MOHAMMED ENTERPRISES ( TANZANIA ) LTD. VS FAROOQ ALI KHAN :  CASE SUMMARY

The Supreme Court in Mohammed Enterprises (Tanzania) Ltd. Vs Farooq Ali Khan (Civil Appeal No. 48/2025) held that Insolvency and Bankruptcy Code, 2016 is a complete code in itself having sufficient checks and balances, remedial avenues and appeals.

FACTS OF THE CASE

CIRP was initiated in the matter of Associate Décor Ltd. vide order dated 26.10.2018. Resolution Plan was approved by  CoC on 11.02.2020 by 100% voting share. One of the aggrieved Resolution Applicant Swamitava filed application before the NCLT seeking direction to the CoC for reconsideration of the Resolution Plan, which was allowed by NCLT. An appeal was filed before NCLAT. Respondent No. 1 also filed interlocutory application. NCLAT allowed the appeal and  set aside the direction of the NCLT.  Aggrieved by the same Swamitava filed Appeal before the Supreme Court, which was also dismissed.

The First Respondent approached the High Court of Karnataka, which set aside the Resolution Plan on the ground that principle of natural justice has been violated and 24  hour notice was not granted.

FINDINGS OF THE SUPREME COURT

The Supreme Court rejected the contention that there has been no delay in approaching High Court. High Court was approached after almost three years. The Supreme Court found no justification in   approaching High Court so late.

The Supreme Court observed that it is 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 the 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.

The Supreme Court observed 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 has been highlighted in a number of occasions by Supreme Court. Supreme Court noted that in Committee of Creditors of KSK Mahanadi Power Company Ltd. Vs. M/s Uttar Pradesh Power Corporation Ltd. it had observed that an unjustified interference with the proceedings initiated under IBC breaches the discipline of law.

The Supreme Court observed that IBC 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.

The final judgment of the High Court was set aside by the Supreme Court.

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