2025 (7) TMI 86 - HC - IBC

Invocation of extraordinary jurisdiction of this Court under Article 226 read with 227 of the Constitution of India - seeking initiation of the CIRP against the respondent No. 2/Corporate Debtor for the default - invocation of statutory remedy provided under Section 61 of the IBC - HELD THAT - This Court is of the considered opinion that it cannot govern the calendar of the learned NCLAT in exercise of its extraordinary jurisdictional powers. The Supreme Court in Allahabad High Court Bar Assn. v. State of U.P. Ors. 2024 (3) TMI 63 - SUPREME COURT (LB) has held that in the ordinary course the Constitutional Courts should refrain from fixing a time bound schedule for the disposal of cases pending before any other Courts. It is further relevant to note that since the instant petition has been taken up today i.e. 27.06.2025 and the appeal is listed before the learned NCLAT on 30.06.2025 it is therefore impractical to allow the relief for directing respondent No. 3 to list the appeal before the learned NCLAT before 28.06.2025 i.e. a Friday keeping in view the fact that the learned NCLAT only conducts Court proceedings on Mondays and Wednesdays during the vacations and thus this prayer has become infructuous. This Court cannot interfere with the procedural functioning of a specialized Tribunal such as the learned NCLAT this Court finds no merit in allowing the aforesaid prayer of the petitioner. The matter is already listed before the learned NCLAT on 30.06.2025. Therefore no further orders are required to be passed in the instant case. Accordingly the present writ petition along with pending applications stands disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter include:

• Whether the High Court, in exercise of its extraordinary jurisdiction under Article 226 read with Article 227 of the Constitution of India, can direct the Interim Resolution Professional (IRP) not to take any steps pursuant to the order admitting insolvency passed by the National Company Law Tribunal (NCLT) until the appeal before the National Company Law Appellate Tribunal (NCLAT) is heard.
• Whether the High Court can direct the Registrar of the NCLAT to list the appeal earlier than the scheduled date to prevent irreparable harm to the corporate debtor.
• The extent to which the High Court can interfere with the procedural and operational functioning of a specialized tribunal such as the NCLAT.
• The propriety of filing a writ petition under Article 226 challenging an order of the NCLT when an appeal under the Insolvency and Bankruptcy Code (IBC) is pending before the NCLAT.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Power of the High Court to restrain the IRP from acting on the NCLT order pending appeal before NCLAT

Relevant legal framework and precedents: The Insolvency and Bankruptcy Code, 2016 (IBC) provides a statutory framework for insolvency resolution, including the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 and the appellate remedy under Section 61 before the NCLAT. The High Court's extraordinary jurisdiction under Articles 226 and 227 is recognized but must be exercised with caution, especially when a specialized tribunal with exclusive jurisdiction is involved.

Court's interpretation and reasoning: The Court noted that the IBC is a special statute that mandates a time-bound process for insolvency adjudication. The statutory scheme envisages that appeals against NCLT orders are to be heard by the NCLAT. The High Court observed that it cannot interfere with the operational steps taken by the IRP pursuant to a valid order of the NCLT, especially when the appellate remedy is available and pending before the NCLAT.

Key evidence and findings: The IRP had issued a public announcement calling for claims submission, a procedural step following the admission of insolvency by the NCLT. The petitioner's appeal before the NCLAT was already listed for hearing on 30.06.2025.

Application of law to facts: Since the appeal was pending before the NCLAT, the Court found no justification to restrain the IRP from performing his statutory duties. The Court emphasized that the existence of an effective appellate remedy before the NCLAT negates the need for High Court intervention to stay the order of the NCLT.

Treatment of competing arguments: The petitioner argued that unless the IRP was restrained, the corporate debtor would suffer irreparable harm, including the constitution of the Committee of Creditors (COC) and potential loss of control. The Court acknowledged the urgency but held that the statutory appellate process was the appropriate remedy and that the High Court's intervention would undermine the IBC's time-bound insolvency resolution framework.

Conclusions: The Court declined to grant any stay or injunction restraining the IRP from acting on the NCLT order pending the hearing of the appeal before the NCLAT.

Issue 2: Power of the High Court to direct early listing of appeal before the NCLAT

Relevant legal framework and precedents: The Supreme Court has held that constitutional courts should generally refrain from interfering with the scheduling and procedural operations of other courts or tribunals unless exceptional circumstances exist. The Court cited the decision in Allahabad High Court Bar Association v. State of U.P. & Ors. (2024) 6 SCC 267, which states:

"Constitutional courts, in the ordinary course, should refrain from fixing a timebound schedule for the disposal of cases pending before any other courts. Constitutional courts may issue directions for the time-bound disposal of cases only in exceptional circumstances. The issue of prioritising the disposal of cases should be best left to the decision of the courts concerned where the cases are pending."

Court's interpretation and reasoning: The Court held that it was not appropriate to direct the Registrar of the NCLAT to list the appeal before the scheduled date. It emphasized respect for the independence and procedural autonomy of the NCLAT. Additionally, the Court noted the impracticality of the prayer given the NCLAT's vacation schedule and the fact that the appeal was already listed for a date shortly after the requested earlier listing.

Key evidence and findings: The appeal was scheduled for 30.06.2025; the petitioner sought listing before 28.06.2025, which was not feasible as the NCLAT only conducts proceedings on Mondays and Wednesdays during vacations, and 29.06.2025 was a Sunday holiday.

Application of law to facts: The Court applied the principle of non-interference in the routine functioning of specialized tribunals and found no exceptional circumstances warranting deviation from the NCLAT's schedule.

Treatment of competing arguments: The petitioner's plea for urgent listing to avoid irreparable harm was considered but found insufficient to override the procedural autonomy of the NCLAT and the absence of extraordinary circumstances.

Conclusions: The Court refused to direct early listing of the appeal before the NCLAT.

Issue 3: Appropriateness of invoking High Court's writ jurisdiction against NCLT orders when appeal lies before NCLAT

Relevant legal framework and precedents: The IBC provides a statutory appellate mechanism before the NCLAT against orders of the NCLT. The High Court's writ jurisdiction is discretionary and should not be used as a substitute for statutory remedies, especially when a specialized tribunal is empowered to adjudicate the matter.

Court's interpretation and reasoning: The Court reiterated that filing a writ petition under Article 226 challenging an NCLT order, when an appeal under Section 61 of the IBC is pending before the NCLAT, is not the proper course of law. The Court emphasized that the statutory appellate remedy must be exhausted before seeking extraordinary relief under Article 226.

Key evidence and findings: The petitioner had already filed an appeal before the NCLAT and sought urgent relief from the High Court instead of awaiting the appellate hearing.

Application of law to facts: The Court held that the High Court could not entertain a writ petition that effectively sought to circumvent the statutory appellate process under the IBC.

Treatment of competing arguments: The petitioner's urgency and potential prejudice arguments were noted but deemed insufficient to bypass the statutory appellate mechanism.

Conclusions: The writ petition was not maintainable as a substitute for appeal before the NCLAT.

3. SIGNIFICANT HOLDINGS

"The extraordinary jurisdictional powers of a High Court are to be exercised with great caution and the same does not merit unnecessary interference in dictating the NCLAT's operational procedure."

"The Insolvency and Bankruptcy Code, being a special act, establishes the framework as to how its Tribunals should emphasize a time-bound process for adjudicating insolvency matters."

"Constitutional courts, in the ordinary course, should refrain from fixing a timebound schedule for the disposal of cases pending before any other courts. Constitutional courts may issue directions for the time-bound disposal of cases only in exceptional circumstances. The issue of prioritising the disposal of cases should be best left to the decision of the courts concerned where the cases are pending."

"Filing a writ petition, disguised as an appeal, in the High Court against the order of NCLT, is not the proper course of law and the same is thus, liable to be considered only by the appropriate forum, i.e., the NCLAT."

Final determinations:

• The High Court declined to stay or restrain the IRP from taking steps pursuant to the NCLT order admitting the corporate debtor into CIRP pending the appeal before the NCLAT.
• The High Court refused to direct the Registrar of the NCLAT to list the appeal earlier than the scheduled date, respecting the procedural autonomy of the specialized tribunal and its vacation schedule.
• The High Court held that invoking writ jurisdiction to challenge an NCLT order when an appeal is pending before the NCLAT is not the proper course of action under the IBC framework.
• The writ petition was disposed of without interfering with the merits of the case, emphasizing adherence to the statutory appellate mechanism and the importance of non-interference in the procedural functioning of specialized tribunals.