Bank Of Baroda vs Farooq Ali Khan

2025 INSC 253 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2759/2025 ARISING OUT OF SLP (C) NO. 18062 OF 2024

BANK OF BARODA ...APPELLANT(S)

VERSUS

FAROOQ ALI KHAN & ORS. …RESPONDENT(S)

JUDGMENT

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Leave granted.

2. The question for our consideration is whether the High Court

could have justifiably invoked judicial review under Article 226 of

the Constitution to interdict personal insolvency proceedings

initiated against respondent no.1 under Section 95 of the

Insolvency and Bankruptcy Code, 2016 1 by holding that his

liability as a debtor has been waived. The High Court jurisdiction

was invoked against the order of the Adjudicating Authority dated Signature Not Verified

16.02.2024 appointing a resolution professional and directing him Digitally signed by KAPIL TANDON Date: 2025.02.20 18:14:42 IST Reason: 1 Hereinafter ‘IBC’.

1 to examine the application under Section 95 and file a report under

Section 99 of the IBC. Having considered the facts, legal

submissions, and for the reasons to follow, we set aside the

judgment and order passed by the High Court and restore the

proceedings before the Adjudicatory Authority from the time of its

order dated 16.02.2024 directing the resolution professional to

submit a report as provided under Section 99 of the IBC.

3. The relevant facts are that respondent no. 1 was a promoter

and director of one Associate Décor Limited 2. While corporate

insolvency resolution proceeding3 has been initiated against the

corporate debtor as well, this is not the subject matter of the

present appeal, which is restricted to the personal insolvency

proceedings against respondent no. 1. Commencing from 2010,

the corporate debtor took various loans from the appellant and

respondent nos. 3 and 4, who are a consortium of banks.

Respondent no. 1 entered into a deed of guarantee for securing

these loans on 10.07.2014. Due to default in payments by the

corporate debtor, and after initiation of CIRP against it, the

appellant issued a demand notice dated 11.08.2020 and invoked

the deed of personal guarantee calling upon respondent no. 1 and

2 Hereinafter ‘corporate debtor’.

3 Hereinafter ‘CIRP’.

2 other guarantors to pay an amount of Rs. 244 crores. However, by

letter dated 14.12.2020, respondent no. 1 and other guarantors

offered Rs. 25 crores as full and final settlement.

4. After issuing a Demand Notice in Form B under Rule 7(1) of

the Insolvency and Bankruptcy (Application to Adjudicating

Authority for Insolvency Resolution Process for Personal

Guarantors to Corporate Debtors) Rules, 20194 on 22.02.2021, the

appellant filed an application under Section 95(1) of the IBC read

with Rule 7(2) of the Rules to initiate personal insolvency

proceedings against respondent no. 1.

5. The Adjudicating Authority, by order dated 16.02.2024,

appointed a resolution professional and directed him to examine

the application and submit his report as provided in Section 99 of

the IBC for approval or rejection of the application. On objections

raised by respondent no. 1 on limitation and the validity and

existence of the personal guarantee, the Adjudicating Authority,

relying on the judgment of this Court in Dilip B. Jiwrajka v. Union

of India 5, stated that “the issue/objections raised by the Ld.

Counsel for the Personal Guarantor will be considered after the

4 Hereinafter ‘Rules’.

5 (2024) 5 SCC 435.

3 submission of the report by the Resolution Professional and

response of the Personal Guarantor on the same”.

6. Respondent no. 1 preferred a writ petition before the High

Court under Article 226 of the Constitution to prohibit the

Adjudicating Authority from entertaining the personal insolvency

petition against him, primarily on the ground that his liability as a

personal guarantor stood waived and discharged. The High Court,

vide the order impugned before us, allowed the writ petition and

held that the personal insolvency proceedings are not

maintainable as respondent no. 1’s liability as a guarantor had

stood waived. In order to arrive at this finding, the High Court

examined various documents pertaining to the guarantee and the

loans. It further held that this Court in Jiwrajka (supra) was not

considering an application that was not maintainable before the

Adjudicating Authority, and thereby distinguished the same.

Pursuant to the impugned order passed by the High Court, the

Adjudicating Authority disposed of the insolvency proceedings

against respondent no. 1 by order dated 19.06.2024.

7. We have heard Mr. Tushar Mehta, learned Solicitor General

for the appellant and Mr. Shyam Mehta, learned senior counsel for

respondent no. 1 in detail.

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8. The simple question for our consideration is whether the High

Court correctly exercised its writ jurisdiction to interdict the

personal insolvency proceedings under the IBC against respondent

no. 1. It is necessary to appreciate the statutory scheme regarding

the admission of an application for initiating personal insolvency

under Part III, Chapter III of the IBC. This Court in Jiwrajka

(supra), while deciding the constitutional validity of Sections 95 to

100, has delved into the same and has held as follows. Pursuant

to an application for initiating personal insolvency proceedings

under Section 94 or Section 95, the Adjudicating Authority

appoints a resolution professional under Section 97. The

resolution professional performs distinct functions under Part II

(dealing with corporate insolvencies) and Part III (dealing with

personal insolvencies) of the IBC. 6 Under Part III, Chapter III, the

resolution professional performs a facilitative role of collating

information, as provided under Section 99 of the IBC, in which the

resolution professional examines the application, determines

whether the debt has been repaid, and submits a report to the

Adjudicating Authority recommending the admission or rejection

of the application. 7 It is only after the submission of this report

6 Jiwrajka (supra), para 50.

7 Ibid, paras 54 and 55.

5 that the Adjudicating Authority’s adjudicatory functions

commence under Section 100. At this stage, the Adjudicating

Authority determines whether to admit or reject the application for

initiating insolvency. 8 These principles have been summarized as

follows:

“86.1. No judicial adjudication is involved at the stages envisaged in Section 95 to Section 99 IBC;

[…] 86.3. The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining “jurisdictional facts” at the stage when it appoints a resolution professional under Section 97(5) IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review;

[…] 86.6. No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100.”

9. The Adjudicating Authority, by its order dated 16.02.2024,

has followed the procedure envisaged under Sections 95 to 100 of

the IBC, and has also relied on the afore-stated principles in

Jiwrajka (supra). It specifically observed that respondent no. 1’s

objections regarding limitation and waiver of the guarantee will be

considered once the resolution professional submits his report.

This is the correct approach as the appointment of a resolution

8 ibid, paras 60 and 74.

6 professional, at the very threshold, is statutorily mandated under

Section 97 of the IBC. As has been held by this Court in Jiwrajka

(supra), the Adjudicating Authority does not adjudicate any point

at this stage and need not decide jurisdictional questions regarding

existence of the debt before appointing the resolution

professional.9 This is because Section 99 requires the resolution

professional to, at the first instance, gather information and

evidence regarding repayment of the debt, and ascertain whether

the application satisfies the requirements of Section 94 or

Section 95 of the IBC. The existence of the debt will first be

examined by the resolution professional in his report, and will then

be judicially examined by the Adjudicating Authority when it

decides whether to admit or reject the application under

Section 100. 10

10. In light of this statutory scheme, which has been followed by

the Adjudicating Authority, we are of the view that the High Court

incorrectly exercised its writ jurisdiction as: first, it precluded the

statutory mechanism and procedure under the IBC from taking its

course, and second, to do so, the High Court arrived at a finding

regarding the existence of the debt, which is a mixed question of

9 ibid, paras 72, 86.1 and 86.3.

10 ibid, para 74.

7 law and fact that is within the domain of the Adjudicating

Authority under Section 100 of the IBC. 11

11. 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. 12 In the present case, the

proceedings had not even reached the stage where the

Adjudicatory Authority was required to make such determination.

Rather, the High Court exercised jurisdiction even prior to the

submission of the resolution professional’s report, thereby

precluding the Adjudicating Authority from performing its

adjudicatory function under the IBC.

12. While there is no exclusion of power of judicial review of High

Courts, and the limits and restraint that the constitutional court

exercises and must exercise are well articulated 13, the primary

issues involved in the present case, including the factual

determination of whether the debt exists, is part of the statutory

and regulatory regime of the Insolvency and Bankruptcy Code. In

11 ibid.

12 Thansingh Nathmal v. Superintendent of Taxes, Dhubri, AIR 1964 SC 1419, para 7; United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, paras 43, 45; Commissioner of Income Tax v. Chhabil Dass Agarwal, (2014) 1 SCC 603, para 15; South Indian Bank Ltd v. Naveen Mathew Philip, 2023 SCC OnLine SC 435, para 14. 13 Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1, para 15; Harbanslal Sahnia v. Indian Oil Corporation Ltd, (2003) 2 SCC 107, para 7.

8 fact, the entire rationale behind appointing a resolution

professional under Section 97 is to facilitate this determination by

the Adjudicating Authority. The High Court ought not to have

interdicted the proceedings under the statute and assumed what

it did while exercising jurisdiction under Article 226 of the

Constitution.14 In this view of the matter, we are of the opinion that

the High Court was not justified in allowing respondent no. 1’s writ

petition. The High Court should have permitted the statutory

process through the resolution professional and the Adjudicating

Authority to take its course.

13. In Mohammed Enterprises (Tanzania) Ltd v. Farooq Ali Khan, 15

while setting aside the judgment of the same High Court interfering

with the CIRP proceedings against the same corporate debtor, we

expressed the same principle in the following terms:

“15…High Court should have noted that Insolvency and Bankruptcy Code is a complete code in itself, having sufficient checks and balances, remedial avenues and appeals. Adherence of protocols and procedures maintains legal discipline and preserves the balance between the need for order and the quest for justice. The supervisory and judicial review powers vested in High Courts represent critical constitutional safeguards, yet their exercise demands rigorous scrutiny and judicious application. This is certainly not a case for the High Court to interdict CIRP proceedings under the Insolvency and Bankruptcy Code.”

14 See Union of India v. V.N. Singh, (2010) 5 SCC 579; Executive Engineer Southern Electricity Supply Company of Orissa Ltd. v. Seetaram Rice Mill, (2012) 2 SCC 108, para 80; Radha Krishan Industries v. State of Himachal Pradesh, (2021) 6 SCC 771, para 27.6.

15 2025 SCC OnLine SC 23.

9 14. In view of the above reasons, we allow the present appeal and

set aside the impugned order dated 28.05.2024 by the Karnataka

High Court in Writ Petition No. 6288/2024 (GM-RES).

Consequently, the appellant’s application in C.P.(IB)

No. 139/BB/2022 is restored to the record of the National

Company Law Tribunal, Bengaluru, and it shall proceed from the

stage of passing of the order dated 16.02.2024. Considering the

fact that the matter has been pending since 2021, we request the

Tribunal to decide the same as expeditiously as possible.

15. No order as to costs.

16. Pending applications, if any, disposed of.

………………………………....J. [PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J. [MANOJ MISRA]

NEW DELHI;

FEBRUARY 20, 2025.

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