Mandatory CCI Approval Before CoC Voting: A Watershed Moment For Competition And Insolvency Law In India

INTRODUCTION

1. In a watershed moment for India's insolvency and competition law regime, the Supreme Court of India ("SC"), in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja¹, has delivered a majority verdict², emphasising on the harmonious relationship between the Competition Act, 2002 ("Act") and the Insolvency and Bankruptcy Code, 2016 ("IBC"). This judgment underscores the mandatory nature of obtaining Competition Commission of India ("CCI") approval before the Committee of Creditors ("CoC") votes for a successful resolution plan. This judgment, apart from clarifying various procedural nuances, settles the jurisprudence on a plethora of issues that will ensure that fair competition remains at the heart of any Corporate Insolvency Resolution Process ("CIRP").

BACKGROUND

2. An insolvency proceeding was initiated against Hindustan National Glass and Industries Ltd. ("HNGIL"), a prominent glass manufacturing company, eventually resulting in HNGIL being admitted into CIRP and a Resolution Professional ("RP") was appointed in respect of HNGIL to implement the CIRP process. Resolution applicants, AGI Greenpac Limited ("AGI") and Independent Sugar Corporation Limited ("INSCO"), amongst others, submitted resolution plans for HNGIL. Both resolution plans of AGI and INSCO comprised a combination that necessitated prior CCI approval under the IBC. INSCO had initially enquired with the RP regarding the timeline for acquiring this CCI approval and whether the RP is seeking rigid compliance of Section 31(4) of the IBC [provision explained in detail later], to which the RP confirmed that such CCI approval can be obtained after the CoC approval. However, the RP clarified that the CCI approval has to be mandatorily obtained before an application is filed with the National Company Law Tribunal ("NCLT") for approval of the resolution plan ("NCLT Application"). Accordingly, INSCO proceeded to acquire necessary CCI approval, prior to submission of their resolution plan. However, no such CCI approval was taken by AGI, rather their first attempt at getting an approval was in fact, rejected.³ Despite the same, RP continued to place both the resolution plans of AGI and INSCO for voting before the CoC. Despite AGI not securing the CCI approval, prior to the CoC voting, the CoC approved AGI's resolution plan with 98% (ninety-eight percent) of the CoC approving the resolution plan. INSCO's resolution plan, which had obtained prior CCI approval, however managed to secure only around 90% (ninety percent) CoC approval. In view of AGI's resolution plan securing higher percentage of CoC approval, the RP accepted the resolution plan of AGI and decided to approach the NCLT, for its approval. It is pertinent to note that even between the period of CoC approval and filing the NCLT Application, AGI failed to procure any CCI approval and was thus in direct conflict and in violation of the timelines, suggested even by the RP to INSCO earlier.

3. INSCO challenged the CoC's decision, arguing that AGI's resolution plan violated the mandatory requirement of prior CCI approval. Most importantly, INSCO relied upon RP's own letter to INSCO, wherein the RP confirmed that such CCI approval ought to be obtained prior to filing the NCLT Application, which was not done by AGI, in the present case. INSCO sought to challenge the approval of AGI's resolution plan as being discriminatory owing to INSCO being given different instructions by RP as to the timelines for acquiring the CCI approval. Despite the objections raised by INSCO, both the NCLT and thereafter the National Company Law Appellate Tribunal ("NCLAT") ruled that while CCI approval was necessary, obtaining it before CoC's voting on the resolution plan or before the filing of the NCLT Application was merely a directory requirement and not a mandatory prerequisite. AGI ultimately obtained the required CCI approval, only during the pendency of the appeal before the NCLAT, i.e. much after the period which is statutorily provided and even much after the period suggested by the RP. Simultaneously, INSCO, along with 3 (three) other appellants, had also filed an appeal before the NCLAT challenging the CCI's conditional approval in the AGI-HNGIL combination owing to certain procedural irregularities and deficiencies in CCI's competitive assessment. However, the principal bench of the NCLAT dismissed all the appeals. Aggrieved by the orders passed by NCLT and NCLAT emanating from both, the competition law and IBC specific forums, INSCO approached the SC by filing separate civil appeals, i.e.: (i) competition appeal (tagged with other appeals from multiple parties) challenging the CCI approval accorded to the combination between AGI and HNGIL; and (ii) IBC appeal (tagged with other appeals from multiple parties) pertaining to the CIRP of HNGIL. These appeals inter alia, called upon the SC to interpret the critical provisions of IBC regarding the CCI approval and the timelines for securing such approval.

4. After hearing all the parties, the SC has now delivered this landmark judgment, which has virtually settled the legal principles pertaining issues, as discussed above.

5. In this article, the authors discuss the SC's findings on various key issues inter alia the timelines for obtaining CCI approval, in relation to a resolution plan involving a combination.

ISSUES BEFORE THE SC

6. As stated above, AGI procured a conditional approval of the CCI (i.e. subject to fulfillment of divestment) only post approval of its resolution plan by the CoC. Hence, this case posed a unique legislative conundrum as: (i) the AGI-HNGIL combination remains the first CCI approval emanating from a CIRP in which the successful resolution applicant only had a conditional CCI approval; and (ii) given that the resolution plan approved by the CoC was modified basis CCI's conditional approval, the SC was tasked with assessing whether this crucial information regarding conditional CCI approval would have impacted the CoC's selection of the resolution plan.

7. In light of the aforesaid, the underlying issues inter alia before the SC were:

1. whether the CoC can approve a resolution plan before the resolution applicant secures approval from the CCI;
2. whether there is any disharmony in the timelines specified under the Act and the IBC;
3. what constitutes a trigger event for filing a notice to the CCI in insolvency cases; and
4. whether the CCI's practice of issuing Show Cause Notice ("SCN") after forming a prima facie opinion of appreciable adverse effect on competition ("AAEC") arising from a combination, only to the acquirer (as opposed to all transacting parties) is in consonance with the provisions of the Act.

SC's FINDINGS

Mandatory CCI approval before CoC voting:

8. The primary issue before the SC was whether CCI's approval of a proposed combination must mandatorily precede the CoC's approval of the resolution plan, as per the proviso to Section 31(4) of the IBC⁴. The verdict, while underscoring the importance of strictly adhering to procedural requirements outlined in the IBC, emphasized that the proviso creates an exception, requiring prior CCI approval for resolution plans involving combinations. In this regard, the SC emphasised on the principle of "Plain Meaning", interpreting "prior approval" as a mandatory requirement to maintain legislative intent and regulatory oversight in competition matters.

9. The SC further observed that the legislative intent behind inserting the proviso to Section 31(4) suggested 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. A contrary interpretation of the said proviso, i.e. prior approval of CCI is directory, would distort the objective for which the legislature inserted the proviso, thereby rendering the same totally inconsequential.

10. Further strengthening the case for regulatory compliance, the SC also observed that the IBC provides a different threshold for CCI's approval as compared to approvals to be received from other statutory and regulatory bodies. Such an arrangement is deliberate as the Act contains both specific restrictions with respect to combinations that may lead to an AAEC as well as a detailed procedure of enquiry and scrutiny of such combinations, to prevent such AAEC.

11. Thus, given that the CCI is empowered to approve, reject and/or modify a proposed combination, its approval must be obtained prior to CoC approval to ensure that the CoC exercises its commercial wisdom only after having complete information on the combination.

Trigger event for filing a notice to the CCI in Insolvency cases

12. The SC provided a much-needed clarity on what constitutes a trigger event for filing a notice to the CCI in insolvency and bankruptcy cases. It was observed that prior to the submission of the resolution plan to the CoC, the application to obtain CCI approval ("CCI Application"), under the Act, can be submitted at various stages⁵. Such stages are inclusive but not limited to, at the time of submitting expression of interest (i.e., T + 60 (sixty) days), or issuance of request for resolution plan (i.e., T + 105 (one hundred five) days), or even when the list of provisional resolution applicants is published (i.e., T + 85 (eighty-five) days). Taking this into account, submitting the CCI Application at either of these stages, would still result in the culmination of the entire CIRP process, within the stipulated time limit of 330 (three hundred thirty) days, under the IBC.

No disharmony in the timelines specified under the Act and the IBC

13. After considering the arguments made by INSCO, the SC noted that there is no disharmony between IBC and the Act, the timelines generally align, barring rare exceptions⁶. As discussed above, the SC rejected the contention that in IBC cases, the CCI Application can only be submitted at the stage of submission of the resolution plan (i.e., T + 135 (one hundred thirtyfive) days) and hence, a delay in obtaining CCI approval will result in a potential disharmony. The SC took note of plethora of statistics submitted and appreciated that the average time taken by the CCI to dispose of combination applications is typically 21 (twenty-one) working days. It was further observed that there are various other stages before the submission of resolution plan to the CoC, when the CCI Application can be filed.

Distinction from the Arcelor Mittal judgment and other judgments

14. It was argued by AGI that as per the Arcelor Mittal judgment⁷, obtaining CCI approval under the Act, prior to the CoC's approval of the resolution plan is directory and not mandatory.⁸ However, the SC rejected NCLAT's reliance on the Arcelor Mittal judgment as the facts in that case were different from the instant case. For instance: (i) the IBC proceedings commenced prior to the introduction of the proviso to Section 31(4) of the IBC, requiring mandatory CCI approval; and (ii) the CCI had granted an unconditional approval and did not address issues related to AAEC (and not imposed any modifications to the resolution plan). The SC also referred to the judgment in Makalu Trading Limited⁹ ("Makalu") and reflected that the said judgment is not an authority on the subject. The SC clearly held that the judgement in Makalu did not go into the objectives of the IBC and the reasons for incorporating the proviso to Section 31 (4) of the IBC. Similarly, another judgment relied upon by AGI, being Vishal Vijay Kalantri¹⁰, was distinguished by the SC on the premise that the proposed acquisition did not amount to a 'combination' under the Act, and hence, the ratio of that judgment is not material for the purpose of interpreting Section 31(4) of IBC.

Procedural lapses under the Act

15. The SC stressed on the importance of issuing SCN to all the 'parties to the combination' if and when the CCI forms a prima facie opinion that a combination is likely to cause or has caused an AAEC in any given relevant market.

16. In light of the aforesaid, the SC quashed and set aside AGI's resolution plan and directed the CoC to reconsider INSCO's plan. While the SC's judgment has given relief to INSCO, it is imperative to understand the future implications of the judgment.

IndusLaw View:

17. The SC's judgment is a game-changer for India's insolvency and competition law landscape as it brings certainty and unequivocally lays down that the CCI approval is mandatory prior to CoC's voting on the resolution plan, comprising a combination and that the proviso to Section 31(4) of the IBC is mandatory in nature. The judgment is likely to have considerable impact on CIRP's involving a combination as set out below:

Practical considerations to be borne in mind by resolution applicants:

18. As stated above, this judgment underscores the importance of securing CCI approval prior to the CoC voting, in case the resolution plan comprises a combination. Notably, if the parties to the combination are in the same sector, given the high combined market shares of the parties, the CCI's review is likely to be more rigorous and time-consuming. Thus, the resolution applicants must undertake a self-assessment regarding the notifiablity requirement, capitalize on the flexibility afforded by the SC in terms of trigger event and approach the CCI at the earliest stage, ensuring that CCI approval is procured in a timely manner. This will further ensure that the CoC can exercise its commercial wisdom with complete information whilst comparing all possible plans of prospective resolution applicants.

RP's to have a strong understanding of regulatory requirements:

19. RP's must have a holistic understanding of the requisite regulatory requirements to effectively manage the CIRP. It is recommended that their appointment and training should be more incisive, as a single lapse in their judgement can derail the entire insolvency proceedings which will ultimately fail the objective of CIRP.

20. While this is not an isolated case where RP's conduct was challenged, given the gravity of the misdemeanor, sufficient time and effort should be invested in training the RPs. It is imperative to sensitize them regarding related statutory provisions, over and beyond insolvency laws, so that the objective of CIRP is realized.

Target to play a bigger role in CCI's modification process

21. While it is the acquirer's responsibility to obtain CCI's approval and assuage its AAEC concerns, pursuant to this verdict, a modification plan submitted to the CCI shall be an imprimatur of not only the acquirer but also the target. This procedural shift is to ensure that the data relied on by the CCI for its assessment and the formulation of the modification plan is true and correct, thereby ensuring a more holistic and inclusive approach for modifications.

Footnotes

1. 2025 INSC 124, Independent Sugar Corporation Ltd. v. Girish Sriram Juneja, order dated January 29, 2025, available at: https://api.sci.gov.in/supremecourt/2023/38828/38828_2023_4_1503_59041_Judgement_29-Jan-2025.pdf

2. The majority opinion was given by Justice Hrishikesh Roy, concurred by Justice Sudhanshu Dhulia, observing that prior Competition Commission of India's approval must precede the Committee of Creditor's approval of the resolution plan. A dissenting opinion was given by Justice S.V.N Bhatti, permitting resolution applicants to obtain Competition Commission of India's approval before final approval by the adjudicating authority i.e., the National Company Law Tribunal.

3. In its first attempt, AGI submitted a notice to the CCI in Form I ("Short Form"), in relation to the proposed acquisition of HNGIL. Meanwhile, during the course of evaluating the Short Form submitted by AGI, the CCI noted that as per the applicable regulations, the notice should preferably have been filed in Form II ("Long Form") as the combined market share of the parties in one of the plausible markets identified in the notice could be more than 15 percent, after the AGI-HNGIL combination. Accordingly, the CCI directed AGI to file a fresh Long Form. Notably, until the CoC voted for AGI's resolution plan and selected it as the successful resolution applicant, AGI, neither had any pending Long Form application before the CCI, nor the CCI's approval to the AGI-HNGIL combination.

4. Section 31 (4) of the IBC: The resolution applicant shall, pursuant to the resolution plan approved under subsection (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the adjudicating authority under sub-section (1) or within such period as provided for in such law, whichever is later. Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.

5. The SC noted that the CCI Application can be submitted immediately after or within thirty days of the execution of 'any agreement' or 'other document', disclosing details of the proposed combination. Other document is defined in the Act as any document conveying an agreement or decision to acquire control over a target company. As such, the CCI has been accepting CCI applications in IBC cases post execution of the resolution plan, which is not a binding document but merely a document conveying resolution applicants' intention to acquire the company undergoing CIRP, pending CoC 's approval. Given that there are other non-binding documents (containing the intention to acquire) submitted by a resolution applicant prior to the resolution plan, to reconcile the timelines, SC took a beneficial interpretation.

6. The upper limit of 210 days to approve a combination, as stipulated under the Act would be attracted only in cases which involve an extremely high degree of AAEC, mostly indicative of a complicated super-monopolistic behemoth.

7. Company Appeal (AT) (Insolvency) No. 524 of 2019, Arcelormittal India Pvt. Ltd vs. Abhijit Guhathakurta, order dated December 16, 2019, available at: https://nclat.gov.in/sites/default/files/migration/upload/6926822325df7714e62981.pdf

8. The Arcelor Mittal Judgment notes that: "It is always open to the 'Committee of Creditors', which looks into viability, feasibility and commercial aspect of the 'Resolution Plan' to approve the 'Resolution Plan' subject to the approval by the Commission, which may be obtained prior to the approval of the plan by the adjudicating authority i.e., the NCLT.

9. Company Appeal (AT) (Insolvency) No. 533 of 2020, Makalu Trading Limited vs. Rajeev Chakraborty and others, order dated September 9, 2020, available at: https://nclat.nic.in/sites/default/files/migration/upload/11909619085f59ca5c8fc40.pdf

10. Company Appeal (AT) (Insolvency) No. 466 of 2020, Vishal Vijay Kalantri vs. Shailen Shah, order dated July 24, 2020, available at: https://nclat.nic.in/sites/default/files/migration/upload/17604705035f1ae77055eff.pdf