Delhi High Court Declines To Exercise Power Of Judicial Review In Petition Against RBI, Upholding NCLT's Authority

Delhi High Court Declines To Exercise Power Of Judicial Review In Petition Against RBI, Upholding NCLT's Authority

In a recent ruling, the Delhi High Court addressed a writ petition filed by Gateway Investment Management Services Ltd. seeking judicial intervention under Article 226 of the Constitution against the Reserve Bank of India (RBI). The petitioner sought various reliefs, including a directive for the RBI to establish a framework under the Banking Regulation Act, 1949. This framework would require financial institutions to operate fairly, transparently, and reasonably when deciding on resolution plans to safeguard public interest and maximize recovery.

The petition also aimed to compel the Committee of Creditors (CoC) to conduct fresh voting on Gateway Investment's resolution plan, following the rejection of its bid during a CoC meeting on September 5, 2024. Gateway Investment argued that it was the highest bidder in the Corporate Insolvency Resolution Process (CIRP) concerning Helios Photo Voltaic Private Ltd, offering a revival plan of ₹109.87 crores payable to secured creditors over a 12-month period. However, its bid was dismissed by the CoC, which Gateway Investment claimed was done arbitrarily and without due regard to 'commercial wisdom.'

The National Asset Reconstruction Company Limited (respondent 2) defended the CoC's decision, asserting that in private contracts and bidding processes, being the highest bidder does not guarantee acceptance of a resolution plan. They emphasized that the resolution plan, once approved by the CoC, is subject to validation by the National Company Law Tribunal (NCLT), where the bidder can raise objections, but cannot seek writ relief from the court.

In its analysis, the Court indicated that Gateway Investment had an adequate alternative remedy available through the NCLT. It noted that the NCLT has jurisdiction over the CoC's conduct and is responsible for adjudicating resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court refrained from exercising its judicial review powers, stating that it would not usurp the NCLT's role in evaluating the CoC's commercial decisions.

Despite Gateway Investment's attempts to present a revised offer that matched the successful applicant’s bid, the Court reiterated that the CoC's decision is best reviewed by the NCLT. Consequently, the petition was dismissed, but Gateway Investment was granted the opportunity to pursue its objections before the NCLT, which will decide the matter in accordance with the law.