Case Note & Summary
The dispute arose from an order dated 09.09.2025 passed by the National Company Law Tribunal (NCLT), Mumbai, which allowed intervention applications by financial creditors (Union Bank of India and Solapur District Central Co-operative Bank Limited) and dismissed an application for withdrawal of the Corporate Insolvency Resolution Process (CIRP) against Gokul Sugar Industries Limited. The petitioners, a suspended director of the corporate debtor and a financial creditor (M/s. Mohandas Chhataram), filed writ petitions challenging this order, alleging flagrant violation of principles of natural justice, despite the availability of an alternative remedy under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC). The CIRP was initiated in May 2024 by the financial creditor under Section 7 of the IBC. Subsequently, the suspended director settled with the financial creditor, leading to an application for withdrawal under Section 12-A of the IBC filed by the Interim Resolution Professional. However, the NCLT permitted intervention by other financial creditors and dismissed the withdrawal application without hearing the suspended director or serving copies of the intervention applications, as required under Rules 34(4) and 37 of the National Company Law Tribunal Rules, 2016. The petitioners argued that this procedural lapse constituted a violation of natural justice, justifying writ jurisdiction. The respondents contended that proper procedure was followed and the petitioners should have appealed to the National Company Law Appellate Tribunal (NCLAT). The High Court analyzed the facts, noting that the NCLT's failure to issue notice and serve documents on the suspended director was a mandatory breach. The court held that such flagrant violation of natural justice warranted intervention through writ petitions, bypassing the alternative remedy. Consequently, the court quashed the NCLT order and remanded the matter for fresh consideration, with directions to afford the suspended director an opportunity to be heard.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Withdrawal Under Section 12-A - Insolvency and Bankruptcy Code, 2016, Section 12-A - Petitioners challenged NCLT order allowing intervention applications by financial creditors and dismissing withdrawal application - Court held that NCLT violated natural justice by not hearing suspended director and not serving intervention applications, making writ petitions maintainable despite alternative remedy (Paras 1-3, 14-15). B) Civil Procedure - Writ Jurisdiction - Alternative Remedy - Insolvency and Bankruptcy Code, 2016, Section 61 - Petitioners sought writ jurisdiction over statutory appeal to NCLAT - Court held that flagrant violation of natural justice justifies bypassing alternative remedy, as procedural lapses caused grave prejudice (Paras 1-3, 14). C) Insolvency Law - Procedural Compliance - Notice Requirements - National Company Law Tribunal Rules, 2016, Rules 34(4), 37 - NCLT failed to issue notice and serve copies of intervention applications to suspended director - Court held this mandatory procedural breach constituted violation of natural justice, vitiating the impugned order (Paras 15, 17).
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Issue of Consideration: Whether the writ petitions are maintainable despite availability of alternative remedy under Section 61 of the Insolvency and Bankruptcy Code, 2016, due to alleged flagrant violation of principles of natural justice by the NCLT in passing the impugned order.
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Final Decision
High Court quashed the impugned order dated 09.09.2025 passed by NCLT and remanded the matter for fresh consideration, with directions to afford the suspended director an opportunity to be heard.
