Interpretation of IBC Resolution Plan is the domain of specialized forums like NCLT/NCLAT, not Writ Courts under Article 226: Delhi High Court - 2025-08-01

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High Court Refuses to Intervene in IBC Matter, Citing Specialized Forums' Expertise

New Delhi: The Delhi High Court, in a significant ruling on jurisdictional boundaries, has held that disputes concerning the interpretation and implementation of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) should be addressed by specialized forums like the National Company Law Tribunal (NCLT), not by a High Court exercising its writ jurisdiction under Article 226 of the Constitution.

A Division Bench of Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar dismissed a writ petition filed by Era Infra Engineering Limited (EIEL), stating that the IBC is a "complete code in itself" and that expert bodies created under it are best equipped to handle such complex matters. The Court vacated its earlier interim order that had stayed recovery proceedings against EIEL's subsidiaries.

Background of the Dispute

The case originated from the corporate insolvency resolution process (CIRP) of EIEL, an engineering and construction company. EIEL had incorporated three Special Purpose Vehicles (SPVs) for executing highway projects for the National Highways Authority of India (NHAI). After EIEL itself went into CIRP, a resolution plan was approved by the NCLT in June 2024, which included a 'Sharing of Arbitral Proceeds (SAP) Agreement'. This agreement stipulated how potential arbitral awards won by its SPVs against the NHAI would be distributed among creditors.

The National Asset Reconstruction Company Limited (NARCL), which had taken over the debt of the SPVs, was a signatory to this SAP Agreement. However, the dispute arose when NARCL initiated separate recovery proceedings against the SPVs before the NCLT and the Debt Recovery Tribunal (DRT), actions which EIEL claimed would "frustrate the purpose" of its own approved resolution plan. EIEL filed a writ petition seeking to restrain NARCL from pursuing these parallel proceedings.

Arguments in Court

Petitioner's Stance: Dr. Abhishek Manu Singhvi, Senior Advocate for EIEL, argued that NARCL, as an instrumentality of the State and a signatory to the SAP Agreement, was acting arbitrarily and in breach of the binding resolution plan. He contended that EIEL was left without an "efficacious alternate remedy" as third-party intervention at the pre-admission stage before the NCLT is not permitted, and the NCLT lacks the jurisdiction to adjudicate such public law claims or injunct DRT proceedings.

Respondent's Stance: Mr. Arvind Nigam, Senior Advocate for NARCL, challenged the maintainability of the writ petition. He argued that EIEL was "forum shopping" after failing to get relief from the NCLT and NCLAT. He submitted that any grievance regarding the resolution plan's implementation must be taken to the authorities that approved it—the NCLT. He asserted that the dispute was contractual and did not involve any public law remedy that would warrant the High Court's intervention.

Court's Analysis and Decision

The High Court sided with the respondent, emphasizing the principle of judicial restraint in matters governed by special statutes. The bench observed that the central question—whether NARCL's actions impinge upon EIEL's resolution plan—was a matter of "interpretation, analysis and implementation of a Resolution Plan which should be best left to the expert body formed under a Special Law."

The Court cited several Supreme Court judgments, including Bank of Baroda v. Farooq Ali Khan and Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan , which established that High Courts should not interdict CIRP proceedings under the IBC.

Addressing EIEL's argument of having no remedy, the Court noted that once CIRP is initiated, the proceedings become in rem (against the world). It relied on the Supreme Court's decision in GLAS Trust Company LLC v. Byju Raveendran to hold that the phrase "any person aggrieved" under the IBC is interpreted broadly, allowing affected parties like EIEL to seek remedies within the IBC framework. The judgment pointed out that EIEL had already approached the NCLAT and should have exhausted its remedies there.

The Court concluded by stating:

"Undoubtedly, alternate remedy does not take away the right of the Petitioner to approach the High Court, however, the High Court ordinarily restrains itself from entertaining such writ petitions where there are specialised bodies which have been created only for dealing with certain provisions arising under the Special Statutes."

With these observations, the Court vacated its stay order dated March 27, 2025, and disposed of the writ petition, directing the petitioner to pursue its remedies before the appropriate forums under the IBC and other relevant statutes.