The Insolvency and Bankruptcy Code, 2016 (IBC), establishes a time-bound and self-contained framework for insolvency resolution. Consequently, the Code creates a specialized mechanism through the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). As a result, parties are generally expected to pursue remedies within this statutory framework.
However, a common question continues to arise: When can a High Court Interfere in IBC proceedings? Although High Courts retain their constitutional powers under Articles 226 and 227 of the Constitution of India, courts exercise these powers sparingly in insolvency matters. Therefore, judicial intervention remains the exception rather than the rule.
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When Can a High Court Interfere in IBC Proceedings Under Articles 226 and 227?
High Courts possess the power of judicial review under Articles 226 and 227 of the Constitution. Nevertheless, the Supreme Court has repeatedly clarified that parties cannot invoke these powers merely because they disagree with an NCLT or NCLAT order.
Instead, a High Court may interfere only in exceptional circumstances, such as:
- Lack of jurisdiction by the tribunal;
- Mala fide or bad-faith exercise of power;
- Violation of principles of natural justice;
- Cases where no effective statutory remedy exists.
Therefore, courts generally discourage litigants from bypassing the appellate mechanism established under the IBC.
Why Do Courts Exercise Restraint When a High Court Interferes in IBC Matters?
The Supreme Court has consistently emphasised judicial restraint in matters governed by special statutes.
In Bhaven Construction v. Executive Engineer, the Court held that judicial interference with a statutory dispute-resolution process should occur only in cases of “exceptional rarity.” Although the case arose under arbitration law, the principle applies equally to insolvency proceedings because the IBC also functions as a specialised code with dedicated forums.
Similarly, in L. Chandra Kumar v. Union of India, the Supreme Court reaffirmed that High Courts remain constitutional courts. However, the Court also clarified that writ jurisdiction should not transform High Courts into alternative appellate forums.
Consequently, the existence of writ powers does not automatically justify intervention in every insolvency dispute.
This judicial approach also complements the reforms discussed in Inside IBC Amendment 2025, which aim to enhance certainty and maintain the integrity of the insolvency framework.
Can Parties Bypass the NCLAT and Approach the High Court Directly?
In most cases, the answer is no.
The Supreme Court has repeatedly held that litigants must first exhaust the remedies available under the IBC. Therefore, parties involved in insolvency proceedings should seek guidance from an NCLT Lawyer in Bangalore before pursuing appellate or constitutional remedies.. Therefore, when a party can challenge an NCLT order before the NCLAT, the High Court will usually refuse to entertain a writ petition.
This principle received renewed emphasis in Aakash v. Think and Learn Pvt. Ltd., where the Supreme Court observed that the aggrieved party had an effective statutory remedy before the NCLAT. Accordingly, the Court held that the High Court should not have exercised its writ jurisdiction.
As a result, parties cannot use writ petitions as a shortcut to avoid the appellate framework established by the IBC.
Can a High Court Interfere in IBC Proceedings to Correct Procedural Unfairness?
Yes, but only in limited situations.
A High Court may intervene where procedural irregularities undermine the fairness of the insolvency process. For example, if a tribunal passes an order without providing an affected party an opportunity to be heard, the principles of natural justice may be violated.
In the Aakash v. Think and Learn writ proceedings before the Karnataka High Court, the Court found that the NCLT had issued an interim status quo order without hearing the affected party. Consequently, the High Court remitted the matter for fresh consideration after ensuring that all parties received an opportunity to present their case.
Importantly, the Court did not decide the insolvency dispute itself. Instead, it merely corrected the procedural defect. Therefore, the decision illustrates the narrow circumstances in which a High Court may interfere in IBC proceedings.
Does Article 227 Allow a High Court to Re-Examine the Merits of an IBC Order?
No, Article 227 grants supervisory jurisdiction rather than appellate jurisdiction. Therefore, a High Court cannot use this power to reassess evidence, reconsider commercial decisions, or substitute its own views for those of the NCLT or NCLAT.
In Rajendra Diwan v. M.P. High Court, the Supreme Court reiterated that supervisory jurisdiction exists to ensure that tribunals act within the bounds of their authority. However, it does not permit a High Court to function as another appellate forum.
Accordingly, disputes concerning factual findings, legal interpretations, or commercial wisdom should ordinarily proceed through the statutory appellate process.
What Is the Practical Test for When a High Court Can Interfere in IBC Proceedings?
The practical position is straightforward.
A High Court will generally decline intervention when:
- The NCLT or NCLAT can adequately address the issue;
- An appeal is available under the IBC;
- The challenge concerns the merits of the decision;
- The dispute relates to commercial wisdom or factual findings.
Conversely, a High Court may consider intervention when:
- The tribunal lacks jurisdiction;
- The proceedings suffer from mala fide conduct;
- A party faces a serious violation of natural justice;
- No effective statutory remedy is available.
Therefore, judicial review remains a narrow constitutional safeguard rather than an alternative insolvency forum.
