In January 2025, the Supreme Court of India passed a landmark judgment in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja, resolving a long-pending doubt in India's insolvency law. The Court ruled that whenever a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) involves a merger or acquisition (legally referred to as a "combination" under the Competition Act, 2002), the Competition Commission of India (CCI) must approve the plan prior to its voting by Committee of Creditors (CoC).
This ruling has significant implications. For long, many resolution applicants and insolvency professionals believed that CCI approval could be taken after the CoC's nod. The Court has now held that this is not legally permissible. This judgment strengthens the procedural backbone of the IBC while reaffirming India's commitment to compliance with competition law in company restructuring. However, it also introduces new challenges that the insolvency ecosystem will now have to navigate carefully.
The Provision in Question
The essence of the controversy is proviso to Section 31(4) of the IBC, inserted by an amendment in 2018. This clause deals with a special situation: when a resolution plan qualifies as a "combination" under Section 5 of the Competition Act, it has to get CCI's approval before the CoC considers it.
The IBC generally allows a resolution applicant one year timeline to obtain approvals from other regulators after the National Company Law Tribunal (NCLT) approves a plan. However, the 2018 proviso made an exception for combinations, making prior CCI approval a prerequisite that has to be met even before CoC scrutiny. Despite this clarity in wording, insolvency professionals and tribunals had been interpreting this rule more flexibly, contending that CCI approval could be sought subsequent to the CoC vote, as long as it came before final NCLT approval.
How the Law Was Being Interpreted
Prior to the Independent Sugar ruling, the general practice was to treat the requirement of prior CCI approval as 'directory rather than mandatory'. This meant that resolution applicants often filed for CCI clearance once the CoC had already sanctioned their plan. The rationale was that the process of CCI review, especially in complex cases, could take several months, which would prevent the CIRP (Corporate Insolvency Resolution Process) from culminating within the 330-day period as provided under Section 12 of the IBC.
The Courts, including the NCLT and NCLAT, largely supported this flexible approach. They felt that requiring CCI approval prior to the CoC voting might discourage bidders, complicate timelines, and defeat the objective of timely resolution of insolvency. This flexibility was already observed in earlier cases such as ArcelorMittal India Pvt. Ltd. v. Abhijit Guhathakurta, where the NCLAT emphatically considered the requirement of prior CCI approval under Section 31(4) IBC as directory, not mandatory. In that case, the CCI clearance was obtained after CoC approval but prior to NCLT sanction, and the tribunal did not intervene, even as the CoC had approved the plan prior to CCI nod.
However, this approach also created unfairness. Bidders who complied with the law and obtained CCI approval beforehand often lost to their rivals who expedited the process and took advantage of timing gaps. This loophole reduced transparency and introduced unpredictability in the system.
The Case of HNGIL and the Supreme Court Verdict
The issue reached its climax during the insolvency of Hindustan National Glass & Industries Ltd. (HNGIL). Two parties came forward as bidders: AGI Greenpac Ltd., a major player in the glass industry, and Independent Sugar Corporation Ltd. (INSCO). Since both bids involved acquiring a dominant market player, they triggered the merger thresholds under the Competition Act.
INSCO followed the legal route and obtained CCI clearance via the green channel process before submitting its plan to the CoC. AGI, however, submitted its plan without prior approval of CCI and still secured 98% of CoC votes. AGI later received CCI's approval, but only after agreeing to sell off one of HNGIL's plants to address market dominance concerns.
INSCO challenged AGI's plan, arguing that it violated Section 31(4) of the IBC Code, because CCI clearance was not obtained prior to the voting of CoC. While, both the NCLT and NCLAT dismissed the objection, saying that the timing was not fatal, the Supreme Court took a different view from them. The apex court ruled that the law must be followed strictly. The phrase "prior to the approval of such resolution plan by the CoC" was found to be followed mandatory, and is not flexible.
As a result, the Court invalidated AGI's plan and directed the CoC to reconsider only those plans that had received the clearance of CCI before the original voting date. This not only revived INSCO's plan but also set a binding precedent, that, no resolution plan involving a combination can be voted upon by the CoC without prior approval from the CCI.
Practical Consequences and Challenges Ahead
The judgement brings legal certainty, but also presents pragmatic and strategic issues for stakeholders involved in CIRP. The largest of these issues is timing. While the Competition (Amendment) Act, 2023, has reduced the review time of CCI to 150 days, the resolution process under IBC is already under pressure to finish within 330 days. The two timelines may still clash unless resolution applicants move quickly and make a request for CCI clearance at the earliest possible opportunity.
To meet the new standard, resolution applicants will have to file CCI filings even prior to the CoC issuing final approval. This adds cost and regulatory burden at a time when bidders do not yet know if their plan will be chosen. This may discourage new or relatively smaller players from participating, leading to less competition in the bidding process.
Another concern is the effect on past resolution plans. While the judgment does not apply retrospectively, the language used by the Court opens up the possibility of challenging previous cases where CCI clearance was obtained after CoC approval. Legal commentators worry that this could lead to a spate of litigations aimed at undoing already-implemented plans.
From the regulatory point of view, the judgment also calls for reforms within the CCI. The Supreme Court criticized the CCI's handling of AGI's application, especially for excluding HNGIL in the pestment proposal discussions. Going forward, the CCI will need to tighten its processes and possibly set up a dedicated fast-track mechanism for insolvency-related merger approvals.
Conclusion
The Supreme Court's ruling in Independent Sugar is a major turning point for practice of competition law and insolvency law in India. It clearly lays down that clearance by the CCI is a mandatory pre-condition to any resolution plan that involves a merger or acquisition above specified thresholds. This enhances the legal integrity of the CIRP and ensures that competition concerns are not sidelined in the rush to complete resolutions.
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