operational, robust, and judicially endorsed, limiting room for collateral challenges.

B. For Lenders and Security Trustees

  • Lenders and security trustees gain greater certainty that their recourse to Section 95 IBC will not be lightly thwarted via writ petitions.
  • Contractual clauses like Clause 17.1.6, permitting IBC actions against borrowers and guarantors, receive implicit judicial recognition.
  • However, lenders must still be prepared to defend their actions before NCLT on merits (lawful recall, existence of default, compliance with RBI norms), as the judgment only insulates the process from collateral writ challenges, not from substantive scrutiny.

C. For the Scope of Article 226 vis-à-vis IBC

This judgment tightens the already emerging jurisprudence on minimal High Court interference in IBC processes, especially:
  • When the challenge is to:
    • Pending insolvency applications (Section 7 or Section 95), or
    • Steps in the statutorily-designed resolution process.
  • When no constitutional invalidity of IBC provisions is raised (as opposed to the situation in Jiwrajka or Swiss Ribbons).
It underscores a now-settled pattern:
  • Use Article 226 primarily for:
    • Cases of patent lack of jurisdiction,
    • Gross violation of natural justice, or
    • Challenges to the vires of the statute or rules.
  • Do not use it as a parallel appellate or fact-finding forum over specialised tribunals like NCLT/NCLAT.

D. On the Interface Between RBI Regulation and IBC

The decision implicitly signals that:
  • Compliance or non-compliance with RBI Master Circulars is a relevant factor but not a separate, independent gateway to derail IBC proceedings via writ petitions.
  • Both lenders and borrowers/guarantors should treat RBI guidelines as:
    • A framework for conduct and fairness,
    • But one whose application and breach are primarily adjudicated in the specialised forum (NCLT), especially where insolvency proceedings are already on foot.

E. Judicial Economy and Consistency

By deferring issues of recall, default, and validity of notices to NCLT—consistent with the Division Bench’s earlier order—the Court:
  • Prevents fragmentation of disputes between civil courts, writ courts, and NCLT.
  • Promotes coherent adjudication within the statutory scheme of IBC.
  • Sends a clear signal against forum-shopping and parallel challenges designed to delay or dilute insolvency proceedings.

VI. Conclusion

The judgment in Sanjay Jhunjhunwala & Ors. v. Piramal Finance Ltd. & Ors. firmly situates itself within the evolving, but now quite clear, jurisprudence on the primacy of NCLT in insolvency matters and the limited role of writ courts in supervising IBC processes. Key takeaways:
  1. Personal guarantor insolvency under Section 95 IBC is to be worked out within the statutory framework of Sections 95–100, starting with the RP’s report and culminating in NCLT’s adjudication. High Courts will not ordinarily pre-empt this process.
  2. Private lenders and security trustees are not per se amenable to writ jurisdiction in ordinary lending disputes, even if regulated by RBI, unless they discharge a public function or duty in a relevant sense.
  3. Allegations of overreach by lenders—whether based on RBI guidelines, repayments, or sufficiency of default—are matters for NCLT/NCLAT, not grounds for bypassing IBC through writ petitions.
  4. The decision reinforces the view that the IBC is a self-contained code with its own hierarchy of decision-making and appeals, and that judicial review under Article 226 is supervisory and exceptional, not routine or substitutive.
In the broader legal context, this judgment:
  • Consolidates the post-Jiwrajka and Farooq Ali Khan approach to personal guarantor insolvency;
  • Discourages collateral challenges to IBC proceedings under the guise of public law remedies; and
  • Strengthens the predictability and coherence of the insolvency framework, which is vital for credit markets and financial stability.
Ultimately, the Court’s message is clear: if the grievance is about whether there is a default, whether RBI norms have been violated, or whether a recall was justified, the right forum is the NCLT—not the writ court.

Case Details

Year: 2025
Court: Calcutta High Court

Judge(s)

The Hon'ble Justice Krishna Rao

Advocates

Comments

© 2023 Gauge Data Solutions Pvt. Ltd. | Terms