'IBC A Complete Code' : Supreme Court Disapproves Of High Court Exercising Writ Jurisdiction To Interdict CIRP

Disapproving a High Court's order interdicting a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), the Supreme Court recently observed that the IBC is a complete code in itself, having sufficient checks and balances, and thus, the exercise of supervisory and judicial review powers by High Courts demands rigorous scrutiny and judicious application.

Allowing the appeal of a successful resolution applicant against Karnataka High Court's interdicting of the CIRP, a bench of Justices PS Narasimha and Manoj Misra said,

"In view of the delay in approaching the High Court, particularly when respondent no.1 himself has initiated proceedings under the Code by filing interlocutory applications seeking similar relief, we are of the opinion that the High Court committed an error in entertaining the writ petition...Apart from delay and laches, High Court should have noted that Insolvency and Bankruptcy Code is a complete code in itself, having sufficient checks and balances, remedial avenues and appeals. Adherence of protocols and procedures maintains legal discipline and preserves the balance between the need for order and the quest for justice. The supervisory and judicial review powers vested in High Courts represent critical constitutional safeguards, yet their exercise demands rigorous scrutiny and judicious application. This is certainly not a case for the High Court to interdict CIRP proceedings under the Insolvency and Bankruptcy Code."

It was further directed that the Adjudicating Authority shall commence the proceedings from where they were interdicted by the High Court and complete the same as expeditiously as possible.

In arriving at the decision, the Court was guided by the earlier decision in Committee of Creditors of KSK Mahanadi Power Company Ltd. v. M/s Uttar Pradesh Power Corporation Ltd, where a bench led by former CJI DY Chandrachud underlined the importance of concluding CIRP and took exception to Telangana High Court deferring a CIRP in the exercise of powers under Article 226 of the Constitution. In the said case, it was held that the High Court was not justified in deferring the CIRP when the main relief sought in the writ petition to consolidate the CIRP of two companies was refused.

To briefly state facts of the present case, CIRP proceedings against Associate Decor Ltd (Corporate Debtor) commenced on 26.10.2018 and the resolution plan of the appellant was approved in 2020. After few initial meetings of the CoC, a CoC meeting was convened on 11.02.2020, wherein a "slightly revised" resolution plan was considered - without allegedly issuing notice to one of the directors of the Corporate Debtor. As such, the appellant's resolution plan was unanimously approved by the CoC.

Eventually, respondent No.1 (suspended director of the Corporate Debtor) approached the Karnataka High Court with a writ petition seeking inter-alia the quashing of Minutes of Meeting dated 11.02.2020 and his declaration as successful resolution applicant. On 22.11.2023, the High Court allowed the writ petition and the appellant's resolution plan was set aside.

Although review petitions were filed, the High Court, vide the impugned order, again allowed the writ petition and set aside the appellant's resolution plan, primarily on the ground that principles of natural justice were violated (as 24 hours' notice was not granted). Under these circumstances, the matter reached the Supreme Court, where the Corporate Debtor argued inter-alia that there was no delay in approaching the High Court.

After hearing the parties, the Supreme Court rejected the argument on delay, observing:

"The CIRP proceedings commenced on 26.10.2018. The sheet anchor of Mr. Divan submission and also the justification for the High Court to assume jurisdiction on the ground that principles of natural justice were violated, when respondent no.1 was not given a notice before the 19th COC meeting, occurred way back on 11.02.2020. However, the jurisdiction of the High Court was invoked only on 04.01.2023. The time gap between these two events is almost three years. The initiation and continuation of proceeding by Swamitva Consortium before the Adjudicating Authority, NCLT or the Supreme Court cannot lend any justification whatsoever in approaching the High Court so late."

Considering that respondent no. 1 had moved an interlocutory application before the Adjudicating Authority seeking rejection of the resolution plan filed by the appellant, the Court said that it was not as if the High Court was unaware of respondent No.1 availing the statutory remedy under the Code. "At least on this ground, the High Court should have relegated respondent no. 1 to the procedure under the Code and permitted him to continue the remedy that he has chosen to adopt."

Case Title: MOHAMMED ENTERPRISES (TANZANIA) LTD. VERSUS FAROOQ ALI KHAN & ORS., CIVIL APPEAL NO. 48/2025 (and connected cases)

Citation : 2025 LiveLaw (SC) 19

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