HC’s Order Directing Deferment of CIRP Was to Be Set Aside as It Breaches Basic Intent of IBC Provisions | SC

Case Details: Committee of Creditors of KSK Mahanadi Power Company Ltd. v. Uttar Pradesh Power Corporation Ltd. - [2024] 168 taxmann.com 644 (SC)

Judiciary and Counsel Details

• Dr Dhananjaya Y Chandrachud, CJI, J B Pardiwala & Manoj Misra, JJ.
• Tushar Mehta, Solicitor General, Uday Khare, Ms Srideepa Bhattacharyya & Ms Neha Shivhare, Advs. M/s. Cyril Amarchand Mangaldas. for the Petitioner.
• Ms Pallavi Pratap, AOR, A. Bavani, Adv., Nalin Kohli, Sr. Adv., Anoop Rawat, Vaijayant Paliwal, Ms Charu Bansal, Vishrut Kansal, Aditya Marwah, Ms Kirti Gupta, Ms Snigdha Saraff, Advs., S.S. Shroff, AOR, Krishna Gandhi, Sr. Adv., Abhay Anand Jena, AOR, for the Respondent.

Facts of the Case

In the instant case, the CIRP was initiated against the corporate debtor. The financial creditor filed a writ petition seeking consolidation of the CIRP of the corporate debtor with two other companies.

The High Court, by the impugned order, declined to grant relief of consolidation and relegated financial creditor to file an application before the NCLT and ‘raise all grounds available under law’.

The High Court also proceeded to direct the NCLT to examine the said application and pass appropriate orders, in accordance with the law, within a period of two weeks from the date of receipt of such application and until such time, CIRP of the corporate debtor be deferred.

Aggrieved by the said order, the CoC of the corporate debtor filed an instant appeal before the Supreme Court.

Supreme Court Held

The Supreme Court held that since the High Court declined to grant the main relief that was sought in the petition for consolidation of the CIRP of three corporate entities and there was absolutely no reason for the High Court to exercise its jurisdiction under Article 226 of the Constitution by directing deferment of CIRP, such a direction under Article 226 breaches discipline of law which had been laid down in provisions of the IBC.

Therefore, the impugned order of the High Court was to be set aside to the extent that it directs deferment of the CIRP of the corporate debtor.

List of Cases Reviewed

• An order of the Single Judge of the High Court of Telangana at Hyderabad dated 10 September 2024 (Para 11) reversed