Summary of the Judgment
Case Name: Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors.
Date of Judgment: January 3, 2025
Judges: Hon’ble Justice Pamidighantam Sri Narasimha and Hon’ble Justice Manoj Misra
Advocates: Dr. Abhishek Manu Singhvi, Mr. Tushar Mehta, and Mr. Shyam Divan
Relevant Acts and Sections:
Article 136 and Article 226 of the Constitution of India
Section 12(A) and Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC)
Regulation 19 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Cited Judgments:
Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. (1998) 8 SCC 1
Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531
Gujarat Urja Vikas Nigam Limited v. Amit Gupta (2021) 7 SCC 209
State Bank of India & Ors. v. Consortium of Mr. Murai Lal Jalan & Ors., 2024 SCC Online SC 3187
Introduction
The judgment delivered by the Hon’ble Supreme Court of India in Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors. revolves around the exercise of judicial review under Article 226 of the Constitution in the context of the Insolvency and Bankruptcy Code, 2016 (IBC). The Court’s decision underscores the principle of maintaining legal discipline and preventing unwarranted interference in insolvency proceedings.
Background of the Case
The Corporate Insolvency Resolution Process (CIRP) against Associate Decor Ltd., initiated by Oriental Bank of Commerce (later merged with Punjab National Bank), faced challenges at multiple levels. The core issue stemmed from a resolution plan approved by the Committee of Creditors (CoC) on February 11, 2020, with unanimous consent. Subsequently, disputes arose regarding the adequacy of notice and procedural compliance, leading to intervention by the High Court of Karnataka.
Key Issues Addressed
Jurisdiction under Article 226: The High Court exercised jurisdiction to quash the resolution plan on grounds of natural justice, particularly citing the absence of 24 hours' notice before the CoC meeting. The Supreme Court analysed whether this intervention was justified.
Delay in Approaching the High Court: The respondent invoked the jurisdiction of the High Court nearly three years after the CoC’s decision. The Court examined whether this delay undermined the validity of the High Court’s orders.
Violation of Natural Justice: The respondent argued that the principles of natural justice were violated due to insufficient notice for the CoC meeting. However, the appellants contended that proper notice had been served and all stakeholders were aware of the proceedings.
Supreme Court’s Observations
On the Role of High Courts
The Hon’ble Bench emphasised that the IBC is a comprehensive code with adequate remedies for aggrieved parties. The Court stated:
“Adherence to protocols and procedures maintains legal discipline and preserves the balance between the need for order and the quest for justice.”
The judgment highlighted that the supervisory jurisdiction under Article 226 should be exercised sparingly, particularly when the IBC provides sufficient avenues for redressal. Referring to Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Gujarat Urja Vikas Nigam Limited v. Amit Gupta, the Court reiterated that interference in insolvency proceedings should be avoided unless extraordinary circumstances exist.
On Delay and Laches
The Supreme Court found the respondent’s delay in approaching the High Court to be unjustifiable. It noted:
“The CIRP proceedings commenced on 26.10.2018, and the respondent invoked the jurisdiction of the High Court only on 04.01.2023. Such inordinate delay cannot be condoned, particularly when alternate remedies were available.”
On Natural Justice
The Bench recognised the importance of adhering to natural justice principles. However, it observed that procedural lapses, if any, did not justify the High Court’s interference. The Court remarked:
“The importance of concluding CIRP proceedings within stipulated timelines cannot be overstated. Procedural deviations must not derail the resolution process unless they result in manifest injustice.”
Implications of the Judgment
Strengthening the Insolvency Framework
The decision reinforces the IBC’s objective of expeditious resolution of corporate insolvency. By limiting judicial intervention, the Supreme Court has affirmed the sanctity of the CoC’s decision-making process.
Balancing Natural Justice and Expediency
While upholding procedural fairness, the judgment underscores that natural justice cannot be a tool for dilatory tactics. This approach aligns with the legislative intent of the IBC to prevent undue delays.
Conclusion
The judgment in Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors. serves as a significant precedent in delineating the boundaries of judicial intervention in insolvency matters. By upholding the principles of expediency and procedural discipline, the Supreme Court has fortified the IBC’s framework, ensuring that it remains a robust mechanism for corporate debt resolution.
This decision is a valuable reminder for legal practitioners to navigate the interplay between constitutional remedies and specialised legislation with precision. It underscores the necessity of timely action and the primacy of statutory remedies in achieving effective outcomes.
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