2025 INSC 25
SUPREME COURT OF INDIA
(HON’BLE PAMIDIGHANTAM SRI
NARASIMHA, J. AND HON’BLE MANOJ MISRA, JJ.)
MOHAMMED ENTERPRISES (TANZANIA)
LTD
Petitioner
VERSUS
FAROOQ ALI KHAN
Respondent
Civil
Appeal No. 48 of 2025 Arising out of SLP (C) No. 11599 OF 2024 WITH CIVIL
APPEAL NO. 49/2025 Arising out of SLP (C) No. 11095 OF 2024 WITH CIVIL APPEAL
NO. 50/2025 Arising out of SLP (C) No. 13493 OF 202-Decided on 03-01-2025
Civil
Insolvency and Bankruptcy Code,
2016, Section 12(A), 29, 60(5)(c) - IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016, Regulation 19 – Corporate Insolvency
Process – Judicial review – Alternative remedy – Natural justice - Delay and laches -
CIRP proceedings commenced on 26.10.2018 – Approaching High Court on 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 - 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, 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 - Judgment and order passed by the High Court
liable to be set aside - Directed that the Adjudicating Authority will now
commence the proceedings from where it was interdicted by the High Court and
complete the same as expeditiously as possible, which is also the spirit of the
Code.
(Para
11, 12, 14 to 16)
JUDGMENT
1.
Leave Granted.
2.
These appeals under Article 136 of the Constitution are
against the judgment of the High Court of Karnataka exercising power
of judicial review[In Writ Petition
No. 483 of 2023 (GM-RES) dated 22.04.2024.] interdicting Corporate Insolvency Process
culminating in the acceptance of a resolution plan by the Committee of
Creditors in minutes of meeting dated 11.02.2020. In this batch of matters,
there are three appeals, one by the successful resolution applicant METL, the
other by the Bank comprising the Committee of Creditors, and the third appeal
by the Resolution Professional appointed by the adjudicating authority to
conduct CIRP against Associate Decor Ltd (“Corporate Debtor”).
3.
The short facts are that the Corporate Insolvency Resolution Proceedings were
admitted against the corporate debtor at the instance of Oriental Bank of
Commerce[Merged with Punjab National Bank
in 2020.] (a financial creditor) on 26.10.2018. It is submitted by Dr
Abhishek Manu Singhvi, Ld. Senior Advocate appearing on behalf of the
successful resolution applicant that upon the resolution professional issuing
the Information Memorandum under Section 29 of the Code on 28.11.2018, his
client submitted his expression of interest. It is submitted that at the 16th,
17th and 18th meeting of the Committee of Creditors, resolution plans were
discussed and deliberated. Further, even at the first adjourned meeting of the
19th COC, resolution plans were reviewed, and the appellant was asked to
incorporate certain items, and the meeting was adjourned to 11.02.2020. It is
submitted that one Mr. Sachin Misal, another director of the corporate debtor
representing the suspended director, Mohd. Farouk Darvesh was present, and he
confirmed that “they have no objection to the plans or to the process that was
followed.” We may mention at this very stage that this fact is opposed by Mr.
Shyam Divan, Ld. Senior Counsel representing the suspended director of the
corporate debtor. Be that as it may, the resolution professional is said to
have issued notice to the suspended directors of the corporate debtor on
11.02.2020, including respondent no.1, that the meeting will be held at 3.00
pm.
4.
While the appellant contends that the second adjourned 19th COC meeting was
convened after notice to all, Mr. Shyam Divan has submitted that no such notice
was ever received by his client. In the meeting, a slightly revised, amended,
and re-stated resolution plan was considered, deliberated upon by the COC and
put to vote. The resolution plan is said to have been approved by the COC
through e-voting on 11.02.2020, the appellants’ plan was approved and the
resettlement proposal submitted by respondent no.1 was rejected. This
decision of the COC led to the declaring of appellant as the successful
resolution applicant unanimously by 100% voting share of the CoC.
5.
In the meanwhile, there were certain proceedings initiated by yet another
company named Swamitva, whose request for filing a resolution plan was
rejected, leading to the said company filing an interlocutory application
before the Adjudicating Authority seeking directions to the COC to reconsider
the resolution plan. The Adjudicating Authority's decision to place the
resolution plan for reconsideration by the CoC was appealed to the NCLAT. The
appellant submitted that respondent no.1, the suspended director of the
corporate debtor also filed an interlocutory application before the NCLAT
seeking rejection of the resolution plan of the applicant on the same grounds
that were raised before us. Having considered the appeal in detail, the NCLAT,
by its order dated 19.09.2022, allowed the appeal and set aside the directions
of the Adjudicating Authority.
6.
In the meanwhile, even the appeal filed by Swamitva against the order of the
NCLAT dated 19.02.2022 before this Court came to be dismissed by an order dated
25.11.2022.
7.
It is in the above said background that first respondent approached the High
Court of Karnataka by filing the writ petition seeking quashing of Minutes of
Meeting dated 11.02.2020, letter of intent dated 09.03.2020, declaration of
respondent no.1 as successful resolution applicant, direction to the CoC for
acceptance of its proposal dated 07.12.2022 and for setting aside of Minutes of
Meeting dated 21.12.2022, wherein the CoC Members had unanimously rejected the
settlement proposal of respondent no.1. It is apparent from these prayers that
the main grievance of the respondent no.1 was with respect to the decision of
the Minutes of Meeting dated 11.02.2020, out of which all other orders and
decisions have emanated.
8.
The High Court initially granted ex-parte stay directing adjudicating authority
to maintain the status quo, and finally by order dated 22.11.2023 allowed the
writ petition whereby appellant’s resolution plan was set aside. Review
Petitions were filed by the consortium banks were allowed on 22.11.2023 and the
writs were restored. However, by the impugned order dated 22.04.2024, the High
Court again allowed the writ petition and set aside the resolution plan,
primarily on the ground that principles of natural justice are violated as 24
hours’ notice was not granted.
9.
Mr. Tushar Mehta, Ld. Solicitor General supported Dr. Singhvi’s submissions and
objected to the High Court exercising jurisdiction under Article
226 interdicting proceedings under the Code. He referred to the decision
of the court in CoC of KSK Mahanadai Power Company Limited v. M/S UP Power
Corporation Limited[Civil Appeal No.
11086 of 2024, dated 14.10.2024.] taking exception to the High Court
exercising its discretionary jurisdiction under Article 226 of the
Constitution, breaching the discipline of alternate remedy as contemplated
under the Insolvency and Bankruptcy Code.
10.
Mr. Shyam Divan, Ld. Senior Counsel appearing for the Corporate Debtor had a
three-fold submission. In the outset, he would submit that the writ petition
under Article 226 is not barred, particularly when there is violation
of the principle of natural justice. For this purpose, he relied on the
decision of this Court in Whirlpool Corporation v. Registrar of Trade
Marks, Mumbai and Ors. [(1998) 8 SCC 1]
Secondly, he specifically referred to the provisions of the Code and in
particular to Section 12(A) of the IBC 2016, read with Regulation 19 of IBBI
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Through his short note of submissions, he would further submit that by
contrasting the amounts submitted as per the information memorandum, it would
be clear that the offer made by the resolution applicant is much inferior to
the proposal made by the first respondent under Section 12(A) of the Code.
Finally, he sought to clarify that there is no delay in filing the writ
petition as the contest raised by Swamitva Consortium was pending between the
cause of action and the filing of the writ petition.
11.
Having considered the matter in detail, we are of the opinion that the last
point taken by Mr. Shyam Divan, that there is no delay in approaching the High
Court, must be rejected. The reason is this. 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.
12.
Further, it is also an admitted fact that on 06.10.2022, respondent no. 1 moved
an interlocutory application before the Adjudicating Authority seeking
rejection of the resolution plan filed by the appellant. The grounds taken in
the interlocutory application are the same as those in this appeal. It is 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. We may hasten to add that it
is not necessary for us to enter into the merits of the matter to examine the
amounts offered by respondent no. 1 and to contrast with the offer made by the
applicant.
13.
The jurisdiction and power of the Adjudicating Authority under Section 60(5)(c)
has already been reiterated by this Court in Committee of Creditors of
Essar Steel India Ltd. v. Satish Kumar Gupta[(2020) 8 SCC 531] and Gujarat Urja Vikas Nigam Limited v. Amit
Gupta[(2021) 7 SCC 209] . It is
important to note that CIRP proceedings commenced on 26.10.2018, six years ago,
and the resolution plan of the appellant was approved in 2020, four years back.
The importance of concluding the CIRP proceedings was highlighted by this
Court, on a number of occasions[In State
Bank of India & Ors. v. Consortium of Mr. Murai Lal Jalan & Ors; 2024
SCC Online SC 3187 pars 151 and 152.]. In a recent order in Committee
of Creditors of KSK Mahanadi Power Company Ltd. v. M/s Uttar Pradesh Power
Corporation Ltd (supra), this Court has observed that an unjustified
interference with the proceedings initiated under the Insolvency and Bankruptcy
Code 2016, breaches the discipline of law.
14.
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.
15.
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.
16.
In view of the above, we allow these appeals and set aside the final judgment
and order passed by the High Court in Writ Petition No. 483 of 2023 (GM-RES)
dated 22.04.2024. We further direct that the Adjudicating Authority will now
commence the proceedings from where it was interdicted by the High Court and
complete the same as expeditiously as possible, which is also the spirit of the
Code.
17.
There shall be no order as to costs.
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