Karnataka HC Says It Cannot 'Micromanage' CIRP Against Gulam Mustafa Enterprises Before NCLT Bengaluru

The Karnataka High Court has recently observed that it cannot micromanage proceedings before the National Company Law Tribunal by directing it to hear a company's applications in a particular order while hearing a petition filed by real estate developer Gulam Mustafa Enterprises Pvt. Ltd.

“At the outset, this Court is of the considered view that the relief sought by the petitioner, in substance, amounts to inviting this Court to micromanage the proceedings pending before the adjudicating authority under the IBC. Such an exercise is impermissible in exercise of supervisory jurisdiction under Article 227 of the Constitution of India,” Justice Sachin Shankar Magadum held.

The court, however, directed the National Company Law Tribunal, Bengaluru, to first decide an intervention application filed by home buyers in the pending insolvency proceedings against Gulam Mustafa Enterprises, holding that it had a direct bearing on the composition of parties and the nature of adjudication.

“The presence of such stakeholders necessitates that their locus and participation be determined at the threshold. Any adjudication in their absence, if they are found to be necessary or proper parties, may result in multiplicity of proceedings and prejudice to their interests," the court observed.

The petition was filed by Gulam Mustafa Enterprises Pvt. Ltd., which is developing the “Global Techies Town” project under a joint development agreement. To finance the project, the company raised substantial funds through secured non-convertible debentures issued through private placement, divided into senior and junior tranches aggregating several hundred crores.

Disputes later surfaced between the company and some of its debenture holders, including Piramal, which led to insolvency proceedings being initiated against Gulam Mustafa Enterprises under Section 7 of the Insolvency and Bankruptcy Code.

Though the company subsequently reached a settlement with Piramal, those proceedings were not withdrawn, adding to the litigation already unfolding before the tribunal.

Separately, another financial creditor moved insolvency proceedings against the company. That petition was admitted and a moratorium imposed before the case was eventually closed after the dues were cleared.

The company argued that despite these developments, respondents India Housing Fund and India Housing Fund Series II continued pursuing parallel proceedings, including restoration applications. It contended that the tribunal had proceeded without first deciding its interlocutory applications, which went to the root of maintainability and whether any default continued to exist.

Senior counsel for the petitioner argued that the company's interlocutory applications ought to have been decided as a preliminary issue before any further steps were taken in the main insolvency petition.

Senior counsel for respondents India Housing Fund and India Housing Fund Series II argued that proceedings by financial creditors under Section 7 are summary in nature and confined to examining the existence of debt and default. They submitted that interlocutory applications cannot be used to stall the statutory process.

The High Court framed the issue as whether it should interfere with the tribunal's order and direct it to decide specific interlocutory applications in a particular sequence.

“The petitioner's attempt to seek a mandamus directing the NCLT to first decide I.A. No.1094/2025, in the opinion of this Court, cannot be countenanced. No litigant can dictate the course of adjudication before a judicial or quasi-judicial forum,” the court said.

The High Court declined to set aside the tribunal's March 17 order or grant the relief sought by the company. It directed that once the home buyers' intervention application is decided, the tribunal may proceed with the insolvency petition and all pending applications in the manner it deems fit.