SC Reiterates Limited Scope of HC Writ Jurisdiction in IBC Cases

The Hon’ble Supreme Court of India recently, in a case of Mohammed Enterprises (Tanzania) Ltd. Versus Farooq Ali Khan & Ors (2025 SCC OnLine SC 23), dated January 3, 2025, overturned an order of the Hon’ble High Court of Karnataka interdicting a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The court reaffirmed that the IBC is a comprehensive code with sufficient checks, balances, and remedial mechanisms, limiting the scope of High Courts to exercise writ jurisdiction in such cases.

CIRP proceedings were initiated against Associate Decor Ltd. (the “Corporate Debtor“) on October 26, 2018, upon an application by Oriental Bank of Commerce (the “Financial Creditor“). After several meetings of the Committee of Creditors (the “CoC”), Mohammed Enterprises (Tanzania) Ltd. (the “Successful Resolution Applicant“) submitted its resolution plan, which was unanimously approved in February 2020.

Farooq Ali Khan (the “Suspended Director” of the Corporate Debtor) challenged the resolution plan, claiming a lack of proper notice for the CoC meeting where the plan was approved. Despite the Suspended Director’s active engagement in statutory remedies under the IBC, including filing interlocutory applications before the Adjudicating Authority and the National Company Law Appellate Tribunal (NCLAT), the Hon’ble High Court of Karnataka entertained his writ petition in 2023, over three years after the contested CoC meeting. The High Court set aside the resolution plan on the grounds of alleged violations of natural justice.

The apex court criticized the High Court’s interference, emphasizing that the Suspended Director’s delayed approach and prior invocation of statutory remedies under the IBC rendered the writ petition untenable. The Hon’ble Supreme Court of India underscored that the IBC provides a self-contained mechanism with adequate safeguards, and High Courts must exercise their supervisory powers under Article 226 of the Indian Constitution, 1950, sparingly to avoid undermining the IBC’s objectives.

The judgment also reiterated principles established in prior cases, such as the case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar, 5 (2020) 8 SCC 531, dated November 15, 2019, and Gujarat Urja Vikas Nigam Limited v. Amit Gupta, (2021) 7 SCC 209, dated March 8, 2021, noting that unwarranted judicial interference disrupts the IBC’s framework. The apex court concluded that the IBC’s purpose of ensuring a time-bound insolvency resolution process must be preserved, free from extraneous interventions.

In finality, the Hon’ble Supreme Court of India set aside the Hon’ble High Court of Karnataka’s judgment and directed the Adjudicating Authority to resume and expedite the CIRP proceedings for the Corporate Debtor.