Introduction:

In Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors., Civil Appeal No. 48/2025, the Supreme Court of India dealt with the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC), and the supervisory jurisdiction of High Courts under Article 226 of the Constitution. The case arose from the Karnataka High Court’s decision to interdict the Corporate Insolvency Resolution Process (CIRP) concerning Associate Decor Ltd. The High Court quashed a resolution plan approved by the Committee of Creditors (CoC), citing alleged violations of natural justice. The Supreme Court, in overturning this decision, reaffirmed the IBC as a complete code, emphasizing its sufficient checks and balances, and held that High Courts should exercise their supervisory jurisdiction sparingly and judiciously in matters governed by the IBC.

Arguments of Both Sides:

The appellant, Mohammed Enterprises, argued that the High Court erred in entertaining the writ petition filed by respondent No. 1 (a suspended director of Associate Decor Ltd.) nearly three years after the alleged violation of principles of natural justice occurred. They emphasized that the IBC provides a comprehensive framework for resolving disputes, including appeals and remedial measures, which respondent No. 1 had already availed. They contended that the High Court’s intervention disrupted the statutory process, undermined the purpose of the IBC, and delayed resolution.

The respondents defended the High Court’s decision, asserting that the CoC meeting held on 11.02.2020, where the appellant’s resolution plan was approved, violated principles of natural justice as no notice was issued to respondent No. 1, a suspended director. They argued that this procedural lapse warranted judicial intervention, and the High Court acted within its constitutional powers to ensure justice. They further claimed there was no undue delay in approaching the High Court as they had been pursuing remedies under the IBC in good faith.

Court’s Judgement:

The Supreme Court began by analyzing the chronology of events. It noted that CIRP proceedings against Associate Decor Ltd. commenced on 26.10.2018, and the appellant’s resolution plan was approved by the CoC in 2020. Respondent No. 1 filed a writ petition in the Karnataka High Court only in January 2023, nearly three years after the CoC meeting. The Court found this delay unjustified, emphasizing that the respondent had already availed statutory remedies under the IBC during this period.

The Court reaffirmed the principle laid down in Committee of Creditors of KSK Mahanadi Power Company Ltd. v. M/s Uttar Pradesh Power Corporation Ltd., where it was held that High Courts should not interfere in CIRP proceedings unless there are exceptional circumstances. It reiterated that the IBC is a complete code in itself, equipped with adequate safeguards and remedies, and any disruption by external judicial intervention undermines its objectives of timely resolution and economic discipline.

The bench rejected the argument of violation of natural justice, holding that even if notice was not issued for the 19th CoC meeting, the respondent had ample opportunity to raise this issue before the Adjudicating Authority or the Appellate Tribunal. The Court emphasized that the IBC framework ensures adherence to procedural and substantive justice through its multi-tiered mechanism.

The Court also criticized the High Court for entertaining the writ petition despite the availability of alternative remedies under the IBC. It observed that allowing the High Court to override the statutory process disrupts the balance between judicial review and statutory discipline, creating legal uncertainty. The bench underscored that the High Court’s powers under Article 226, while expansive, must be exercised with caution and only in cases of grave injustice or exceptional circumstances.

In its conclusion, the Supreme Court directed the Adjudicating Authority to resume CIRP proceedings from the stage at which they were interrupted by the High Court. It also underscored the importance of adhering to IBC protocols and completing the resolution process expeditiously.