Supreme Court Mandates CCI Approval Before CoC Nod for Combination Resolution Plans: Independent Sugar Corporation Ltd. vs. Girish Sriram Juneja & Ors. (2025) INSC 124 (29 January 2025)

Case Background

The case involves the Corporate Insolvency Resolution Process (CIRP) of Hindustan National Glass and Industries Ltd. (HNGIL), a major player in the glass packaging industry. DBS Bank initiated CIRP against HNGIL under Section 7 of the Insolvency and Bankruptcy Code (IBC). HNGIL had a 60% market share in the glass packaging industry. AGI Greenpac Ltd. (AGI), the second-largest company in the same sector, submitted a resolution plan to combine with HNGIL. This proposed combination raised concerns about its potential adverse impact on competition, given that their combined market share could reach 80-85% in the F&B segment and 45-50% in the alco-beverage segment. Independent Sugar Corporation Ltd. (INSCO), another resolution applicant, contested the approval of AGI’s plan, arguing that it lacked the mandatory prior approval from the CCI.

The Resolution Professional (RP) initially required CCI approval before CoC approval, but later relaxed this requirement, allowing AGI to seek CCI approval after CoC approval but before filing with the NCLT. AGI’s initial CCI application was rejected. Despite this, the CoC approved AGI’s resolution plan. Subsequently, AGI obtained conditional CCI approval after proposing to divest one of HNGIL’s plants. INSCO challenged this approval, arguing that CCI approval was a mandatory prerequisite for CoC approval.

Timeline

Course of Proceedings

The National Company Law Tribunal (NCLT) rejected INSCO’s challenge, stating that the required CCI approval had been obtained. The National Company Law Appellate Tribunal (NCLAT) upheld this decision, ruling that while CCI approval was mandatory, obtaining it before CoC approval was only directory. The NCLAT reasoned that the lengthy CCI approval process should not halt the CIRP. The NCLAT also upheld the CCI’s approval of the combination, finding that the voluntary remedies proposed by AGI sufficiently addressed competitive concerns.

Legal Framework

The core legal issue revolves around Section 31(4) of the Insolvency and Bankruptcy Code (IBC), which states:

“(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (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, 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.”

The proviso to Section 31(4) mandates that for resolution plans involving a ‘combination’ as defined under Section 5 of the Competition Act, 2002, CCI approval must be obtained before CoC approval. Section 5 of the Competition Act, 2002 defines a combination as an acquisition, merger or amalgamation.

Arguments

INSCO (Appellant):

• ✓ The entire process was flawed as AGI’s plan was approved without the required CCI approval, violating Section 31(4) of the IBC.
• ✓ The proviso to Section 31(4) is mandatory, requiring CCI approval before CoC approval for combination proposals.
• ✓ The RP and CoC should have re-evaluated other compliant plans.
• ✓ The NCLAT erred in finding no inconsistency between IBC and Competition Act timelines.
• ✓ The CCI bypassed mandatory procedures by not issuing a show cause notice to HNGIL and by allowing AGI to propose modifications.
• ✓ The divestment plan was not approved by CoC and was based on incorrect data.
• ✓ AGI’s resolution plan was conditional, violating IBC framework.

Committee of Creditors (CoC):

• ✓ The IBC aims for time-bound resolution and asset maximization.
• ✓ The proviso to Section 31(4) is directory, not mandatory, to harmonize IBC and Competition Act timelines.
• ✓ Treating the proviso as mandatory would undermine the IBC’s scheme.
• ✓ The Green Channel mechanism gave INSCO an unfair advantage.
• ✓ The CoC fully complied with the IBC and Competition Act.
• ✓ CCI’s approval did not modify AGI’s plan, so CoC approval was unnecessary.

Resolution Professional (RP):

• ✓ The RP adhered to the law and followed NCLAT judgments, treating the proviso to Section 31(4) as directory.
• ✓ The RP’s role is procedural, with no substantive involvement in resolution plans.

AGI Greenpac (Successful Resolution Applicant):

• ✓ The proviso to Section 31(4) is directory, as held in previous NCLAT judgments.
• ✓ The term ‘CoC’ in the proviso was a drafting error, with the intended reference being to the Adjudicating Authority.
• ✓ A literal interpretation would make the IBC unworkable.
• ✓ There were no changes to AGI’s resolution plan, making it not conditional.
• ✓ INSCO lacks locus standi as an unsuccessful resolution applicant.
• ✓ The CIRP must be concluded quickly to avoid jeopardizing the business.

Innovation of arguments: The argument that the term ‘CoC’ in the proviso was a drafting error and that the intended reference was to the ‘Adjudicating Authority’ was an innovative argument by AGI.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue:

1. Whether the approval of a proposed combination by the CCI must mandatorily precede the approval of the Resolution Plan by the CoC, as stipulated under the proviso to Section 31(4) of the IBC.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

On Literal Interpretation:

• Kanailal Sur v. Paramnidhi Sadhu Khan, 1957 SCC OnLine SC 8 (Supreme Court of India)
• State of Uttar Pradesh v. Vijay Anand Maharaj, 1962 SCC OnLine SC 12 (Supreme Court of India)
• Bhavnagar University v. Palitana Sugar Mill Private Limited, (2003) 2 SCC 111 (Supreme Court of India)
• Corp. of the City of Victoria v. Bishop of Vancouver Island, 1921 SCC OnLine PC 75 (Privy Council)
• Rananjaya Singh v. Baijnath Singh, (1954) 2 SCC 314 (Supreme Court of India)
• Sri Venkataramana Devaru v. State of Mysore, 1954 SCC OnLine SC 25 (Supreme Court of India)
• Hardeep Singh v. State of Punjab, (2014) 3 SCC 92 (Supreme Court of India)
• Visitor, Aligarh Muslim University v. K.S. Misra, (2007) 8 SCC 593 (Supreme Court of India)
• Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (Supreme Court of India)
• Vemareddy Kumaraswamy Reddy v. State of A.P., (2006) 2 SCC 670 (Supreme Court of India)

On Mandatory Nature of Statute:

• A. R. Antulay v. Ramdas Sriniwas Nayak, (1984) 2 SCC 500 (Supreme Court of India)
• Sharif-ud-Din v. Abdul Gani Lone, (1980) 1 SCC 403 (Supreme Court of India)
• Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1 (Supreme Court of India)
• Mackinnon Mackenzie & Co. Ltd. v. Mackinnon Employees Union, (2015) 4 SCC 544 (Supreme Court of India)
• Indore Development Authority v. Manoharlal, (2020) 8 SCC 129 (Supreme Court of India)
• State of U.P. v. Babu Ram Upadhyaya, 1960 SCC OnLine SC 5 (Supreme Court of India)

On Interpretation of Statutes:

• Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), (2022) 2 SCC 401 (Supreme Court of India)
• Shashikant Laxman Kale v. Union of India, (1990) 4 SCC 366 (Supreme Court of India)
• ACG Associated Capsules v. Commissioner of Income Tax, (2012) 3 SCC 321 (Supreme Court of India)

On Insolvency and Bankruptcy Code:

• Committee of Creditors of Essar vs. Satish Kumar Gupta, (2020) 8 SCC 531 (Supreme Court of India)
• Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17 (Supreme Court of India)

On Competition Act:

• CCI v. Steel Authority of India Ltd., (2010) 10 SCC 744 (Supreme Court of India)

On Locus Standi:

• GLAS Trust Company LLC v. BYJU Raveendran & Ors., 2024 SCC OnLine SC 303 (Supreme Court of India)
• Samir Agrawal v. CCI & Ors., (2021) 3 SCC 136 (Supreme Court of India)

On Overruled Judgments:

• The Supreme Court distinguished and did not rely on the following NCLAT judgments:
  • Arcelor Mittal India Pvt. Ltd. v. Abhijit Guhathakurta, 2019 SCC OnLine NCLAT 920 (National Company Law Appellate Tribunal) – The court noted that the CIRP in Arcelor commenced prior to the introduction of the proviso to Section 31(4) of the IBC. The NCLT in Arcelor held that the proviso could not be applied retrospectively.
  • Makalu Trading Ltd. v. Rajiv Chakraborty, 2020 SCC OnLine NCLAT 643 (National Company Law Appellate Tribunal)- The court noted that this judgment merely reiterates the findings in Arcelor Mittal, without any independent analysis.
  • Vishal Vijay Kalantri v. Shailen Shah, 2020 SCC OnLine NCLAT 1013 (National Company Law Appellate Tribunal) – The court noted that the question of obtaining approval from the CCI did not arise in that case, as the acquisition in question, did not qualify as a ‘combination’ under the Competition Act, 2002.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on the principles of literal interpretation and the mandatory nature of statutory provisions to hold that the proviso to Section 31(4) of the IBC is mandatory.
• The Court distinguished and did not rely on the NCLAT judgments in Arcelor Mittal India Pvt. Ltd. v. Abhijit Guhathakurta, 2019 SCC OnLine NCLAT 920, Makalu Trading Ltd. v. Rajiv Chakraborty, 2020 SCC OnLine NCLAT 643, and Vishal Vijay Kalantri v. Shailen Shah, 2020 SCC OnLine NCLAT 1013, which had held the proviso to be directory.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the plain and unambiguous language of the proviso to Section 31(4) of the IBC, emphasizing the mandatory nature of prior CCI approval. The Court also prioritized the legislative intent behind the proviso, which was to ensure that combinations are scrutinized for their impact on competition before the CoC approves the resolution plan. The Court also emphasized the importance of procedural safeguards and the need to balance the objectives of both the IBC and the Competition Act.

Fact:Law Ratio

Logical Reasoning:

The Court rejected the argument that the proviso to Section 31(4) is directory, emphasizing that the plain language of the statute must be respected. It also rejected the argument that the term ‘CoC’ in the proviso was a drafting error. The Court further noted that the timelines under the IBC and the Competition Act are not inconsistent. The Court also rejected the argument that the CCI’s approval did not modify AGI’s plan, so CoC approval was unnecessary.

The Court also highlighted that the CCI’s order was procedurally deficient for not issuing a show cause notice to the target company (HNGIL) and for not following the prescribed procedure for investigation.

Key Takeaways

• ✓ CCI approval is mandatory before CoC approval for resolution plans involving combinations.
• ✓ Resolution professionals and CoCs must ensure strict compliance with the proviso to Section 31(4) of the IBC.
• ✓ The judgment emphasizes the importance of balancing the objectives of the IBC and the Competition Act.
• ✓ The CCI must follow all prescribed procedures, including issuing show cause notices to all parties to a combination and conducting thorough investigations.
• ✓ The judgment reinforces the principle that procedural safeguards are essential for a fair and just resolution process.

Directions

The Supreme Court issued the following directions:

• ✓ AGI Greenpac’s Resolution Plan was deemed unsustainable due to the lack of prior CCI approval.
• ✓ The CoC’s approval of AGI’s Resolution Plan was set aside and quashed.
• ✓ Actions taken under the Resolution Plan were nullified, and the rights of all stakeholders were restored to their status quo ante.
• ✓ The CoC was directed to reconsider INSCO’s Resolution Plan and any other plans that had the requisite CCI approval as of 28.10.2022.

Analysis of Specific Amendments

The Supreme Court’s interpretation of the proviso to Section 31(4) of the IBC has significant implications for the resolution process. The proviso was inserted to ensure that combinations under the Competition Act are scrutinized before the CoC approves a resolution plan. This amendment was made to prevent anti-competitive practices and to ensure that the resolution process does not undermine the objectives of the Competition Act.

Rationale for the Amendment:

• ✓ To prevent resolution plans that could lead to monopolies or oligopolies.
• ✓ To ensure that the resolution process aligns with the objectives of the Competition Act.
• ✓ To protect the interests of consumers and other stakeholders.

Challenges Arising from the Amendment:

• ✓ The amendment could lead to delays in the resolution process, as obtaining CCI approval can be time-consuming.
• ✓ It could create uncertainty for resolution applicants, as they would need to obtain CCI approval before seeking CoC approval.
• ✓ It could lead to increased litigation, as resolution applicants may challenge the CCI’s decisions.

Implications of the Amendment:

• ✓ Resolution professionals and CoCs must ensure strict compliance with the proviso to Section 31(4) of the IBC.
• ✓ Resolution applicants must obtain CCI approval before seeking CoC approval.
• ✓ The CCI must follow all prescribed procedures, including issuing show cause notices to all parties to a combination and conducting thorough investigations.
• ✓ The judgment reinforces the principle that procedural safeguards are essential for a fair and just resolution process.

Dissenting Opinion

Justice S.V.N. Bhatti dissented with the majority opinion, holding that the proviso to Section 31(4) of the IBC is directory and not mandatory. Justice Bhatti emphasized the importance of time-bound resolution under the IBC and argued that treating the proviso as mandatory would undermine the objectives of the IBC.

Key Points of Dissent:

• ✓ The proviso to Section 31(4) is directory and not mandatory.
• ✓ The IBC aims for time-bound resolution and asset maximization.
• ✓ Treating the proviso as mandatory would undermine the IBC’s scheme.
• ✓ The NCLAT was right in holding that the proviso is directory.
• ✓ The proviso to Section 31(4) of the IBC should be interpreted in a manner that harmonizes the objectives of the IBC and the Competition Act.

Conclusion

The Supreme Court’s judgment in Independent Sugar Corporation Ltd. vs. Girish Sriram Juneja & Ors. has clarified the mandatory nature of prior CCI approval for resolution plans involving combinations under the Competition Act, 2002. The judgment has significant implications for the insolvency resolution process, emphasizing the importance of regulatory compliance and procedural safeguards. Resolution professionals, CoCs, and resolution applicants must ensure strict adherence to the proviso to Section 31(4) of the IBC to avoid legal challenges and ensure a fair and just resolution process.