CCI’s Approval Of Proposed Combination Must Be Obtained Before Approval Of Resolution Plan By CoC U/S 31(4) IBC: SC
The Apex Court was hearing a batch of Civil Appeals preferred against the Judgment of the NCLAT pertaining to the Corporate Insolvency Resolution Process (CIRP).
The Supreme Court held that the approval of a proposed combination by the Competition Commission of India (CCI) must be obtained before the approval of Resolution Plan by the Committee of Creditors (CoC) under Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC).
The Court held thus in a batch of Civil Appeals preferred against the Judgment of the National Company Law Appellate Tribunal (NCLAT) pertaining to the Corporate Insolvency Resolution Process (CIRP) of the Hindustan National Glass and Industries Ltd. (HNGIL).
The three-Judge Bench of Justice Hrishikesh Roy, Justice Sudhanshu Dhulia, and Justice S.V.N. Bhatti observed, “In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. For a Resolution Plan containing a combination, the CCI’s approval to the Resolution Plan, in our opinion, must be obtained before and consequently, the CoC’s examination and approval should be only after the CCI’s decision. This interpretation respects the original legislative intent, and deviation from the same would not only undermine the statute but would also erode the faith posed by the stakeholders in the integrity of our legal and regulatory framework.”
The Bench added that, where the provisions allow for dilution or departure from the intended scheme of the IBC or the Competition Act, 2002, it is the responsibility of the legislature to rectify such inconsistencies through appropriate legislative measures and the Judiciary should not normally venture into the legislative domain.
Senior Advocates Abhishek Manu Singhvi, Mahesh Jethmalani, Rajshekhar Rao, Dushyant Dave, Dhruv Mehta and Balbir Singh represented the Appellants. Senior Advocate P. Chidambaram represented the Resolution Professional while Solicitor General Tushar Mehta represented the CoC. Senior Advocates Mukul Rohatgi and Parag Tripathi represented the Successful Resolution Applicant.
Facts of the Case
HNGIL was the Corporate Debtor/Target Company with a 60% market share of the glass packaging industry in India and the Resolution Professional (RP) represented it. Combining with HNGIL was AGI Greenpac Ltd. i.e., the Successful Resolution Applicant which was the second largest company in the field of glass packaging and manufacturing in India, after HNGIL. The combination between AGI Greenpac and HNGIL was generating a key issue for adjudication since it was likely to result in an Appreciable Adverse Effect on Competition (AAEC) in the glass packaging industry. The main contesting party to the proposed combination was the Appellant i.e., Independent Sugar Corporation Ltd. (INSCO). After the CIRP was initiated against HNGIL, the NCLT, Kolkata admitted the matter and an Expression of Interest (EOI) was floated by RP prescribing a mandatory requirement of approval from CCI prior to CoC’s approval.
Subsequently, the RP granted relaxation to Resolution Applicants to procure CCI approval after CoC’s approval of the Resolution Plan but prior to filing Application before NCLT. Thereafter, AGI Greenpac submitted an Application with CCI, intimating that it proposed to enter into a combination with HNGIL by acquiring 100% of HNGIL’s shareholding and business. CCI declared this Application as ‘not valid’ and final Resolution Plans were submitted for consideration by CoC. Immediately then, the Appellant objected to the approval accorded to AGI Greenpac’s Resolution Plan. However, CoC approved AGI’s Resolution Plan with 98% votes while the Appellant’s Resolution Plan received 88% votes. Hence, AGI sought approval before CCI and the same was granted. Challenging this, the Appellant approached NCLT but its application was rejected. Then the Appellant approached NCLAT but it also upheld the said approval. Hence, the case was before the Apex Court.
Reasoning
The Supreme Court in the above context of the case, noted, “… a provision would not be considered ambiguous merely because it contains a word which in different contexts, is capable of a different meanings, but instead if it contains a word or phrase which is capable of having more than one meaning in that particular context.”
The Court further said that the Courts must always attempt to uphold a provision as it is and not invalidate it, merely because one of the possible interpretations could lead to such a result and when there is no ambiguity in the words used, the question of finding a disguised intention or purpose behind the use of a particular word (the word ‘prior’ in this case), would not ordinarily arise.
“The legislative intent in the proviso to Section 31(4) IBC, is in clear and unambiguous terms. The same specifically provides for prior approval of the CCI before the approval of the Resolution Plan, by the COC. This provision introduced with straightforward and clear words must be interpreted and understood as being mandatory in nature. Otherwise the object behind the enactment of the said proviso, would be defeated”, it also observed.
The Court elucidated that after the COC’s approval, the Resolution Plan cannot be modified in any manner since the Adjudicating Authority can only approve the Resolution Plan, as has been approved by the CoC and the same is made clear by Section 31(1) of the IBC.
“The interplay between the provisions of the Competition Act and the IBC necessitates a careful balancing of competing interests, underscoring the indispensability of procedural compliance. 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”, it added.
Furthermore, the Court remarked that, as India aspires to establish itself as a global manufacturing powerhouse and investment hub, it is imperative that it is able to provide a reliable, robust and competitive business environment for both domestic and international stakeholders.
“In essence, the introduction of the Green Channel route, which strives to create a level-playing field and enable new entrants to effectively compete with established players in the Indian market, is a significant step in that direction. However, to ensure that entities operate with utmost confidence in the sanctity and fairness of India’s legal and regulatory system, the objectives of the IBC and the Competition Act must also necessarily be in harmony with one another”, it emphasised.
The Court said that, providing relief for stressed assets must necessarily align with the statutory framework, as adherence to legal principles is fundamental to a fair and just resolution process.
“… a balance between the need for expeditious relief and adherence to the statutory framework must necessarily be maintained, in order to ensure that the objectives of both, the IBC and the Competition Act are met in a manner that supports India's long-term economic aspirations”, it also enunciated.
In his concurring opinion, Justice S.V.N. Bhatti said, “I have had the opportunity to read the well-crafted judgement circulated by my Learned Brother, Justice Hrishikesh Roy. In spite of my effort to subscribe to the view taken by my Learned Brother, for the subtle distinction I noticed in interpreting the proviso to section 31(4) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), I find it apt to express my position on the same through this opinion.”
He observed that the failure of the resolution process will finally result in the sale of scrap of the assets of the corporate debtor, and again, a scenario experienced under previous regimes is reflected.
“It is axiomatic, more particularly in commercial matters, that costs and consequences of adjudication follow the event. In corporate and commercial matters, as a corollary, the cost must follow the result”, he added.
Justice Roy in a separate Order remarked, “In these matters, the three of us could not reach a common conclusion. Brother Justice Sudhanshu Dhulia has concurred with the opinion that has been penned by me, while Brother Justice S.V.N. Bhatti has decided to write a separate opinion canvassing an alternate view, reaching a different conclusion.”
He added that such differences must be understood as useful steps towards the evolution of jurisprudence in the field of IBC and the Competition Act.
Accordingly, the Apex Court allowed the INSCO’s Appeal and quashed the impugned approval.
Cause Title- Independent Sugar Corporation Ltd. v. Girish Shriram Juneja & Ors. (Neutral Citation: 2025 INSC 124)
