Source: Supreme Court 

Why in News? 

A bench of Justice PS Narsimha and Justice Manoj Misra held that the IBC is a complete code in itself having sufficient checks and balances.                     

• The Supreme Court held this in the case of Mohammed Enterprises (Tanzania) Ltd v. Farooq Ali Khan & Ors. 

 What was the Background of Mohammed Enterprises (Tanzania) Ltd v. Farooq Ali Khan Case?  

• Corporate Insolvency Resolution Proceedings (CIRP) were admitted against the corporate debtor on 26^th October 2018, initiated by Oriental Bank of Commerce, a financial creditor. 
• During the 19^th Committee of Creditors (CoC) meeting, resolution plans were reviewed. The appellant was asked to incorporate certain items, and the meeting was adjourned to 11^th February 2020. 
• Sachin Misal, representing the suspended director, Mohd. Farouk Darvesh confirmed no objection to the plans or the process. However, this was contested by Mr. Shyam Divan, counsel for the suspended director. 
• The resolution professional issued a notice for the second adjourned 19^th CoC meeting on 11^th February 2020, but Mr. Shyam Divan claimed his client did not receive the notice. 
• At the adjourned meeting, a revised resolution plan was deliberated, voted on, and unanimously approved by the CoC with 100% voting share, declaring the appellant as the successful resolution applicant. 
• Another company, Swamitva, whose resolution plan submission was rejected, filed an interlocutory application seeking reconsideration. This was dismissed by the NCLAT on 19^th September 2022. 
• The suspended director also filed an application to reject the appellant’s resolution plan, raising similar objections. The NCLAT rejected these appeals. 
• Swamitva’s appeal against the NCLAT order was dismissed by the Supreme Court on 25th November 2022. 
• The suspended director expressed interest in submitting a resolution plan at earlier CoC meetings (16^th, 17^th, and 18^th), where resolution plans were deliberated. 
• The High Court allowed the writ petition and set aside the resolution plan primarily on the ground that principles of natural justice were violated as 24 hours’ notice was not granted.  
• The present appeals were filed under Article 136 of the Constitution of India, 1950 (COI) against the judgment of the Karnataka High Court interdicting Corporate Insolvency Process culminating in the acceptance of a resolution plan by the Committee of Creditors in minutes of meeting dated 11th February 2020. 

 What were the Court’s Observations?  

• The Court observed that the jurisdiction and power of the Adjudicating Authority under Section 60(5)(c) of Insolvency and Bankruptcy Code, 2016 (IBC) has already been reiterated by the Supreme Court. 
• The Court has on several occasions highlighted the importance of concluding the CIRP proceedings in a timely manner. 
• The Court observed that in view of the delay in approaching the High Court, particularly when respondent no.1 himself has initiated proceedings under the Code by filing interlocutory applications seeking similar relief, the High Court committed an error in entertaining the writ petition. 
• The High Court should have noted 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. 
• The Court held that this was certainly not the case for the High Court to interdict CIRP proceedings under the IBC Code. 

 What is IBC? 

• The Insolvency and Bankruptcy Code (IBC) was introduced in 2016 to address the growing problem of non-performing assets and inefficient debt recovery mechanisms in India. 
• It replaced older systems with a time-bound, creditor-driven process for resolving corporate financial distress. 
• Under the IBC, insolvency can result in either resolution or liquidation. Efforts are first made to restructure the company or transfer ownership, and if these fail, the company's assets are liquidated. 

 What is the Process followed under IBC? 

• The process of insolvency can be understood by the flowchart below: 

What are the Important Case Laws on IBC as a Complete Code? 

• ES Krishnamurthy & Ors v. M/s Bharat Hitech Builders Pvt. Ltd.  (2021): 
  • The IBC is a complete code in itself. 
  • The Adjudicating Authority and the Appellate Authority are creatures of the statute. Their jurisdiction is statutorily conferred.  
  • The statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction.  
  • Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.  
•  Indian Overseas Bank v. RCM Infrastructure Limited (2022): 
  • The Supreme Court in this case held that it has been consistently held that the IBC is a complete code in itself. 
  • Also, in view of the provisions of Section 238 of the IBC, the provisions of the IBC would prevail notwithstanding anything inconsistent therewith contained in any other law for the time being in force.