A) ABSTRACT / HEADNOTE

The present judgment examines the scope of judicial interference with the commercial wisdom exercised by the Committee of Creditors under the Insolvency and Bankruptcy Code, 2016. The Supreme Court was called upon to decide whether the National Company Law Appellate Tribunal exceeded its jurisdiction by setting aside an approved resolution plan on grounds of alleged lack of viability, breach of confidentiality, defective advertisement, and non-consideration of disputed assets. The Court reaffirmed that once all material factors relevant to viability and feasibility are placed before the Committee of Creditors and a conscious commercial decision is taken, the adjudicating authorities must adopt a strict hands-off approach.

The judgment also clarifies that mere suspicion of information leakage without demonstrable benefit to the resolution applicant cannot invalidate the resolution process. Further, procedural objections based on subsequently amended regulations cannot be retrospectively applied to invalidate actions taken under the earlier legal framework. The decision reinforces the primacy of creditor autonomy, limits appellate interference, and strengthens predictability in insolvency resolution by insulating commercial decisions from judicial second-guessing, provided statutory compliance under Sections 30 and 31 of the IBC is satisfied.

Keywords:
Insolvency Resolution Process; Commercial Wisdom; Committee of Creditors; Viability and Feasibility; Judicial Review

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arose from a corporate insolvency resolution process initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 by a financial creditor against a sugar manufacturing company. The process progressed through statutory stages culminating in the approval of a resolution plan by the Committee of Creditors. The dispute emerged when the erstwhile promoter of the corporate debtor challenged the approval before the National Company Law Appellate Tribunal, alleging defects in the resolution plan and procedural irregularities.

The NCLAT interfered with the approved plan and remanded the matter for reconsideration, invoking concerns regarding viability and feasibility, alleged breach of confidentiality of liquidation value under Regulation 35(2), ownership disputes relating to ethanol plant machinery, and alleged non-compliance with Regulation 36A. This intervention prompted appeals before the Supreme Court by both the financial creditor and the resolution professional.

The background is significant as it presented the Supreme Court with another opportunity to delineate the limits of appellate scrutiny over insolvency resolutions, especially in light of its earlier authoritative pronouncements in K. Sashidhar v. Indian Overseas Bank and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta. The judgment is situated within a broader jurisprudential trend that prioritises economic efficiency, creditor autonomy, and certainty in insolvency outcomes.

D) FACTS OF THE CASE

The appellant financial creditor filed an application under Section 7 of the IBC on 04.09.2017 against M/s Khandoba Prasanna Sakhar Karkhana Ltd., which was admitted on 01.01.2018. An interim resolution professional was appointed, and the Committee of Creditors was constituted. Following statutory procedures, a resolution professional was confirmed, and expressions of interest were invited through an advertisement dated 30.03.2018.

During the pendency of the CIRP, the promoter of the corporate debtor unsuccessfully challenged the initiation proceedings before the Bombay High Court. Multiple meetings of the CoC were held, culminating in the approval of a resolution plan submitted by M/s Sai Agro (India) Chemicals in the 8th CoC meeting on 09.02.2019. The approved plan contemplated a total payout of Rs. 29.74 crores, substantially higher than the liquidation value of Rs. 13.53 crores.

The promoter thereafter sought permission to submit his own resolution plan, which was rejected by the NCLT as being time-barred and procedurally untenable. The NCLT approved the resolution plan on 01.08.2019. The promoter appealed to the NCLAT, which allowed the appeal and remanded the matter. The remand order became the subject matter of the present civil appeals.

E) LEGAL ISSUES RAISED

i. Whether the NCLAT was justified in interfering with the commercial wisdom of the Committee of Creditors regarding viability and feasibility of the resolution plan?
ii. Whether mere matching of liquidation value amounts to breach of confidentiality under Regulation 35(2)?
iii. Whether disputed ownership of certain assets invalidates the resolution plan?
iv. Whether advertisement dated 30.03.2018 violated Regulation 36A retrospectively?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellants submitted that viability and feasibility are matters exclusively within the domain of the Committee of Creditors and immune from judicial review, relying upon K. Sashidhar and Essar Steel. It was argued that all relevant facts, including disputes concerning the ethanol plant, were fully disclosed and consciously considered by the CoC.

They further contended that no benefit accrued to the successful resolution applicant from the alleged disclosure of liquidation value, negating any breach of confidentiality. The advertisement was defended as being compliant with the unamended Regulation 36A prevailing at the relevant time.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondent promoter argued that the resolution plan was fundamentally flawed as it assumed availability of assets not owned by the corporate debtor. It was alleged that identical liquidation values indicated leakage of confidential information. It was also contended that the resolution process was vitiated due to defective advertisement and undue haste in approval by the CoC.

H) RELATED LEGAL PROVISIONS

i. Section 7, Insolvency and Bankruptcy Code, 2016
ii. Section 30(2), Insolvency and Bankruptcy Code, 2016
iii. Section 31, Insolvency and Bankruptcy Code, 2016
iv. Section 61(3), Insolvency and Bankruptcy Code, 2016
v. Regulation 35(2), IBBI (CIRP) Regulations, 2016
vi. Regulation 36A, IBBI (CIRP) Regulations, 2016

I) JUDGEMENT

The Supreme Court allowed the appeals and set aside the impugned NCLAT order, restoring the NCLT’s approval of the resolution plan. The Court held that the NCLAT had exceeded its jurisdiction by re-evaluating the commercial decision of the CoC. The Court reiterated that once statutory parameters under Section 30(2) are satisfied, adjudicating authorities cannot substitute their own views on economic viability.

On confidentiality, the Court held that mere coincidence in liquidation value without demonstrable benefit does not establish breach. The Court also rejected retrospective application of amended Regulation 36A, holding that procedural compliance must be tested against the law prevailing at the relevant time. The disputes regarding asset ownership were found to have been consciously factored into the commercial decision, rendering appellate interference unwarranted.

a) RATIO DECIDENDI

The commercial wisdom of the Committee of Creditors in approving a resolution plan, after due consideration of all relevant material, is non-justiciable except on limited statutory grounds under Sections 30(2) and 61(3) of the IBC. Judicial or appellate authorities cannot reassess viability, feasibility, or business prudence once the statutory threshold is crossed.

b) OBITER DICTA

The Court observed that insolvency litigation should not become a tool for erstwhile promoters to re-enter the process indirectly by raising hyper-technical objections after statutory timelines lapse. Such conduct undermines the objectives of the IBC.

c) GUIDELINES

i. Adjudicating authorities must adopt a hands-off approach once CoC approval is granted.
ii. Confidentiality breaches must be established by demonstrable advantage, not suspicion.
iii. Procedural regulations cannot be applied retrospectively to invalidate completed acts.
iv. Disputed assets do not vitiate resolution plans if consciously evaluated by the CoC.

J) REFERENCES

a) Important Cases Referred

i. K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150
ii. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2019) SCC OnLine SC 1478

b) Important Statutes Referred

i. Insolvency and Bankruptcy Code, 2016
ii. IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016