Article submitted by Garima Bothra, Associate (assisted by Swati Reddy)
- Introduction:
The Supreme Court of India, in Independent Sugar Corporation Limited v. Girish Sriram Juneja & Ors [MANU/SC/0121/2025],clarified the interpretation of Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), regarding the requirement for Competition Commission of India (“CCI”) approval in resolution plans involving combinations. This judgment has significant implications for corporate restructuring and the interplay between the IBC and the Competition Act, 2002 (“Competition Act”).
The successful resolution applicant in the case was AGI Greenpac Ltd. (“AGL”), whose resolution plan proposed a combination with the corporate debtor, Hindustan National Glass and Industries Ltd. (“HNGIL”). This merger would have resulted in a dominant market position, with an estimated 80-85% share in the food & beverage sector and 45-50% in the alco-beverage sector.
The Resolution Professional (“RP”), in the present case, granted relaxation to the resolution applicants to procure the CCI approval after the Committee of Creditors’ (“CoC”) approval of the resolution plan but prior to filing the application before the National Company Law Tribunal (“NCLT”). Subsequently, CCI granted approval to AGL, subject to certain modifications, including a divestment. Challenging the approval of the resolution plan submitted by AGL and seeking reconsideration of the Appellant’s resolution plan, an application was filed before NCLT Kolkata. The application before NCLT was dismissed, and the same was upheld by the National Company Law Appellate Tribunal (“NCLAT”) in an appeal.
The Appellant in the present case before the Hon’ble Supreme Court (“SC”) argued that while Section 31(4) of the IBC permits statutory approvals within one year of NCLT approval, the proviso excludes combinations under Section 5 of the Competition Act, 2002, requiring stricter compliance. The proviso states:
“Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the CCI under that Act prior to the approval of such resolution plan by the committee of creditors.”
Therefore, without the consent of the CoC, the RP lacked the authority to divest or sell the Corporate Debtor’s assets. Further, the resolution plan of AGL is conditional, violating the IBC framework. The approval of the CCI also acknowledged that even after divestment, it must be demonstrated that the same is aligned with its approval. The plan creates an unfeasible sequence, as the divestment depends on the resolution plan’s implementation, which itself requires prior CCI approval, leading to unfeasible complications, which should have been avoided by the NCLAT.
In contrast, AGL argued that the proviso to Section 31(4) was merely directory and not mandatory. It contended that the reference to “CoC” in the proviso was a drafting error, with the intended reference being the Adjudicating Authority (NCLT). AGL further asserted that a literal interpretation of the provision would frustrate the objective of the IBC. Lastly, AGL challenged the Appellant’s locus standi, arguing that, as an unsuccessful resolution applicant, it lacked the right to contest the resolution plan’s approval.
Supreme Court’s observations
The Court held that both Section 61 of the IBC and Section 53B of the Competition Act provide a right of appeal to “any person aggrieved.” Since the appellant was an unsuccessful resolution applicant whose plan could have otherwise been approved by the CoC, it satisfied the requirement of being “aggrieved.”
The NCLAT had observed that the proviso was directory in nature and that strict adherence to Section 31(4) would delay the Corporate Insolvency Resolution Process (“CIRP”). However, the Supreme Court rejected this interpretation, observing that model timelines under IBC regulations cannot override explicit statutory provisions. It noted that the Competition Act does not conflict with the IBC timelines, except in cases where anti-competitive concerns necessitate extended scrutiny. Additionally, the Court observed that a Combination Notice under Section 6(2) of the Competition Act can be filed at different stages of CIRP and is not required to be filed only after the submission of the resolution plan, the parties should not be held responsible for any delay on the part of the CCI, in examining the combination. The 330-day timeline for CIRP remains intact, and extensions are permitted only in exceptional circumstances arising due to tribunal delays rather than inaction by the parties.
The Court underscored that a resolution plan containing a combination that has not secured prior CCI approval is incapable of implementation. This is because the CCI has the authority to approve, reject, or modify a proposed combination. If a resolution plan is approved by the CoC before obtaining CCI clearance and later requires modifications due to regulatory conditions, it undermines the certainty and finality of the resolution process. Moreover, a plan that results in an Appreciable Adverse Effect on Competition (AAEC) cannot be enforced unless the CCI grants its approval beforehand.
The Court reaffirmed that the RP functions in an administrative capacity and does not possess adjudicatory powers. Consequently, the RP cannot waive, modify, or relax statutory requirements, including the obligation to obtain prior CCI approval under Section 31(4) of the IBC. Any attempt by the RP to grant relaxations informally, such as through email communication, is beyond its authority and legally untenable.
Under Section 31(1) of the IBC, once a resolution plan is approved by the CoC, it cannot be modified before the NCLT. This implies that the NCLT’s role is confined to either approving or rejecting the plan in its presented form. Any modifications mandated by the CCI after the CoC’s approval cannot be incorporated into the resolution plan, potentially leading to enforcement complications.
Conclusion
The judgment underscores the importance of harmonizing the objectives of the IBC and the Act. While the IBC aims for the timely resolution of stressed assets, it cannot override statutory provisions related to competition law. The ruling highlights that expeditious resolution must align with legal mandates to maintain confidence in India’s regulatory framework. The Court emphasized that obtaining prior approval from the CCI is a precondition before the CoC can approve a resolution plan involving a combination. Any deviation from this statutory requirement would undermine the legislative intent and compromise legal certainty. The judgment emphasizes that procedural safeguards are not mere formalities but essential protections to ensure fairness and transparency. The failure to address competition law objections before approving the resolution plan vitiated the integrity of the resolution process. The ruling reinforces that adherence to due process is non-negotiable and procedural lapses will invalidate a resolution. This ruling sets a strong precedent ensuring that insolvency resolution processes comply with competition law requirements. It reinforces the mandatory nature of regulatory approvals, strengthens investor confidence, and upholds the integrity of India’s legal framework by prioritizing procedural fairness and legal certainty.
A copy of the judgment is available here.
