Navigating with caution: High Courts' judicial review of NCLT decisions

The Supreme Court recently reiterated that a High Court's interference in an order of the National Company Law Tribunal (NCLT) under Articles 226 and 227 of the Constitution is unwarranted where the National Company Law Appellate Tribunal (NCLAT) constitutes the appropriate appellate forum.

These observations emerged in Think and Learn Private Limited’s (Byju’s parent company) Special Leave Petition against a Karnataka High Court order. The order set aside NCLT Bengaluru’s interim status quo on Aakash Educational Services' (Byju's subsidiary) shareholding. The Supreme Court refused to intervene, citing subsequent developments, but its observations raise pertinent questions on the permissibility of a High Court’s interference in NCLT proceedings.

This article takes a look at recent instances where the Supreme Court set aside High Court interventions in NCLT proceedings, outlines the limited scope of the High Court’s jurisdiction and cautions against excessive interference in NCLT cases.

The NCLT is a key commercial tribunal responsible for deciding various claims arising out of the Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016 (IBC, 2016). In matters falling within its domain, even the civil court’s jurisdiction stands ousted as per Section 430 of Companies Act, 2013. Any person aggrieved by an NCLT order can maintain an appeal before the NCLAT under Section 421 of Companies Act, 2013. Despite this two-tiered mechanism, parties to insolvency proceedings repeatedly bypass the NCLAT’s appellate mechanism. They approach the High Court against an NCLT order either for a speedier remedy or for the proverbial two bites at the cherry - one before the High Court and if that fails, before the NCLAT. This practice of judicial review of tribunals’ decisions before the High Courts is counterintuitive to the objective for which such tribunals were established - to ease the burden of High Courts.

In this year itself, the Supreme Court had to step in on multiple occasions to rectify High Courts’ interference in NCLT proceedings under the IBC, 2016. For instance, in January 2025, in Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors, the Karnataka High Court’s order setting aside a resolution plan was quashed by the Supreme Court. It was held that the High Court erred in interfering under its writ jurisdiction, where the ground for challenge - violation of principles of natural justice - was marred by a delay of three years. The High Court also ignored that a similar relief had been claimed before the NCLT. The Supreme Court, while acknowledging the significance of the High Court’s supervisory jurisdiction, urged it to exercise such jurisdiction judiciously in cases concerning the IBC, 2016. This, because the IBC 2016, being a complete code, affords adequate checks and balances, remedies and appeals to aggrieved parties.

Soon thereafter, in February 2025, the Supreme Court in Bank of Baroda v. Farooq Ali Khan & Ors, annulled a Karnataka High Court order setting aside personal insolvency proceedings initiated under Section 95 of the IBC, 2016 and restored the insolvency proceedings. The Supreme Court emphatically observed that the High Court had incorrectly exercised its writ jurisdiction and unduly precluded the statutory scheme under the IBC, 2016 from taking its course. The High Court’s intervention was considered premature. The scheme of the IBC, 2016 prescribed admission/rejection of insolvency process against a personal guarantor only after the resolution professional’s report was submitted, which in this case, was not yet done. The High Court was held to have intervened in the proceedings under the IBC, 2016 without just cause.

Thus, the Supreme Court’s recent observations in Think & Learn’s SLP, on the High Court’s unwarranted interference in NCLT proceedings, is not an outlier but indicative of a trend.

Does this mean that a High Court must maintain a hands-off approach when there are pending NCLT proceedings or where the IBC, 2016 is invoked? Not necessarily. Articles 226 and 227 of the Constitution empower a High Court to hear writ petitions against tribunals’ orders and vest it with supervisory jurisdiction. However, such supervisory jurisdiction has been circumscribed through a catena of Supreme Court decisions. Accordingly, a High Court can entertain a writ petition against a tribunal's order in a limited set of circumstances. These include cases where (i) the issue in challenge falls under the public law domain, (ii) there is a violation of principles of natural justice, or (iii) the orders or proceedings are wholly without jurisdiction. This is an indicative list.

(i) Public law domain

The Supreme Court in M/s Embassy Property Developments Pvt Ltd v. State of Karnataka & Ors held that the NCLT is coram non judice (lacking jurisdiction) in cases where the corporate debtor seeks to exercise rights falling outside the scope of IBC, 2016. In this case, the resolution professional sought a deemed extension of the corporate debtor’s mining lease under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957) before the NCLT, Chennai Bench. The tribunal, apart from setting aside the Government of Karnataka’s refusal to grant a deemed extension, also directed the State to issue supplemental lease deeds in the corporate debtor’s favour. The Karnataka High Court stayed this order. On appeal, the Supreme Court observed that the entitlement to deemed extension was sought under the MMDR Act, 1957, hence it fell under the statutory/public law domain. Further, the correctness of an administrative authority’s decision can only be challenged before a superior court having the power of judicial review. The Supreme Court observed that NCLT lacked the power of judicial review. Thus, in instances that concern public law issues, the jurisdictional High Court is the appropriate authority, despite the pendency of proceedings under the IBC, 2016.

(ii) Violation of principles of natural justice and (iii) lack of jurisdiction

The Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Harbanslal Sahnia v. Indian Oil Corporation Ltd held that the plea of alternate remedy does not fetter the High Court’s exercise of writ jurisdiction under exceptional cases. This includes a situation where there is a violation of principles of natural justice or where the authority has exercised jurisdiction where none exists. One such notable instance is Kamal K Singh v. Union of India, where the Bombay High Court set aside the NCLT Mumbai Bench order admitting a corporate debtor into insolvency, for failure to pronounce the order in open court as per Rule 151 of NCLT Rules, 2016. This was considered a violation of principles of justice that rendered the order a nullity, and a writ was held to be maintainable.

In light of the Supreme Court’s multiple interventions, High Courts must tread cautiously in deciding to exercise their writ jurisdiction against an NCLT order. A delicate balance needs to be struck between the IBC, 2016’s mission to foster timely insolvency resolution vis a vis High Court’s supervisory jurisdiction. High Courts should direct parties to pursue the alternative remedy before the NCLAT when writ petitions before them are appeals in disguise. It is also crucial that High Courts refrain from deferring or issuing a stay on insolvency proceedings in a routine manner, as it derails the time-bound nature of the insolvency process, and can negatively affect stakeholders’ interests.

This practice of using Article 226 jurisdiction to defer insolvency proceedings has been characterised as a breach of the discipline of the law under the IBC, 2016 by the Supreme Court. Parties aggrieved by an NCLT order should toe the jurisdictional line between the NCLAT and the High Court carefully, and not contribute to unwanted delays arising out of litigation across various fora. Persistent judicial interference and procedural delays in insolvency proceedings can erode investor confidence and create uncertainty in the business environment, ultimately slowing economic growth.

Shetty Neha Santosh currently works as a Consultant at DAKSH for the 'Transforming Tribunals' initiative.