'High Courts Do Not Substitute Statutory Tribunals', Calcutta High Court Refuses To Halt Guarantors' Insolvency Proceedings

The Calcutta High Court  on Wednesday held that it cannot interfere with personal insolvency proceedings initiated under the Insolvency and Bankruptcy Code, holding that such proceedings must take their course before the National Company Law Tribunal.

A single bench of Justice Krishna Rao said the High Court could not halt a proceeding that falls within the jurisdiction of the adjudicating authority.

The court said, “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 also said, “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.”

The case concerned insolvency petitions filed against guarantors Sanjay Jhunjhunwala and others, who had furnished guarantees securing credit facilities extended to the borrowing company. Piramal Finance Limited recalled the loan on June 13, 2025, demanding repayment of Rs 92.83 crore, and its Security Trustee Catalyst Trusteeship Limited issued a demand notice and filed a Personal Guarantor insolvency plea on 25 June 2025. Two proceedings were pending before the NCLT, a CIRP application against the borrowing company and a proceeding under insolvency plea against the guarantors.

The guarantors argued that the borrowing company had already paid all outstanding dues along with penal interest and had even paid future quarterly instalments. They said that only Rs 27.71 crore out of Rs 102 crore remained outstanding, that the amount was not yet due, and that they intended to clear it by January 2026.

They said that once the borrower had paid the dues, no claim remained against guarantors. They also argued that the lender could not classify the account as a non performing asset because the RBI Master Circular requires a continuous 90 day default.

Piramal Finance said that the questions raised by the guarantors could only be decided by the NCLT. It submitted that the loan agreement authorised the Security Trustee to initiate the proceedings and that the borrower had already filed a commercial suit in which the Division Bench had clarified on November 3, 2025 that the “legality, validity and sufficiency of the recall notice and the follow up notices may be decided upon by the NCLT, if so raised to the extent of recalling.”

It said that the guarantors had not made any representation to the Reserve Bank of India despite seeking directions relating to the Master Circular.

The court said that the insolvency proceedings against personal guarantors had not even reached the stage where the Resolution Professional submits a report under Section 99 and that any interference now would defeat the design of the Code.

It allowed the guarantors to raise all issues before the adjudicating authority. 

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