The Supreme Court ruled that the High Court had no jurisdiction under Article 226 to defer the CIRP after it had declined the relief of consolidation of insolvency proceedings.
The Supreme Court Bench headed by Dr. Dhananjaya Y. Chandrachud, CJI., Justice J. B. Pardiwala and Justice Manoj Misra reviewed an appeal and held that the High Court lacks jurisdiction under Article 226 of the Constitution to direct the deferment of a Corporate Insolvency Resolution Process (CIRP) when the primary relief sought, such as consolidation of CIRP proceedings, has been denied, as such interference contravenes the statutory framework of the Insolvency and Bankruptcy Code, 2016.
The Supreme Court, exercising its jurisdiction under Article 136 of the Constitution, reviewed an appeal filed by the Committee of Creditors (CoC) of KSK Mahanadi Power Company Limited, a public limited company undergoing the Corporate Insolvency Resolution Process (CIRP). The appeal challenged a High Court order that directed the deferment of the CIRP without issuing notice to the CoC or other respondents. The High Court had previously declined to grant the main relief sought by Uttar Pradesh Power Corporation Limited (UPPCL) for consolidating the CIRP of the Corporate Debtor with two other companies. However, it directed the deferment of the CIRP until an application by UPPCL before the National Company Law Tribunal (NCLT) was decided, which the CoC contested.
The High Court's order was based on a petition filed by UPPCL under Article 226 of the Constitution. The petition sought consolidation of CIRP proceedings of three entities, including KSK Mahanadi Power Company Limited, before the NCLT. The High Court declined the consolidation request, citing prior judicial decisions by the NCLT and NCLAT rejecting similar applications. Despite rejecting the main relief, the High Court directed the NCLT to defer the CIRP pending the adjudication of any fresh application filed by UPPCL. This decision was challenged by the CoC, which argued that the High Court lacked jurisdiction to interfere with the CIRP under Article 226, particularly when the relief sought was denied.
The Supreme Court found merit in the CoC's grievances, ruling that the High Court had overstepped its jurisdiction under Article 226 by ordering a deferment of the CIRP despite refusing the primary relief. The Court emphasized that such an order breached the legal framework established under the Insolvency and Bankruptcy Code, 2016. The Supreme Court set aside the High Court's directions to defer the CIRP and reiterated the importance of adhering to the statutory processes prescribed by the IBC.
The appeal was allowed, and the impugned order of the High Court directing the deferment of the CIRP was quashed. All pending applications were disposed of in light of the judgment.
Mr. Tushar Mehta, Solicitor General, Mr. Uday Khare, Advocate, Ms. Srideepa Bhattacharyya, Ms. Neha Shivhare, Advocates and M/s. Cyril Amarchand Mangaldas represented the Appellant.
Ms. Pallavi Pratap, AOR, Mr. A. Bavani, Ms. Nalin Kohli, Sr. Advocate, Mr. Anoop Rawat, Mr. Vaijayant Paliwal, Ms. Charu Bansal, Mr. Vishrut Kansal, Mr. Aditya Marwah, Ms. Kirti Gupta, Ms. Snigdha Saraff, Advocates and Mr. S.S. Shroff, AOR appeared for the Respondent No. 1.
Mr. Krishna Gandhi, Sr. Advocate and Mr. Abhay Anand Jena, AOR appeared for Respondent No. 4 & Respondent No. 6.
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