Supreme Court overturns premature writ intervention in personal insolvency proceedings under Section 95 IBC 2016

SC allowed appeal against HC's premature exercise of writ jurisdiction under Article 226 to interdict personal insolvency proceedings under Section 95 of IBC, 2016. HC incorrectly intervened before resolution professional could submit report and before Adjudicating Authority could determine debt existence under Section 100. Court held that statutory tribunals should be permitted to complete their adjudicatory functions before judicial review, and HC should not substitute itself as decision-making authority. The premature writ intervention precluded proper statutory process from taking course.

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The Supreme Court considered whether the High Court was justified in invoking judicial review under Article 226 of the Constitution to interdict personal insolvency proceedings against respondent no. 1 under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) based on the waiver of liability as a debtor. The High Court had allowed the writ petition, holding that the personal insolvency proceedings were not maintainable due to the waiver of liability. However, the Supreme Court set aside the High Court's judgment and restored the proceedings before the Adjudicatory Authority.The relevant facts involved respondent no. 1 being a promoter and director of a corporate debtor who had taken loans from the appellant and other banks. After default in payments, the appellant invoked the deed of personal guarantee, leading to the initiation of personal insolvency proceedings against respondent no. 1 under Section 95 of the IBC.The Adjudicating Authority appointed a resolution professional to examine the application and submit a report under Section 99 of the IBC. Respondent no. 1 raised objections regarding limitation and the validity of the personal guarantee. The Adjudicating Authority decided to consider these objections after the submission of the resolution professional's report, following the principles established in Dilip B. Jiwrajka v. Union of India.Respondent no. 1 filed a writ petition before the High Court, challenging the personal insolvency petition against him. The High Court allowed the writ petition, finding that the personal insolvency proceedings were not maintainable as the liability as a guarantor had been waived. The High Court's decision led to the disposal of the insolvency proceedings against respondent no. 1.The Supreme Court analyzed the statutory scheme under the IBC, emphasizing that the resolution professional's report is recommendatory and does not bind the Adjudicating Authority. The Court highlighted that the High Court's intervention precluded the statutory mechanism and the Adjudicating Authority's adjudicatory function under the IBC. The Court reiterated that statutory tribunals should determine questions of law and fact, and High Courts should not substitute themselves in such matters.The Supreme Court held that the High Court's exercise of writ jurisdiction was incorrect as it interfered with the statutory process and made determinations that fell within the Adjudicating Authority's domain. The Court emphasized the importance of following the statutory procedures under the IBC and allowing the resolution professional and Adjudicating Authority to carry out their functions.In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's order and restoring the appellant's application before the National Company Law Tribunal. The Court requested the Tribunal to expedite the decision on the matter, considering its pending status since 2021. No costs were awarded, and pending applications were disposed of.

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