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The legal framework w.r.t. law of insolvency in India has seen considerable progress since the introduction of Insolvency and Bankruptcy Code, 2016 (“IBC”). The Legislature, taking cue from various judgments passed by the courts and the grey areas identified during the implementation of the provisions of IBC, introduced various amendments from time to time. However, notwithstanding such amendments, various legal questions involving interpretation and implementation of provisions of IBC keep arising posing challenges before the Courts to resolve the same.
Recently, an interesting question arose before Supreme Court of India in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors. – 2025 INSC 124 whether seeking approval of the Competition Commission of India (“CCI”) to a resolution plan involving combination, prior to the approval of Committee of Creditors (“CoC”) as stipulated under Section 31(4) of IBC is mandatory or directory?
A set of appeals were filed by various parties under Section 62 of IBC, challenging the judgment dated 18.09.2023 passed by National Company Law Appellate Tribunal (“NCLAT”) w.r.t. the Corporate Insolvency Resolution Process (“CIRP”) initiated against Hindustan National Glass and Industries Ltd. (“HNGIL” or “the corporate debtor”). The above appeals were taken up together as the same involved a common question of law.
HNGIL, a dominant player in India’s glass packaging industry with approximately 60% market share, attracted several resolution applicants after the National Company Law Tribunal, Kolkata (“NCLT”), admitted a petition against HNGIL filed under Section 7 of the IBC by DBS Bank. The CIRP was initiated against HNGIL on 21.10.2021, pursuant to which several resolution plans were submitted.
Two primary resolution applicants came to the fore i.e., AGI Greenpac Ltd. (“AGI”) and Independent Sugar Corporation Ltd. (“INSCO”). Since, HNGIL as well as AGI were both dominant players in Glass packaging industry, AGI’’s takeover of HNGIL would have been a ‘combination’ in terms of Section 5 of Competition Act, 2002. For the sake of clarity, the definition of ‘combination’ primarily includes an arrangement between two corporate entities where one entity is taking complete or partial control of another entity or two entities are getting merged. However, an exhaustive definition of ‘combination’ is provided under the aforesaid provision which can be referred to for better understanding of the meaning of the said term.
Considering the fact that only a company having operations of glass packaging would submit the resolution plan which would have been ‘combination’; in the Expression of Interest (“EOI”) issued by the Resolution Professional (“RP”), a mandatory condition was imposed, requiring all resolution applicants to obtain prior approval from the CCI before the CoC could vote on their Resolution Plans as mandated under Section 31(4) of IBC. The RP vide an email dated 25.08.2022 granted a relaxation to the resolution applicants to obtain CCI approval after CoC’s approval but prior to filing the application for approval before NCLT. Subsequently, AGI submitted its application to CCI on 27.09.2022, which was rejected by CCI as ‘not valid’. However, despite the above, CoC approved AGI’s resolution plan on 28.10.2022 with 98% votes. Subsequently, AGI once again applied to CCI to 03.11.2022 seeking its approval. At the same time INSCO challenged approval of AGI’s plan before NCLAT. CCI on 15.03.2023 granted approval to AGI’s combination proposal with HNGIL. INSCO challenged the aforesaid approval as well as approval of AGI’s resolution plan, however, the same was rejected. Even the challenge to the aforesaid judgment was rejected by NCLAT and the approval granted to AGI’s resolution plan was upheld. It was categorically held by NCLAT that though it was ‘mandatory’ to obtain CCI approval to a resolution plan in the given circumstances, however, the requirement of seeking such approval as mandated under Section 31(4) of IBC, prior to approval of CoC was ‘directory’ in nature. INSCO challenged the aforesaid judgment before Supreme Court of India.
II. CONTENTIONS OF THE PARTIES
INSCO contended that the express terms of the EOI and RP’s own e-mail communications, and, most significantly, the statutory mandate under the proviso to Section 31(4) of the IBC necessitated that CCI approval must precede CoC approval. INSCO further argued that the process was vitiated by procedural irregularities and preferential treatment. It was also argued that AGI had neither secured CCI approval at the relevant stage nor complied with mandatory procedural obligations under both the IBC and the Competition Act, 2002. Moreover, it was also alleged that the post facto approval granted by the CCI was based on misleading data provided by AGI.
On the other side, AGI, the Resolution Professional, and the CoC maintained that the proviso to Section 31(4) of the IBC was merely ‘directory’. Their principal defence was that the provisions of the IBC and the Competition Act have to be read harmoniously and insisting on prior approval of CCI before CoC would disrupt the time-sensitive nature of the CIRP and undermine the IBC's objective of preserving the corporate debtor as a going concern. AGI also contended that since there was no consequence for the non-compliance of the proviso therefore, the same cannot be treated as a mandatory provision. There have been instances wherein Supreme Court of India has held that if any statute does not provide any consequence for non-compliance of any provision, such provision has to be treated as directory in nature. AGI also challenged the locus standi of INSCO to challenge the approval of plan.
The Supreme Court of India, by majority (2:1), ruled in favour of the Appellant and set aside the CoC's approval of AGI’s plan, holding that CCI’s prior approval was indeed a ‘mandatory’ precondition before CoC approval, as mandated under the proviso to Section 31(4) of the IBC. The Hon’ble Justice Hrishikesh Roy delivered a reaffirmation of statutory text and legislative intent. His Lordship observed:
"The statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4)…this interpretation respects the original legislative intent, and deviation from the same would not only undermine the statute but also erode the faith posed by stakeholders in our legal and regulatory framework."
The Court’s findings were multifaceted:
The Court highlighted the language used in Section 61 of the IBC and observed that ‘any person aggrieved’ by the order of NCLT can prefer an appeal under Section 62 before NCLAT and further to Supreme Court of India. The expression “any person aggrieved” as appearing in Section 62 of IBC must be understood widely and not in a restricted manner. Accordingly, Court held that INSCO had the locus to maintain the appeal.
The Court held that the language of the proviso to Section 31(4) of IBC is clear and categorical. The legislative intent of inserting the proviso suggests seeking prior approval of CCI and such mandate should not be seen as a flexible provision to be ignored. The requirement of prior approval, if held as directory, would distort the very objective of inserting the said proviso and it would become completely inconsequential.
It was observed that the effort should be to interpret any phrase or proviso in a reasonable manner without getting into or going beyond the legislative intent. Thus, interpretation of the word ‘prior’ used in Section 31(4) of IBC, cannot be different from what is expressly mentioned in the proviso and hence, cannot be construed as ‘directory’.
The Court while arriving at its conclusion also observed that CCI was empowered under Section 31(3) of the Competition Act, 2002 to direct the modification in the resolution plan and therefore, it was important to obtain the approval of CCI prior to approval by CoC, otherwise the modifications directed by CCI would be kept out of the scrutiny of CoC. It was observed that in case a resolution plan contained any provision which might have ‘appreciable adverse effect’ on competition, if presented before CoC for approval prior to obtaining CCI’s approval, the above aspect would be completely ignored. Such kind of plan would, thus, be clearly in violation of the provisions of IBC & Competition Act, 2002.
The Court also noticed that there was a major procedural lapse, as CCI failed to issue the Show cause notice under Section 29(1) of the Competition Act, 2002 to the Corporate Debtor. This was held to be in violation of basic framework of IBC under which all parties to the ‘combination’ should be afforded a fair opportunity to participate in the decision making process.
The Court discussed various provisions of IBC & Competition Act, 2002 to deal with the contentions relating to harmonious interpretation of the aforesaid statutes. It was observed that the timelines stipulated under the above statutes do not cause any disharmony or conflict except when some external factors were involved. It was also held that the CCI had granted the approval within the time period specified under the Competition Act, 2002 and therefore, if no dilatory tactics were employed, CCI would be able to grant approval in time. Accordingly, the contention that the time spent before CCI would delay the process was found to be incorrect. It was also observed that the provisions of the above two statutes could not be interpreted disjunctively.
The Court after extensively discussing the provisions of both the statutes, allowed the set of appeals and set aside the CoC approval granted to AGI’s resolution plan. The plan was found to be unsustainable due to not having the prior approval of CCI. The Court further directed to restore the rights of the parties as per status quo ante i.e., prior to approval of resolution plan by CoC on 22.10.2022. It was also directed that CoC would reconsider INSCO’s plan as well as other resolution plans which had secured CCI approval as on 22.10.2022.
Resolution Professionals must take heed that any deviation from statutory procedure, even if allegedly practical, may result in the vitiation of the entire CIRP process. The RP’s e-mail permitting submission of post facto CCI approval, despite contrary terms in the EOI and the statute, was criticized by the Court. This underlines the importance of strict adherence to statutory processes, lest the actions of RP be exposed to scrutiny or challenge.
REVIEW PETITIONS
Post passing of the aforesaid judgment two separate review petitions were preferred by CCI & AGI. CCI sought a review of the observations made by the Court w.r.t. CCI’s power under Section 29 (1) & Section 29(1A) of the Competition Act, 2002. The court allowed the review filed by CCI and modified its earlier judgment by holding that in so far as provisions contained under Section 29(1) are concerned, it is mandatory for CCI to issue show cause notices to the parties to a ‘combination’ in case it is of a prima facie opinion that the ‘combination’ is likely to cause or is causing appreciable adverse effect. Subject to the response by the parties and the data CCI has the discretion under Section 29(1A) to go for investigation by Director General and take the steps specified in Section 29(1A).
The Court while arriving at the above conclusion emphasised on the language used in both the aforesaid provisions whereby under Section 29(1) the expression used is “shall” but in Section 29 (1A) the expression used is “may”. The Court, therefore, clarified that CCI had wide discretion available under Section 29(1A) of the Competition Act, 2002.
As far as AGI’s review petition was concerned, the same was rejected as not being maintainable.
CONCLUSION
This landmark judgment fortifies the legal architecture surrounding CIRP and sets a clear precedent: regulatory compliance, particularly under competition law, is not a box-ticking formality but a substantive precondition for a lawful resolution. It corrects a perverse drift towards pragmatism at the cost of legality and upholds the integrity of India’s insolvency regime.
For litigants and practitioners alike, the ruling serves as a clear directive that procedural relaxation cannot override statutory mandate and expediency cannot substitute for legality.