The Supreme Court reiterated that the High Court cannot interfere in the Corporate Insolvency Resolution Process (CIRP) under Article 226 when statutory remedies under the Insolvency and Bankruptcy Code (IBC) exist, emphasizing that the IBC is a complete code.
The Supreme Court Bench of Justice Pamidighantam Sri Narasimha and Justice Manoj Misra reviewed a set of three interrelated appeals and held that the High Court erred in exercising its writ jurisdiction under Article 226 to interfere with the Corporate Insolvency Resolution Process (CIRP), emphasizing that the Insolvency and Bankruptcy Code (IBC) is a complete code with sufficient remedial mechanisms. The Court reiterated that judicial intervention in insolvency proceedings is unwarranted and disrupts their discipline. A delayed approach to the High Court, particularly when statutory remedies have been pursued, undermines the integrity and finality of the CIRP.
The Supreme Court granted leave and considered appeals under Article 136 of the Constitution against the judgment of the Karnataka High Court, which exercised judicial review powers to interdict the Corporate Insolvency Resolution Process (CIRP). The High Court had set aside the acceptance of a resolution plan by the Committee of Creditors (CoC) in its meeting held on 11.02.2020. The appeals were filed by the successful resolution applicant METL, the bank constituting the CoC, and the Resolution Professional. The CIRP had been initiated against Associate Decor Ltd. at the instance of the Oriental Bank of Commerce (merged with Punjab National Bank in 2020) on 26.10.2018. The resolution professional issued the Information Memorandum under Section 29 of the Insolvency and Bankruptcy Code (IBC) on 28.11.2018, following which METL submitted its expression of interest. The resolution plans had been discussed and deliberated in the 16th, 17th, and 18th CoC meetings and further reviewed in the 19th meeting, which was adjourned on 11.02.2020.
During the second adjourned 19th CoC meeting, a revised resolution plan was considered, deliberated upon, and subsequently approved through e-voting, with METL emerging as the successful resolution applicant by unanimous consent. Meanwhile, Swamitva, a third-party company whose resolution plan submission had been rejected, challenged the CoC’s decision before the Adjudicating Authority. Respondent No. 1, the suspended director of the corporate debtor, also filed an interlocutory application before the NCLAT seeking rejection of METL’s resolution plan on similar grounds. The NCLAT, by its order dated 19.09.2022, allowed the appeal and set aside the Adjudicating Authority’s directions to reconsider the resolution plan. A related appeal filed by Swamitva before the Supreme Court was also dismissed on 25.11.2022. Subsequently, Respondent No. 1 filed a writ petition before the Karnataka High Court challenging the CoC's decision of 11.02.2020 and sought relief, including setting aside the resolution plan and mandating the CoC to accept an alternative proposal dated 07.12.2022.
The High Court initially granted an ex-parte stay, directing the Adjudicating Authority to maintain the status quo. It ultimately allowed the writ petition on 22.04.2024, setting aside the resolution plan on the grounds that the principles of natural justice had been violated due to the lack of a 24-hour notice before the 19th CoC meeting. The Solicitor General, supporting the resolution applicant, contended that the High Court had exceeded its jurisdiction under Article 226 by interfering in CIRP proceedings, citing precedent from Committee of Creditors of KSK Mahanadi Power Company Limited v. Uttar Pradesh Power Corporation Limited, REEDLAW 2024 SC 10529. The suspended director argued that the writ petition was maintainable due to the violation of natural justice and referred to the Supreme Court’s ruling in Whirlpool Corporation v. Registrar of Trade Marks. He also invoked Section 12(A) of the IBC, asserting that the offer made under this provision was superior to METL’s resolution plan.
The Supreme Court, after a detailed examination, rejected the contention that there was no delay in filing the writ petition. It emphasized that the CIRP had commenced on 26.10.2018, and the alleged violation regarding the CoC meeting had occurred on 11.02.2020, yet the High Court’s jurisdiction was invoked only on 04.01.2023—almost three years later. The pendency of proceedings by Swamitva before the Adjudicating Authority, NCLAT, or Supreme Court could not justify such a delay. Furthermore, Respondent No. 1 had already availed a statutory remedy under the IBC by filing an interlocutory application before the Adjudicating Authority on 06.10.2022, seeking rejection of the resolution plan. The Supreme Court reiterated that the IBC is a complete code with sufficient checks, balances, and remedial avenues. It underscored the necessity of concluding CIRP proceedings in a time-bound manner, as highlighted in multiple precedents, including State Bank of India and Others v. The Consortium of Mr. Murari Lal Jalan and Mr. Floran Fritsch and Another, REEDLAW 2024 SC 11515. The Court held that the High Court had erred in entertaining the writ petition, given the availability of an alternate remedy and the delay in approaching the court.
Accordingly, the Supreme Court allowed the appeals, set aside the Karnataka High Court’s judgment dated 22.04.2024, and directed the Adjudicating Authority to resume CIRP proceedings from the stage where the High Court had intervened. The Court reinforced the importance of maintaining procedural discipline under the IBC and ensuring that judicial interference does not disrupt the insolvency resolution framework. There was no order as to costs.
Dr Abhishek Manu Singhvi, Senior Advocate, appeared on behalf of the Successful Resolution Applicant.
Mr. Shyam Divan, Senior Advocate, represented the Corporate Debtor.
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