Understanding the Need for Law Reform on CCI Approvals in Resolution Plans

Introduction

On May 2, 2025, the Supreme Court of India delivered a significant ruling in Independent Sugar Corporation Limited v. Girish Shriram Juneja[1], sparking renewed debate on the role of the Competition Commission of India (CCI) in the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC). While the IBC is designed to help distressed companies restructure or exit efficiently, the CCI’s mandate is to ensure that business combinations do not harm competition in the market. The central question before the Court was whether CCI approval must be obtained before the Committee of Creditors approves a resolution plan. This decision, and the issues it highlights, underscore the pressing need for legal reform to bring greater clarity and efficiency to the process.

The Case’s Background

The issue arose during the corporate insolvency resolution process (CIRP) of Hindustan National Glass and Industries Ltd. (HNGIL), where AGI Greenpac Ltd. (AGI) submitted a resolution plan to acquire the company. Since the plan qualified as a “combination” under Section 5 of the Competition Act, 2002, it required approval from the Competition Commission of India (CCI) due to its potential impact on market competition. However, Independent Sugar Corporation Ltd. (INSCO) challenged the plan, arguing that it was invalid without prior CCI clearance. On September 19, 2023, the National Company Law Appellate Tribunal (NCLAT) ruled that while CCI approval was indeed necessary, it was not required before the Committee of Creditors (CoC) approved the plan. INSCO subsequently appealed this decision before the Supreme Court, leading to the recent landmark ruling.

What Was the Perspective Prior To This Ruling?

Initially, courts, particularly the NCLAT, took a more lenient view on the timing of CCI approval and the processes surrounding it. Section 31(4) of the IBC provides that if a resolution plan involves a “combination” under the Competition Act, approval from the CCI must be obtained before the Committee of Creditors (CoC) approves the plan. However, in cases such as ArcelorMittal India Pvt. Ltd. v. Abhijit Guhathakurta (2019), Vishal Vijay Kalantri v. Shailen Shah (2020), and Makalu Trading v. Rajiv Chakraborty (2020), the NCLAT held that while CCI approval was indeed necessary, it did not have to precede CoC approval. The tribunal reasoned that requiring prior approval could delay the insolvency resolution process and undermine the IBC’s objective of timely resolution.

In Vishal Vijay Kalantri and Makalu Trading, the Supreme Court declined to interfere with the NCLAT’s view, effectively endorsing this position. However, the recent Independent Sugar Corporation judgment has departed from this approach, laying down a stricter requirement for CCI approval in the insolvency process.

Supreme Court’s Majority Ruling

In the Independent Sugar Corporation case, the Supreme Court, in a split verdict, overturned the NCLAT’s ruling. The majority held that the proviso to Section 31(4) of the IBC clearly requires CCI approval before the Committee of Creditors (CoC) can approve a resolution plan involving a merger or combination. The judges relied on the plain language of the statute, noting that when the law is unambiguous, it must be applied as written. Since the provision expressly calls for prior CCI clearance, the Court deemed it a mandatory precondition.

Explaining its rationale, the Court emphasized that regulating market competition falls squarely within the CCI’s jurisdiction, ensuring that mergers do not create monopolies or reduce consumer choice. If the CoC were to approve a resolution plan without CCI clearance, the plan could later be struck down for violating competition law—wasting both time and resources and undermining the IBC’s objective of speedy resolution. To prevent such inefficiencies, the Court clarified that only those resolution plans with prior CCI approval should be placed before the CoC, making CCI clearance an essential eligibility requirement.

The Dissenting Opinion

A separate dissenting opinion took a different view from the majority. The judge argued that the proviso to Section 31(4) of the IBC should be treated as directory rather than mandatory—a guideline on how to proceed, not an absolute requirement. A rigid interpretation, the judge reasoned, would undermine the core objectives of the IBC: maximizing asset value, resolving insolvency within strict timelines, and ensuring swift restructuring or liquidation. Since CCI reviews often take considerable time, insisting on prior approval could slow down the process, discourage potential resolution applicants, and ultimately reduce competition and recovery prospects.

The dissent further emphasized that competition compliance is not central to the CoC’s role, which is to assess the commercial viability of a resolution plan—its ability to rescue the company and enable debt repayment. The responsibility for ensuring compliance with competition law, the judge noted, rests with the adjudicating authority (NCLT), which gives the final approval after the CoC’s business judgment has been exercised. In this view, requiring CCI approval before CoC consideration would unnecessarily burden the process and frustrate the IBC’s purpose.

Why Flexibility Makes The Most Sense

While the majority ruling emphasizes strict compliance with the wording of the law, such rigidity can create practical challenges. The IBC mandates that insolvency cases be resolved within 330 days, with the twin objectives of rescuing distressed companies and maximizing creditor recovery. Requiring CCI approval before the Committee of Creditors (CoC) considers a resolution plan adds a lengthy review process that may take several months. This delay can erode the value of the debtor company, discourage potential applicants, and significantly reduce the likelihood of a successful resolution.

The CoC—comprising financial creditors such as banks—is best placed to assess whether a plan is commercially viable and feasible. Insisting on prior CCI clearance risks disqualifying otherwise sound plans simply because the competition review process is incomplete. The dissenting opinion, therefore, offers a more pragmatic approach: allowing CoC approval before CCI clearance ensures that the IBC’s emphasis on speed and efficiency is preserved, while compliance with competition law can still be secured prior to the NCLT’s final approval.

Conclusion

The Supreme Court’s ruling in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja settles the legal position that CCI approval must be obtained before the Committee of Creditors (CoC) approves a resolution plan involving a combination. While this interpretation adheres to the literal wording of Section 31(4) of the IBC, it risks delaying the resolution process and constraining the CoC’s ability to take timely commercial decisions. By contrast, the dissenting opinion and earlier NCLAT precedents reflect a more pragmatic approach, aligning more closely with the IBC’s core objectives of speed, efficiency, and value maximization.

The ambiguity highlighted in the 2018 memorandum further indicates that the present statutory language may not fully capture legislative intent. A sensible reform would be to amend Section 31(4) so that CCI approval is required before final NCLT approval, rather than prior to CoC approval. Such a change would preserve the integrity of competition law while safeguarding the IBC’s purpose, ensuring faster resolutions, encouraging more applicants, maximizing creditor recoveries, and ultimately strengthening India’s insolvency ecosystem and economic resilience.

[1] https://api.sci.gov.in/supremecourt/2023/38828/38828_2023_4_1503_59041_Judgement_29-Jan-2025.pdf