The Supreme Court set aside the High Court's order, reaffirming that the Insolvency and Bankruptcy Code (IBC) is a complete code, upholding its supremacy, and emphasizing the importance of procedural discipline in addressing challenges to Corporate Insolvency Resolution Processes (CIRP).
The Supreme Court Bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra adjudicated multiple civil appeals on Friday and held that the High Court erred in exercising jurisdiction under Article 226 to intervene in proceedings under the Insolvency and Bankruptcy Code (IBC). The Court observed that the IBC is a comprehensive code providing adequate remedies, and such intervention was unwarranted, particularly given the delayed challenge and the availability of parallel remedies under the IBC. Emphasizing procedural discipline, the Court underscored the importance of adhering to the IBC's framework and timelines to ensure efficiency and legal order in insolvency resolution.
The Supreme Court, granting leave to appeal, examined the validity of the Karnataka High Court’s decision to interdict the Corporate Insolvency Resolution Process (CIRP) under Article 226 of the Constitution. The appeals arose from a challenge to the High Court’s judgment, which set aside a resolution plan approved by the Committee of Creditors (CoC) during the CIRP of Associate Decor Ltd., a corporate debtor, citing alleged violations of natural justice.
The CIRP against the corporate debtor was admitted on October 26, 2018, at the behest of the Oriental Bank of Commerce (now merged with Punjab National Bank). The process led to the submission of a resolution plan by METL, the successful resolution applicant, which was discussed and revised across several CoC meetings before being approved unanimously via e-voting on February 11, 2020. However, respondent no.1, representing the suspended director of the corporate debtor, challenged the proceedings, alleging insufficient notice of the CoC meetings and procedural lapses.
The High Court entertained the writ petition despite significant delays, ultimately setting aside the resolution plan. It reasoned that the 24-hour notice given before the adjourned 19th CoC meeting violated the principles of natural justice. The appellant and the Solicitor General argued against this decision, asserting that the High Court’s intervention disrupted the legislative intent of the Insolvency and Bankruptcy Code (IBC), a complete and exhaustive code designed to address insolvency disputes.
The Supreme Court found that the High Court erred in entertaining the writ petition after a delay of nearly three years and noted that respondent No. 1 had already availed remedies under the IBC through interlocutory applications. The Court emphasized that the IBC provides a comprehensive framework with sufficient procedural safeguards and appellate mechanisms. It reiterated that the High Court should not have exercised its jurisdiction in contravention of the discipline and timelines mandated under the IBC.
Ultimately, the Supreme Court set aside the High Court’s judgment and directed the Adjudicating Authority to resume proceedings from the point of interruption, ensuring their conclusion in a timely manner, consistent with the objectives of the IBC. This judgment reaffirmed the importance of adhering to statutory processes and highlighted the judiciary’s role in maintaining procedural discipline under specialized legislative frameworks.
Dr Abhishek Manu Singhvi, Senior Advocate appeared on behalf of the Successful Resolution Applicant.
Mr. Shyam Divan, Senior Advocate represented Respondent No.1/Corporate Debtor.
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