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Bank of Baroda v. Farooq Ali Khan

Civil Appeal · 2025 INSC 253Decided 20 Feb 2025
Civil Appeal No. 2759/2025 (arising out of SLP(C) No. 18062 of 2024)
Justice Pamidighantam Sri Narasimha · Justice Manoj Misra

Background

Farooq Ali Khan had personally guaranteed loans taken by a corporate borrower, Associate Décor Limited, from a consortium of banks led by Bank of Baroda. After the company defaulted, Bank of Baroda invoked the personal guarantee and moved the National Company Law Tribunal (as Adjudicating Authority) under the IBC to start personal insolvency proceedings against him. The Adjudicating Authority appointed a resolution professional to examine the claim, but before that professional could even submit a report, Khan went to the Karnataka High Court, which used its writ powers to halt the insolvency process by ruling that his guarantee liability had already been waived.

Decision Breakdown

The Supreme Court held that the High Court jumped the gun. Relying on its earlier ruling in Dilip B. Jiwrajka v. Union of India, the Court explained that under Sections 95 to 100 of the IBC, no judicial determination of issues like waiver or limitation is meant to happen until the resolution professional submits a recommendatory report and the Adjudicating Authority then decides under Section 100 whether to admit the case. Since the process hadn't even reached that stage, the High Court had no business deciding disputed facts about the guarantee under Article 226 and effectively short-circuited a complete statutory scheme with its own checks and balances. The Court set aside the High Court's order and restored the proceedings to the stage of the resolution professional's report.

Lesson Learnt

Courts will generally not let writ petitions be used to jump ahead of a specialised statutory process (like IBC insolvency proceedings) before it has run its proper course: factual disputes such as whether a debt or guarantee still exists must first go through the process Parliament designed (resolution professional's report, then adjudication), not be decided prematurely by a High Court.

Official source (sci.gov.in)View Judgment (PDF)

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