| Prior approval of the Competition Commission of India (CCI) under Section 31(4) of the Insolvency and Bankruptcy Code (IBC) is mandatory before approval of a Resolution Plan by the Committee of Credit |
| Prior approval of the Competition Commission of India (CCI) under Section 31(4) of the Insolvency and Bankruptcy Code (IBC) is mandatory before approval of a Resolution Plan by the Committee of Credit |
INDEPENDENT SUGAR CORPORATION LIMITED V. GIRISH SRIRAM JUNEJA
2025 INSC 124 (Invalid Date)
Justices: Justice Hrishikesh Roy, Justice Sudhansu Dhulia, and Justice SVN Bhatti
Question(s):
(i)Whether the approval of the Competition Commission of India (CCI) for a proposed combination must mandatorily precede the approval of the Resolution Plan by the Committee of Creditors (CoC) under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC)? (ii) Whether the National Company Law Appellate Tribunal (NCLAT) erred in holding that prior CCI approval before CoC approval is only directory and not mandatory? (iii)Whether the Resolution Plan approved by CoC in favour of AGI Greenpac was legally valid despite the alleged lack of statutory approvals at the time of voting?
Factual Background:
Independent Sugar Corporation Ltd. (INSCO) challenged the approval of a Resolution Plan submitted by AGI Greenpac Ltd. for the acquisition of Hindustan National Glass and Industries Ltd. (HNGIL), a major player in the glass packaging industry. HNGIL, undergoing insolvency proceedings under the IBC, had invited resolution applicants, with both INSCO and AGI Greenpac submitting their respective plans.
A key issue arose when AGI Greenpac’s Resolution Plan was approved by the CoC on 28.10.2022 with 98% votes, despite lacking prior approval from the CCI. INSCO contended that such approval was mandatory under Section 31(4) of the IBC, especially in cases involving combinations under the Competition Act, 2002. NCLAT ruled that while CCI approval was mandatory, its timing—whether before or after CoC approval—was directory, thus upholding AGI Greenpac’s approval. INSCO challenged this ruling before the Supreme Court.
Decision of the Supreme Court:
A three Judge-Bench of the Supreme Court set aside the NCLAT judgment, holding that prior approval from the CCI before CoC approval is mandatory, not merely directory. The Court ruled that the statutory framework under the IBC and Competition Act requires compliance with the proviso to Section 31(4) IBC, which mandates obtaining CCI approval before a Resolution Plan involving a combination is put to vote. The order of the Court was rendered by a bench of Justice Hrishikesh Roy, Justice Sudhansu Dhulia, and Justice SVN Bhatti.
Reasons for the Decision:
Plain Meaning of the Proviso to Section 31(4) IBC
The Court applied the principle of plain meaning, holding that the statutory language clearly mandates that where a Resolution Plan contains a provision for a combination, CCI approval must be obtained prior to CoC approval (¶35). The legislative intent behind inserting the provision to Section 31(4) of the IBC suggests that prior approval of the CCI was specifically mandated and it should not be seen as a flexible provision to be ignored in certain exigencies. Interpreting it as merely a directory would go against the legislature’s intent. Such a view would weaken the provision and render it ineffective. (¶53).
Legislative Intent and Reports Supporting Mandatory Compliance
The CCI, under Section 31(3) of the Competition Act and Regulation 25(1)(A) of the Combination Regulations, must approve, reject, or modify a combination before the CoC considers it. This ensures that the CoC, while exercising its commercial wisdom, has complete regulatory information ((¶79-81). Therefore, the approval from CCI must be obtained before the same is approved by the CoC. Otherwise, an illogical situation may arise since any modifications so directed by the CCI, would be kept out of the scrutiny of the CoC and the CoC would be forced to exercise its commercial wisdom without complete information (¶80-81). The Court also examined that when a Resolution Plan containing a provision for a combination that leads to an Appreciable Adverse Effect on Competition (AAEC) is placed before the CoC for approval before securing prior approval from the CCI, the Plan is incapable of being enforced or implemented. Specific consequences in law are provided under the IBC and the Competition Act for the same. As is clear, such a major omission cannot be cured at a later stage. In the present case, the CCI-unapproved Resolution Plan does not pass muster. The same cannot be approved by this Court as it is in violation of Sections 30(2)(e), 30(3), 30(4), and 34(4)(a) of the IBC, thereby contravening provisions of the law for the time being in force (¶86).
Harmony between Stipulated Timelines
NCLAT held that the proviso to Section 31(4) of the IBC is directory, reasoning that mandatory prior approval from the CoC would disrupt CIRP timelines. The Supreme Court rejected this, emphasizing that statutory provisions take precedence over subordinate regulations and that the IBC and Competition Act timelines generally do not conflict. It noted that CCI typically approves combination proposals within 21 working days, with no recorded instance of approval exceeding 120 days, making concerns over extended delays largely theoretical. The Court also observed that combination applications can be submitted at multiple stages, including the Expression of Interest or issuance of RFRP, rather than waiting until the Resolution Plan stage, ensuring CIRP completion within 330 days. In rare cases involving significant AAEC concerns, delays may occur, but these are due to regulatory processes rather than actions of the parties involved. The recent Competition (Amendment) Act, 2023, reducing CCI approval timelines, further supports the feasibility of completing insolvency proceedings within statutory limits. Therefore, the Court found no substantial basis for interpreting the provisions disjunctively, as done by the NCLAT (¶87-99).
CoC’s Role and Procedural Lapses in AGI Greenpac’s Plan Approval
The Supreme Court examined the procedural lapses in the approval process of the AGI Greenpac-HNGIL combination under the Competition Act, emphasizing that prior CCI approval is mandatory before a transaction is finalized. The CCI had initially found AGI Greenpac’s Form I submission incomplete and directed the submission of a detailed Form II, eventually granting approval with voluntary modifications, including the divestment of an HNGIL plant (¶119). However, a key procedural lapse occurred when the CCI failed to issue a mandatory Show Cause Notice (SCN) to HNGIL, the target company, as required under Section 29(1) of the Competition Act, limiting its ability to participate in the review process. The law mandates that all parties to a combination, including the acquirer and the target, must be notified of potential competition concerns to ensure transparency and fairness (¶124-125).
The Court further noted that the Competition Act requires a structured fact-finding process, including stakeholder consultations, which was not adequately followed in this case. The failure to properly scrutinize and notify all relevant parties before approving the combination raised concerns about whether market competition was sufficiently protected (¶129). Additionally, the Court highlighted that Regulation 25(1A) of the Combination Regulations mandates that any voluntary modification to a combination, such as divestment, must have the approval of both the acquirer and the target company to protect stakeholder interests. This requirement is not a mere procedural formality but a substantive safeguard, ensuring that modifications do not undermine the operational and structural integrity of the target company. In this case, the proposed divestment of the target’s plant was a crucial part of its revival under the IBC, making the target company’s active participation essential for compliance with both insolvency and competition laws. Given these deficiencies, the Court emphasized that the lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court (¶136-139).
Justice SVN Bhatti’s Dissenting Opinion:
Literal vs Purposive Interpretation (¶¶ 37-42)
Justice Bhatti analyzed the principle of literal interpretation, stating that statutory words must be given their ordinary meaning unless such an approach results in absurdity or contradicts legislative intent (¶38). He cited Madhav Rao Scindia vs Union of India (AIR (1971) SC 530), emphasizing that words can have multiple shades of meaning, requiring interpretation in context (¶39). Referring to Corp of the City of Victoria vs Bishop of Vancouver Island (AIR (1971) SC 530), he explained that purposive interpretation is necessary to avoid inconsistency and ensure statutes remain workable (¶41). He held that rigid literalism should not obstruct the IBC’s objective of efficient insolvency resolution (¶42)?.
Interpretation of Section 31(4) and its Proviso (¶¶ 52-55)
Justice Bhatti examined the amendments introduced by Act 26 of 2018, particularly the insertion of the proviso to Section 31(4). He noted that the IBC was designed to enhance India’s business environment, and the amendment aimed to clarify that Competition Commission of India (CCI) approval must be obtained before CoC approval (¶52). However, he reasoned that external aids such as explanatory notes and legislative history should be considered only after analyzing the provision’s language and intent (¶54). He referred to Essar Steel India Ltd. (2020) 8 SCC 531) to highlight the importance of CoC’s commercial wisdom and the Adjudicating Authority’s role in ensuring statutory compliance (¶55)?.
Timing of CCI Approval and Effect on Resolution Applicants (¶¶ 65-66)
Justice Bhatti emphasized that while CCI approval is essential before final adjudication under Section 31, its absence at the CoC approval stage does not invalidate the resolution plan. He pointed out that mandating CCI approval before CoC voting could exclude viable applicants and hinder competition, thereby reducing asset value maximization (¶65). He held that the phrase “prior to” in the proviso to Section 31(4) is a temporal expression that should be interpreted flexibly, allowing CCI approval to be obtained before Adjudicating Authority approval rather than at the CoC stage (¶66)?.
Judicial Precedents and the Role of Adjudicating Authority (¶¶ 78-81)
Justice Bhatti referred to NCLAT rulings in ArcelorMittal (2019 SCC OnLine NCLAT 920), Vishal Vijay Kalantari (2021 SCC OnLine SC 3243), and Makalu Trading Limited (2020 SCC OnLine NCLAT 643), where it was held that Section 31(4) is directory. He asserted that commercial wisdom of the CoC should not be constrained by regulatory conditions that can be addressed later in the process (¶78). He concluded that the consequences of non-compliance with combination approval requirements should be assessed at the Adjudicating Authority stage, ensuring adherence to both the IBC and Competition Act without disrupting the resolution process (¶79-81)?
The Supreme Court ruled that prior approval of the CCI is mandatory before the CoC considers a Resolution Plan involving a combination. It held that the approval of AGI Greenpac’s Resolution Plan was legally invalid, as it lacked CCI clearance at the time of CoC approval. The Court remanded the matter to the NCLT to reconsider the Resolution Plans in compliance with statutory provisions.
Prepared by Iram Jan
Communications Division| Supreme Court of India
© Supreme Court of IndiaINDEPENDENT SUGAR CORPORATION LIMITED V. GIRISH SRIRAM JUNEJA
2025 INSC 124 (Invalid Date)
Justices: Justice Hrishikesh Roy, Justice Sudhansu Dhulia, and Justice SVN Bhatti
Question(s):
(i)Whether the approval of the Competition Commission of India (CCI) for a proposed combination must mandatorily precede the approval of the Resolution Plan by the Committee of Creditors (CoC) under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC)? (ii) Whether the National Company Law Appellate Tribunal (NCLAT) erred in holding that prior CCI approval before CoC approval is only directory and not mandatory? (iii)Whether the Resolution Plan approved by CoC in favour of AGI Greenpac was legally valid despite the alleged lack of statutory approvals at the time of voting?
Factual Background:
Independent Sugar Corporation Ltd. (INSCO) challenged the approval of a Resolution Plan submitted by AGI Greenpac Ltd. for the acquisition of Hindustan National Glass and Industries Ltd. (HNGIL), a major player in the glass packaging industry. HNGIL, undergoing insolvency proceedings under the IBC, had invited resolution applicants, with both INSCO and AGI Greenpac submitting their respective plans.
A key issue arose when AGI Greenpac’s Resolution Plan was approved by the CoC on 28.10.2022 with 98% votes, despite lacking prior approval from the CCI. INSCO contended that such approval was mandatory under Section 31(4) of the IBC, especially in cases involving combinations under the Competition Act, 2002. NCLAT ruled that while CCI approval was mandatory, its timing—whether before or after CoC approval—was directory, thus upholding AGI Greenpac’s approval. INSCO challenged this ruling before the Supreme Court.
Decision of the Supreme Court:
A three Judge-Bench of the Supreme Court set aside the NCLAT judgment, holding that prior approval from the CCI before CoC approval is mandatory, not merely directory. The Court ruled that the statutory framework under the IBC and Competition Act requires compliance with the proviso to Section 31(4) IBC, which mandates obtaining CCI approval before a Resolution Plan involving a combination is put to vote. The order of the Court was rendered by a bench of Justice Hrishikesh Roy, Justice Sudhansu Dhulia, and Justice SVN Bhatti.
Reasons for the Decision:
Plain Meaning of the Proviso to Section 31(4) IBC
The Court applied the principle of plain meaning, holding that the statutory language clearly mandates that where a Resolution Plan contains a provision for a combination, CCI approval must be obtained prior to CoC approval (¶35). The legislative intent behind inserting the provision to Section 31(4) of the IBC suggests that prior approval of the CCI was specifically mandated and it should not be seen as a flexible provision to be ignored in certain exigencies. Interpreting it as merely a directory would go against the legislature’s intent. Such a view would weaken the provision and render it ineffective. (¶53).
Legislative Intent and Reports Supporting Mandatory Compliance
The CCI, under Section 31(3) of the Competition Act and Regulation 25(1)(A) of the Combination Regulations, must approve, reject, or modify a combination before the CoC considers it. This ensures that the CoC, while exercising its commercial wisdom, has complete regulatory information ((¶79-81). Therefore, the approval from CCI must be obtained before the same is approved by the CoC. Otherwise, an illogical situation may arise since any modifications so directed by the CCI, would be kept out of the scrutiny of the CoC and the CoC would be forced to exercise its commercial wisdom without complete information (¶80-81). The Court also examined that when a Resolution Plan containing a provision for a combination that leads to an Appreciable Adverse Effect on Competition (AAEC) is placed before the CoC for approval before securing prior approval from the CCI, the Plan is incapable of being enforced or implemented. Specific consequences in law are provided under the IBC and the Competition Act for the same. As is clear, such a major omission cannot be cured at a later stage. In the present case, the CCI-unapproved Resolution Plan does not pass muster. The same cannot be approved by this Court as it is in violation of Sections 30(2)(e), 30(3), 30(4), and 34(4)(a) of the IBC, thereby contravening provisions of the law for the time being in force (¶86).
Harmony between Stipulated Timelines
NCLAT held that the proviso to Section 31(4) of the IBC is directory, reasoning that mandatory prior approval from the CoC would disrupt CIRP timelines. The Supreme Court rejected this, emphasizing that statutory provisions take precedence over subordinate regulations and that the IBC and Competition Act timelines generally do not conflict. It noted that CCI typically approves combination proposals within 21 working days, with no recorded instance of approval exceeding 120 days, making concerns over extended delays largely theoretical. The Court also observed that combination applications can be submitted at multiple stages, including the Expression of Interest or issuance of RFRP, rather than waiting until the Resolution Plan stage, ensuring CIRP completion within 330 days. In rare cases involving significant AAEC concerns, delays may occur, but these are due to regulatory processes rather than actions of the parties involved. The recent Competition (Amendment) Act, 2023, reducing CCI approval timelines, further supports the feasibility of completing insolvency proceedings within statutory limits. Therefore, the Court found no substantial basis for interpreting the provisions disjunctively, as done by the NCLAT (¶87-99).
CoC’s Role and Procedural Lapses in AGI Greenpac’s Plan Approval
The Supreme Court examined the procedural lapses in the approval process of the AGI Greenpac-HNGIL combination under the Competition Act, emphasizing that prior CCI approval is mandatory before a transaction is finalized. The CCI had initially found AGI Greenpac’s Form I submission incomplete and directed the submission of a detailed Form II, eventually granting approval with voluntary modifications, including the divestment of an HNGIL plant (¶119). However, a key procedural lapse occurred when the CCI failed to issue a mandatory Show Cause Notice (SCN) to HNGIL, the target company, as required under Section 29(1) of the Competition Act, limiting its ability to participate in the review process. The law mandates that all parties to a combination, including the acquirer and the target, must be notified of potential competition concerns to ensure transparency and fairness (¶124-125).
The Court further noted that the Competition Act requires a structured fact-finding process, including stakeholder consultations, which was not adequately followed in this case. The failure to properly scrutinize and notify all relevant parties before approving the combination raised concerns about whether market competition was sufficiently protected (¶129). Additionally, the Court highlighted that Regulation 25(1A) of the Combination Regulations mandates that any voluntary modification to a combination, such as divestment, must have the approval of both the acquirer and the target company to protect stakeholder interests. This requirement is not a mere procedural formality but a substantive safeguard, ensuring that modifications do not undermine the operational and structural integrity of the target company. In this case, the proposed divestment of the target’s plant was a crucial part of its revival under the IBC, making the target company’s active participation essential for compliance with both insolvency and competition laws. Given these deficiencies, the Court emphasized that the lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court (¶136-139).
Justice SVN Bhatti’s Dissenting Opinion:
Literal vs Purposive Interpretation (¶¶ 37-42)
Justice Bhatti analyzed the principle of literal interpretation, stating that statutory words must be given their ordinary meaning unless such an approach results in absurdity or contradicts legislative intent (¶38). He cited Madhav Rao Scindia vs Union of India (AIR (1971) SC 530), emphasizing that words can have multiple shades of meaning, requiring interpretation in context (¶39). Referring to Corp of the City of Victoria vs Bishop of Vancouver Island (AIR (1971) SC 530), he explained that purposive interpretation is necessary to avoid inconsistency and ensure statutes remain workable (¶41). He held that rigid literalism should not obstruct the IBC’s objective of efficient insolvency resolution (¶42)?.
Interpretation of Section 31(4) and its Proviso (¶¶ 52-55)
Justice Bhatti examined the amendments introduced by Act 26 of 2018, particularly the insertion of the proviso to Section 31(4). He noted that the IBC was designed to enhance India’s business environment, and the amendment aimed to clarify that Competition Commission of India (CCI) approval must be obtained before CoC approval (¶52). However, he reasoned that external aids such as explanatory notes and legislative history should be considered only after analyzing the provision’s language and intent (¶54). He referred to Essar Steel India Ltd. (2020) 8 SCC 531) to highlight the importance of CoC’s commercial wisdom and the Adjudicating Authority’s role in ensuring statutory compliance (¶55)?.
Timing of CCI Approval and Effect on Resolution Applicants (¶¶ 65-66)
Justice Bhatti emphasized that while CCI approval is essential before final adjudication under Section 31, its absence at the CoC approval stage does not invalidate the resolution plan. He pointed out that mandating CCI approval before CoC voting could exclude viable applicants and hinder competition, thereby reducing asset value maximization (¶65). He held that the phrase “prior to” in the proviso to Section 31(4) is a temporal expression that should be interpreted flexibly, allowing CCI approval to be obtained before Adjudicating Authority approval rather than at the CoC stage (¶66)?.
Judicial Precedents and the Role of Adjudicating Authority (¶¶ 78-81)
Justice Bhatti referred to NCLAT rulings in ArcelorMittal (2019 SCC OnLine NCLAT 920), Vishal Vijay Kalantari (2021 SCC OnLine SC 3243), and Makalu Trading Limited (2020 SCC OnLine NCLAT 643), where it was held that Section 31(4) is directory. He asserted that commercial wisdom of the CoC should not be constrained by regulatory conditions that can be addressed later in the process (¶78). He concluded that the consequences of non-compliance with combination approval requirements should be assessed at the Adjudicating Authority stage, ensuring adherence to both the IBC and Competition Act without disrupting the resolution process (¶79-81)?
The Supreme Court ruled that prior approval of the CCI is mandatory before the CoC considers a Resolution Plan involving a combination. It held that the approval of AGI Greenpac’s Resolution Plan was legally invalid, as it lacked CCI clearance at the time of CoC approval. The Court remanded the matter to the NCLT to reconsider the Resolution Plans in compliance with statutory provisions.
Prepared by Iram Jan
Communications Division| Supreme Court of India
© Supreme Court of India