Calcutta High Court: Writ Petition Cannot Stop Personal Insolvency Proceedings Under IBC

The Calcutta High Court has held that a writ petition cannot be used to stop personal insolvency proceedings initiated under Section 95 of the Insolvency and Bankruptcy Code (IBC). The ruling came in Sanjay Jhunjhunwala v. Piramal Finance, where Justice Krishna Rao said that the IBC already provides a complete dispute-resolution system, including appeal rights, and this must be followed before turning to the High Court.

The Court clarified that issues such as default, recall notices, and compliance with RBI guidelines must be examined only by the National Company Law Tribunal (NCLT). Since Section 95 proceedings were already pending, the petitioners had to raise all their objections before the NCLT and, if needed, the NCLAT.

The petitioners had given personal guarantees for loans to Piramal Finance. They argued that the borrower had cleared most dues, including penal charges, and had prepaid future instalments. According to them, only a small amount remained unpaid and was “not yet due”, so invoking Section 95 was unlawful and violated Articles 14, 19(1)(g) and 21.

Piramal Finance disagreed, stating that the loan agreement allowed them to start insolvency proceedings. They also pointed out that both the Section 7 case against the borrower and the Section 95 case against the guarantors were pending before the NCLT. Further, Piramal Finance and the security trustee were private entities, and therefore a writ petition under Article 226 would not lie against them.

The High Court agreed that the disputes involved detailed factual assessment and must be decided through the statutory IBC process. It added that writ jurisdiction cannot be invoked when an effective alternative remedy exists before the NCLT.

Finding no violation of fundamental rights, the Court dismissed the writ petition.