Independent Sugar Corporation Limited vs Girish Sriram Juneja on 29 January, 2025
Facts
The issue concerns Hindustan National Glass and Industries Ltd. (HNGIL), the top glass packaging manufacturer in India, and the Corporate Insolvency Resolution Process (CIRP). A petition filed by DBS Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was accepted by the Kolkata Bench of the National Company Law Tribunal (NCLT) on October 21, 2021. Two major candidates filed their resolution plans in response to the Resolution Professional’s Expression of Interest: Independent Sugar Corporation Ltd. and AGI Greenpac Ltd., India’s second-largest glass packaging company. (INSCO), a Bermuda-based company. AGI Greenpac proposed to acquire 100% of HNGIL. A major legal issue arose as AGI Greenpac’s plan was approved by the Committee of Creditors (CoC) without obtaining prior approval from the Competition Commission of India (CCI), a requirement under the IBC when a combination, such as a merger, is involved.
Legal Issues
- Whether the approval of the Competition Commission of India (CCI) must be obtained prior to the approval of a resolution plan by the Committee of Creditors, as mandated under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016?
- Whether the failure to obtain prior CCI approval renders the resolution plan invalid and unenforceable under the IBC framework?
- Whether an unsuccessful resolution applicant has the locus standi to challenge the approval of another resolution plan by the CoC and the NCLT?
Arguments
The appellant, INSCO, argued through its senior counsels Dr. A.M. Singhvi and Mr. Mahesh Jethmalani that the requirement of prior CCI approval under the IBC was mandatory, not optional. They asserted that AGI Greenpac’s plan was placed before the CoC for approval despite the fact that its earlier CCI application (Form I) had been declared invalid and a fresh application (Form II) was still pending. INSCO contended this constituted a serious violation of the legal procedure, especially since AGI’s later modifications to gain CCI clearance involved divesting one of HNGIL’s plants—an act not permitted without CoC’s approval under the IBC. They argued that AGI’s plan was conditional, incomplete, and therefore invalid. In contrast, AGI Greenpac, represented by Mr. Mukul Rohatgi and Mr. Parag Tripathi, argued that the proviso to Section 31(4) should be considered directory rather than mandatory. They stressed that strict compliance would stall CIRP processes due to the long timelines required by CCI to evaluate combinations. They also introduced the “Scrivener’s Error” argument, suggesting that the term “CoC” in the proviso was a drafting mistake and that it should have read “Adjudicating Authority,” thereby implying that CCI approval could validly be obtained even after CoC’s nod. They maintained that no material change occurred post-CCI approval and thus the CoC’s decision should stand. Appearing for the CoC, Solicitor General Mr. Tushar Mehta emphasized the importance of maintaining strict timelines under the IBC to preserve value and expedite resolution. He supported the view that the timeline for CCI approval should not obstruct CIRP progress. The Resolution Professional’s counsel, Mr. P. Chidambaram, also defended the process followed and cited past NCLAT rulings treating the proviso as directory, which he said the RP relied upon in good faith.
Judgment
The Supreme Court upheld the challenge by INSCO, ruling that the proviso to Section 31(4) of the IBC is mandatory, not directory. The Court rejected the arguments for a flexible interpretation and held that prior approval from the CCI was a clear statutory requirement for any resolution plan involving a combination, such as a merger or acquisition. It observed that the language of the proviso was plain and unambiguous, with the word “prior” used deliberately and meaningfully. The Court held that accepting post-facto approval would violate not just the statutory text but also the principle of ensuring informed commercial decision-making by the CoC. The Court also rejected the Scrivener’s Error argument, emphasizing that courts should not read into a law what is not there unless the error is obvious and universally acknowledged. On the issue of locus standi, the Court found that INSCO, being an unsuccessful resolution applicant, did qualify as a “person aggrieved” under both the IBC and the Competition Act. It made it clear that the phrase “any person aggrieved” had to be interpreted broadly in cases of insolvency, which are in rem in nature. On the basis of the findings, the Supreme Court revoked the NCLAT orders dated 18 September 2023 and 28 July 2023. It held that the approval by the CoC of AGI Greenpac’s Resolution Plan was invalid since the requirement of mandatory pre-approval by the CCI was not met. The issue was referred for reconsideration of the resolution plans, this time strictly according to the IBC and the Competition Act. The decision upholds the binding effect of regulatory clearances in insolvency resolutions and reiterates the obligation to follow statutory timelines and protocols.