The Supreme Court on Thursday set aside a judgment by the Karnataka High Court and reinstated personal insolvency proceedings against Farooq Ali Khan, a promoter and director of Associate Décor Limited. .The apex court held that the High Court had incorrectly exercised its writ jurisdiction by intervening in the statutory process under the Insolvency and Bankruptcy Code (IBC), 2016.A bench of Justices PS Narasimha and Manoj Misra held, “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.”.The case centered on whether the High Court had justifiably invoked its judicial review powers under Article 226 of the Constitution to prevent personal insolvency proceedings against Khan, who argued that his liability as a guarantor had been waived. The proceedings stemmed from a personal guarantee Khan had provided for loans taken by Associate Décor Limited from a consortium of banks, including Bank of Baroda.Associate Décor Limited, facing the corporate insolvency resolution process (CIRP), had defaulted on loans secured by Khan's personal guarantee. Bank of Baroda initiated personal insolvency proceedings against Khan under Section 95 of the IBC. The National Company Law Tribunal (NCLT), Bengaluru appointed a resolution professional to examine the application and submit a report under Section 99 of the IBC.Khan challenged this order in the Karnataka High Court, claiming his liability had been waived. The High Court ruled in his favour, halting the insolvency proceedings..The Supreme Court, however, set aside the High Court's order, emphasising the statutory scheme under the IBC. The bench highlighted that the High Court had erred by intervening before the resolution professional could submit their report, a critical step under Section 99 of the IBC.“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. 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 judgment said. It stressed that the High Court had prematurely examined the validity of Khan's guarantee, a matter within the adjudicating authority's purview..The Court thus restored the proceedings before the NCLT and requested it to expedite the matter, considering that it has been pending since 2021..Bank of Baroda was represented by Solicitor General Tushar Mehta with Advocates Madhav Kanoria, Srideepa Bhattacharyya, Neha Shivhare and Sumit Attri from Cyril Amarchand Mangaldas. .Khan was represented by Senior Advocate Shyam Mehta with Advocates Ishwar Singh, Shivam Singh, Sivaramakrishnan, Varad Kilor, Vinay N Kumar and Gopal Singh..[Read Judgment]
The Supreme Court on Thursday set aside a judgment by the Karnataka High Court and reinstated personal insolvency proceedings against Farooq Ali Khan, a promoter and director of Associate Décor Limited. .The apex court held that the High Court had incorrectly exercised its writ jurisdiction by intervening in the statutory process under the Insolvency and Bankruptcy Code (IBC), 2016.A bench of Justices PS Narasimha and Manoj Misra held, “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.”.The case centered on whether the High Court had justifiably invoked its judicial review powers under Article 226 of the Constitution to prevent personal insolvency proceedings against Khan, who argued that his liability as a guarantor had been waived. The proceedings stemmed from a personal guarantee Khan had provided for loans taken by Associate Décor Limited from a consortium of banks, including Bank of Baroda.Associate Décor Limited, facing the corporate insolvency resolution process (CIRP), had defaulted on loans secured by Khan's personal guarantee. Bank of Baroda initiated personal insolvency proceedings against Khan under Section 95 of the IBC. The National Company Law Tribunal (NCLT), Bengaluru appointed a resolution professional to examine the application and submit a report under Section 99 of the IBC.Khan challenged this order in the Karnataka High Court, claiming his liability had been waived. The High Court ruled in his favour, halting the insolvency proceedings..The Supreme Court, however, set aside the High Court's order, emphasising the statutory scheme under the IBC. The bench highlighted that the High Court had erred by intervening before the resolution professional could submit their report, a critical step under Section 99 of the IBC.“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. 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 judgment said. It stressed that the High Court had prematurely examined the validity of Khan's guarantee, a matter within the adjudicating authority's purview..The Court thus restored the proceedings before the NCLT and requested it to expedite the matter, considering that it has been pending since 2021..Bank of Baroda was represented by Solicitor General Tushar Mehta with Advocates Madhav Kanoria, Srideepa Bhattacharyya, Neha Shivhare and Sumit Attri from Cyril Amarchand Mangaldas. .Khan was represented by Senior Advocate Shyam Mehta with Advocates Ishwar Singh, Shivam Singh, Sivaramakrishnan, Varad Kilor, Vinay N Kumar and Gopal Singh..[Read Judgment]
