The High Court improperly exercised its jurisdiction under Article 226, disrupting the statutory process of personal insolvency proceedings mandated by the Insolvency and Bankruptcy Code.

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, 2016¹[Hereinafter ‘IBC’.] 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 16.02.2024 appointing a resolution professional and directing him 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 Limited²[Hereinafter ‘corporate debtor’]. While corporate insolvency resolution proceeding³[Hereinafter ‘CIRP’] 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 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[Hereinafter ‘Rules’] 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, (2024) 5 SCC 435, stated that “the issue/objections raised by the Ld. Counsel for the Personal Guarantor will be considered after the 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