| ASPECTS | DETAILS |
| Case Name | Bank of Baroda vs. Farooq Ali Khan & Ors. (2025 INSC 253) |
| Introduction | The Supreme Court of India ruled on whether the Karnataka High Court rightly exercised its judicial review powers under Article 226 of the Constitution to halt personal insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016 against a personal guarantor. The key issue was whether the High Court could intervene before the statutory process under the IBC was completed. |
| Factual Background | Bank of Baroda, along with a consortium of banks, sanctioned loans to Associate Décor Ltd., where Farooq Ali Khan (respondent no.1) was a promoter and personal guarantor. After the corporate debtor defaulted, the bank invoked the personal guarantee for ₹244 crores. Respondent no.1 challenged the personal insolvency proceedings under Section 95 of the IBC, arguing that his liability as a guarantor was waived. The Karnataka High Court ruled in his favor, stopping the insolvency process. |
| Legal Issues |
|
| Applicable Law |
|
| Analysis | The Supreme Court of India held that the High Court’s intervention was premature and unjustified. The Adjudicating Authority had correctly followed the statutory insolvency resolution process by appointing a Resolution Professional (RP) to assess the debt under Section 99 of IBC. The High Court’s decision bypassed the statutory framework, preventing the NCLT from deciding the case on its merits. The Court reiterated that personal insolvency proceedings must follow the IBC’s structured approach, ensuring due process is maintained. |
| Conclusion | The Supreme Court set aside the Karnataka High Court’s order, restoring the personal insolvency proceedings before the National Company Law Tribunal (NCLT), Bengaluru. It emphasized that judicial intervention should not disrupt the statutory mechanism of the IBC. The Court also clarified that personal guarantors to corporate debtors are subject to the insolvency resolution process under the IBC. |
| Current Scenario | The Supreme Court directed the NCLT to continue hearing the personal insolvency case from where it was halted, ensuring an expedited resolution. This decision reinforces the IBC’s objective of speedy debt recovery and strengthens the framework for personal guarantor liability under insolvency law. |
CASE SUMMARY – The Supreme Court ruled that the Karnataka High Court wrongly exercised its writ jurisdiction under Article 226, interfering in personal insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016. The case involved a ₹244 crore default, where the bank invoked a personal guarantee. The Supreme Court upheld the IBC framework, emphasizing that personal guarantors to corporate debtors must face insolvency proceedings. The judgment restored the case to the National Company Law Tribunal (NCLT), Bengaluru, ensuring an expedited resolution under the IBC.
“Judicial intervention should not derail the statutory process under the Insolvency and Bankruptcy Code (IBC), 2016.”
SOURCE- SUPREME COURT OF INDIA
