The Supreme Court ruled that resolution plans under the Insolvency and Bankruptcy Code (IBC) involving mergers or acquisitions must get Competition Commission of India (CCI) approval before the Committee of Creditors (CoC) stage. However, Justice SVN Bhatti dissented, stating that CCI clearance could be obtained after CoC approval. This decision ensures regulatory compliance and prevents anti-competitive practices early in the insolvency process.
New Delhi: The Supreme Court, with a 2:1 majority, ruled that the Competition Commission of India (CCI) approval for corporate insolvency resolution plans involving combinations (such as mergers and acquisitions) must be obtained before the Committee of Creditors (CoC) approves them.
Justices Hrishikesh Roy and Sudhanshu Dhulia supported this interpretation, while Justice SVN Bhatti dissented.
The case revolved around the interpretation of the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC). This provision stipulates that if a resolution plan involves a combination, the resolution applicant shall obtain CCI approval “prior to CoC approval.”
The majority opinion stated,
“For a Resolution Plan containing a combination, the CCI’s approval to the Resolution Plan… must be obtained before… the CoC’s examination and approval should be only after the CCI’s decision.”
They emphasized that adherence to this legal requirement is crucial to maintaining trust in the legal and regulatory framework.
Justices Roy and Dhulia acknowledged the IBC’s goal of timely resolutions for stressed assets but asserted that such resolutions should not compromise legal procedures.
They noted,
“Expeditious resolution cannot come at the cost of disregarding statutory provisions.”
In contrast, Justice Bhatti argued that the word “shall” could be interpreted as “may,” suggesting that CCI approval is directory rather than mandatory.
The Supreme Court was addressing appeals related to the Corporate Insolvency Resolution Process (CIRP) of Hindustan National Glass and Industries Ltd. (HNGIL), specifically concerning a resolution plan from AGI Greenpac Ltd. The proposed acquisition raised significant anti-competitive concerns, as the combination would give them a dominant market share.
The controversy arose when AGI Greenpac’s plan was approved by the CoC prior to obtaining CCI clearance. Although the CCI later granted conditional approval, the NCLAT had previously ruled that while CCI approval is necessary, the timing of its acquisition could be considered directory.
The Supreme Court’s majority opinion emphasized that the term prior to must be interpreted strictly, asserting that “to interpret the specific word to mean that such an approval can be obtained even ‘after’… would amount to reconstructing a statutory provision.”
Ultimately, the Court set aside AGI Greenpac’s resolution plan, directing the CoC to reevaluate all resolution plans. It highlighted the need for mandatory oversight of conditional approvals to ensure compliance and maintain the integrity of the IBC process.
Justice Bhatti, in his dissent, expressed concern over delays in the IBC process and suggested imposing costs on the appellants involved.
The appellants were represented by notable senior advocates, including Dr. Abhishek Manu Singhvi and Mukul Rohatgi, among others.
Case Title: Independent Sugar Corporation v. Girish Sriram Juneja
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