INDEPENDENT SUGAR CORPORATION LTD. versus GIRISH SRIRAM JUNEJA & ORS. (29/01/2025) — Supreme Court headnote

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Summary

By a 2:1 majority (Hrishikesh Roy J., for himself and Sudhanshu Dhulia J.; S.V.N. Bhatti J. dissenting), the Supreme Court held that the proviso to Section 31(4) IBC is mandatory: where a resolution plan involves a combination, Competition Commission approval must be obtained before the Committee of Creditors approves the plan. The CoC's approval of AGI Greenpac's plan for Hindustan National Glass, given without that approval, was set aside. The majority also found the CCI's conditional approval procedurally flawed, since no show cause notice went to the target company and the voluntary divestment lacked the target's participation.

Issues

Whether an unsuccessful resolution applicant and others have locus to appeal under Section 62 IBC and Section 53T of the Competition Act.
Whether the requirement in the proviso to Section 31(4) IBC that CCI approval of a combination be obtained before the CoC approves the resolution plan is mandatory or directory.
Whether the CIRP timelines and the Competition Act timelines are so incompatible that the proviso must be read as directory, and whether the NCLAT decisions in Arcelor Mittal, Makalu Trading and Vishal Vijay Kalantri govern the point.
Whether the CCI, after forming a prima facie view of appreciable adverse effect on competition, had to issue a show cause notice to the target company as well as the acquirer, and follow the procedure in Section 29(2) onwards before approving the combination.
Whether a voluntary modification under Regulation 25(1A) of the Combination Regulations required the target's participation, and whether discrepancies in capacity data vitiated the conditional approval.

Provisions considered

Section 31(4), proviso, Insolvency and Bankruptcy Code, 2016The majority read the proviso literally: the word 'prior' requires CCI approval of a combination before CoC approval, so the requirement is mandatory, and a plan approved without it cannot be enforced. The dissent read the proviso purposively with Section 31(1) and (2) and held that CCI approval need only be available when the Adjudicating Authority decides. (¶¶ 28, 32, 34, 35, 53, 56, 65, 78, 86, 150, 155.1)
Sections 30(2)(e), 30(3) and 31(1), Insolvency and Bankruptcy Code, 2016The majority held that the resolution professional must place before the CoC only plans that do not contravene any law. A combination causing appreciable adverse effect is void under the Competition Act, so a plan without CCI approval should not be put to the CoC, and after CoC approval the Adjudicating Authority cannot modify the plan. (¶¶ 86, 111, 113, 114, 115, 118)
Sections 61 and 62, Insolvency and Bankruptcy Code, 2016Because insolvency proceedings are in rem, 'any person aggrieved' is read widely; an unsuccessful resolution applicant whose plan could otherwise have been approved has locus. (¶¶ 24, 26, 27)
Sections 53B and 53T, Competition Act, 2002'Any person aggrieved' was read broadly, in line with Samir Agrawal, so the objectors could challenge the CCI's approval. (¶¶ 25, 26)
Section 6(1), (2) and (2A), Competition Act, 2002A combination causing appreciable adverse effect is void, and notice to the CCI can be given within thirty days of any agreement or other document, including at early CIRP stages. The majority therefore found no real conflict between the CIRP and CCI timelines. (¶¶ 92, 93, 94, 112, 113, 117)
Sections 29 and 30, Competition Act, 2002The majority held that the show cause notice under Section 29(1) must go to all 'parties to the combination', including the target, and faulted the CCI for skipping the public consultation and investigation steps in Sections 29(2) to (6). The dissent agreed notice must go to the target, but held that the CCI may stop at the Section 29(1) stage if satisfied with the reply. (¶¶ 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 138, 139)
Section 31(3), Competition Act, 2002Because the CCI can direct modifications to a combination, its approval must precede CoC approval so that the CoC sees the plan as modified when exercising its commercial wisdom. (¶¶ 80, 81)
Regulations 2(f) and 25(1A), Competition Commission of India (Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011'Parties to the combination' includes the acquirer and the target. A voluntary modification must carry the approval of both; here the divestment of the target's Rishikesh plant was offered by the acquirer alone. (¶¶ 124, 136, 137, 139)
Regulation 40A, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Model timelines in subordinate legislation cannot override the statutory proviso; the regulations must be read to conform to the statute. (¶ 88)

Held

An unsuccessful resolution applicant whose plan could have been approved by the CoC is a 'person aggrieved' with locus to appeal under Section 62 IBC and Section 53T of the Competition Act. (¶¶ 26, 27)
The proviso to Section 31(4) IBC is clear and must be given its plain meaning: the word 'prior' cannot be read as 'after'. CCI approval of a combination must be obtained before the CoC approves the plan, and the requirement is mandatory. Reading it as directory would make the proviso meaningless and amount to rewriting the statute. (¶¶ 34, 35, 53, 55, 56, 62, 65, 78, 150)
The legislative history supports this: Parliament deliberately set CCI approval at a different, earlier stage than other regulatory approvals. The Notes on Clauses refer to the CoC, and the stray reference to the Adjudicating Authority in the Memorandum was an inadvertent error with lower interpretive value that cannot prevail over clear statutory text. (¶¶ 69, 70, 73, 74, 76, 77)
A plan with a combination placed before the CoC without prior CCI approval cannot be enforced, the defect cannot be cured later, and CoC approval of it has no legal effect. The CoC must see any CCI-directed modification before exercising its commercial wisdom. (¶¶ 79, 80, 81, 86)
The IBC and Competition Act timelines ordinarily do not conflict. The CCI usually decides within about 21 working days, and notice can be filed early in the CIRP. Delay attributable to the CCI despite timely filing is not to be held against the parties. (¶¶ 89, 90, 93, 94, 96, 97, 98)
The NCLAT wrongly relied on Arcelor Mittal (a CIRP that began before the proviso, with no adverse-effect concerns, decided without detailed reasoning), Makalu Trading and Vishal Vijay Kalantri. Dismissal of an SLP or appeal in limine without reasons is not a binding declaration of law. (¶¶ 100, 101, 103, 104, 105, 107, 108, 109, 110)
The resolution professional has no adjudicatory power and could not relax, by email, the requirement of prior CCI approval set in the process documents. (¶ 116)
On the competition appeals, the majority held that the CCI should have issued the Section 29(1) show cause notice to the target as well as the acquirer, and that the resolution professional's lack of objection did not excuse the omission. It also faulted the CCI for not seeking public and stakeholder input under Section 29(2), for accepting a voluntary divestment of the target's plant without the target's participation under Regulation 25(1A), and for unexamined discrepancies in plant capacity data. Together these defects vitiated the conditional approval. (¶¶ 125, 126, 131, 132, 135, 136, 139, 141, 143)
Dissent (S.V.N. Bhatti J., in his separate opinions): Section 30(4) asks the CoC only to assess feasibility and viability, and only the Adjudicating Authority can reject a non-compliant plan. Reading the proviso purposively and in harmony with Section 31, CCI approval at the CoC stage is directory; it is enough if approval exists when the Adjudicating Authority approves the plan. The NCLAT view, which this Court had left undisturbed in Vishal Vijay Kalantri and Makalu Trading, is correct and should be kept for commercial certainty. On the competition appeals, he agreed that notice must go to both acquirer and target, but held that the CCI could approve the combination on a satisfactory reply without calling for a Director General report, and that its expert assessment should not be disturbed. He would have dismissed the IBC appeals with costs.

Result

By majority: Civil Appeal No. 6071 of 2023 allowed. The CoC's approval of AGI Greenpac's resolution plan set aside as lacking prior CCI approval; actions under the plan nullified and status quo ante restored; the CoC to reconsider the appellant's plan and any other plans that had CCI approval on the date of the CoC vote. The decision applies to the connected appeals allowed with it, and the appeals of AGI Greenpac and the CCI (Civil Appeal Nos. 5401, 6771, 7037, 7038 and 7428 of 2023) were dismissed.