Writ Proceedings Can’t Interdict Proceedings Of IBC: MP HC

The Madhya Pradesh High Court has dismissed a writ petition filed by personal guarantors of a corporate debtor challenging a fresh demand notice issued by Bank of Baroda under the Insolvency and Bankruptcy regime, holding that the Insolvency and Bankruptcy Code (IBC) is a self-contained statute and that writ jurisdiction cannot be invoked at the stage of a show cause notice. The bench of Justice Vishal Mishra ruled that the petition was premature and not maintainable, particularly when parallel proceedings were already pending before appellate forums under the IBC. The dispute stems from credit facilities extended in 2011 by the Bank to M/s Extol Industries Ltd., a company engaged in the manufacture of wind turbines. The loan was subsequently restructured in 2013 and 2015. According to the petitioners, the company had regularly serviced its debt, and “no dues” certificates were issued in October 2015 and January 2016. Despite this, the Bank classified the account as a Non-Performing Asset (NPA) with effect from March 31, 2016, and later issued a demand notice dated December 11, 2017 under the SARFAESI Act, claiming over ₹24.83 crore. The classification and demand were challenged before the Debts Recovery Tribunal (DRT), Jabalpur. On December 9, 2024, the DRT set aside both the NPA classification and the 2017 demand notice. However, the Bank challenged this decision before the Debts Recovery Appellate Tribunal (DRAT), Allahabad, where the appeal remains pending. Parallelly, the Bank initiated insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 against M/s Extol Industries Ltd. before the National Company Law Tribunal (NCLT), Indore. The NCLT admitted the corporate insolvency resolution process (CIRP) on March 23, 2025. The admission order was upheld by the National Company Law Appellate Tribunal (NCLAT) on May 30, 2025. A further challenge is pending before the Supreme Court. The NCLAT observed that when all facts and documents were considered together, “the Corporate Debtor stood as a defaulter qua the debt borrowed from the Financial Creditor since 31.03.2016.” While the insolvency proceedings against the company were ongoing, the Bank issued a fresh demand notice dated October 17, 2025 to the personal guarantors under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. The guarantors challenged this notice before the High Court, arguing the earlier NPA classification and SARFAESI demand had already been set aside by the DRT. The fresh notice was barred by limitation, being issued nearly eight years after the original demand. The Bank had suppressed material facts regarding the DRT’s order. Strict compliance was required as the proceedings entailed serious civil consequences. They relied on judgments including IDBI Bank vs Hemangi Patel and Raju Premji vs Customs to buttress their arguments on limitation and statutory compliance. The Bank opposed the petition, contending that the IBC is a complete code with built-in remedies and appellate mechanisms. The writ petition was premature, as it challenged only a show cause notice. The DRT order had not attained finality since it was under challenge before the DRAT. The corporate insolvency proceedings had already been admitted and upheld by the NCLAT. The petitioners had also approached the Supreme Court without securing any stay. The Court agreed with the Bank and held that the Insolvency and Bankruptcy Code is a “complete code in itself” with sufficient checks, balances, and remedial avenues. Judicial review under Article 226 must be exercised cautiously, especially in matters governed by a special statute. The petitioners had adequate alternate remedies before the NCLAT and the Supreme Court. Since the corporate insolvency process had already been admitted and upheld in appeal, the High Court should not interdict proceedings at the show cause stage. The Court further noted that unless the NCLAT proceedings are stayed, they continue in accordance with law. The High Court dismissed the writ petition, observing that the petitioners are free to raise their objections before the NCLAT or the Supreme Court in the pending matters. “No relief can be extended to the petitioners,” the Court concluded, bringing the writ proceedings to an end without costs. Click Here To Read Order

Writ Proceedings Can’t Interdict Proceedings Of IBC: MP HC

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