INDEPENDENT SUGAR CORPORATION LIMITED vs GIRISH SRIRAM JUNEJA, 2025

INDEPENDENT SUGAR CORPORATION LIMITED vs GIRISH SRIRAM JUNEJA, 2025

Case Title and Citation: INDEPENDENT SUGAR CORPORATION LIMITED V. GIRISH SRIRAM JUNEJA 2025 INSC 124 (Dated: January 29, 2025)

Factual Background

Independent Sugar Corporation Ltd. (INSCO), the Appellant, challenged the approval of a Resolution Plan submitted by AGI Greenpac Ltd. (AGI) for the acquisition of Hindustan National Glass and Industries Ltd. (HNGIL), the corporate debtor, which held a dominant position in the glass packaging industry. The Corporate Insolvency Resolution Process (CIRP) for HNGIL was initiated in October 2021. The Request for Submission of Resolution Plans (RFRP) mandated that approval from the Competition Commission of India (CCI) for a combination be obtained prior to the Resolution Plan’s approval by the Committee of Creditors (CoC). Despite this, the CoC approved AGI’s Resolution Plan with 98% of the votes on October 28, 2022, even though AGI lacked the requisite CCI approval at that time. AGI had submitted a combination application (Form I) to the CCI on September 27, 2022, which was declared invalid on October 22, 2022. AGI subsequently filed a detailed application (Form II) on November 3, 2022. The National Company Law Appellate Tribunal (NCLAT) upheld the CoC’s approval, ruling that while CCI approval was mandatory, the timing requirement (prior to CoC approval) was merely directory. INSCO challenged this interpretation and the NCLAT’s decision before the Supreme Court.

Issue(s)

1. Whether the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC) mandates that approval from the CCI for a combination must be obtained prior to the Resolution Plan’s approval by the Committee of Creditors (CoC)?
2. Whether the NCLAT erred in classifying the requirement for prior CCI approval before CoC voting as merely “directory” instead of “mandatory”?
3. Whether the Resolution Plan, as approved by the CoC in favor of AGI Greenpac, was legally valid despite lacking mandatory statutory approvals, including CCI clearance, at the time of voting?

Decision of the Supreme Court

A three-Judge Bench of the Supreme Court (comprising Justices Hrishikesh Roy and Sudhansu Dhulia, with Justice S.V.N. Bhatti dissenting on the interpretation of the proviso) set aside the NCLAT judgment. The majority ruled that prior approval from the CCI before CoC approval is mandatory under the proviso to Section 31(4) of the IBC. Consequently, the approval granted by the CoC to AGI Greenpac’s Resolution Plan was deemed legally unsustainable and void. The Court remanded the matter, directing the CoC to reconsider the Resolution Plans in compliance with the statutory provisions.

Reason for the decision

The majority opinion, delivered by Justice Hrishikesh Roy, supported by Justice Sudhanshu Dhulia, rested on the following reasons:

1. Plain Meaning Rule and Legislative Intent: The Court emphasized the plain and unambiguous language of the proviso to Section 31(4) of the IBC, which clearly uses the term “prior to the approval of such resolution plan by the committee of creditors”. Applying the rule of literal interpretation, the Court held that this language creates an exception for combination proposals, requiring CCI approval before CoC approval. Interpreting “prior” as “directory” would weaken the provision and render the legislature’s specific intent ineffective.
2. Harmonizing IBC and Competition Act: The Court rejected the NCLAT’s reasoning that making prior CCI approval mandatory would violate the strict timelines of the CIRP. It noted that CCI typically disposes of combination applications quickly (average of 21 working days), and applicants could submit applications earlier in the CIRP timeline (e.g., at the Expression of Interest stage). Statutory provisions, like the proviso to Section 31(4), must take precedence over timeline regulations.
3. Integrity of Commercial Wisdom (CoC): Since the CCI has the power to reject or modify a combination proposal, the CoC must have the CCI-approved Resolution Plan (which includes any mandated modifications) before exercising its commercial wisdom. Placing an unapproved plan before the CoC forces it to vote without complete regulatory information, leading to an illogical situation.
4. Consequence of Non-Compliance: A Resolution Plan lacking mandatory CCI approval contravenes the law in force (Section 6(1) of the Competition Act), making it incapable of enforcement or implementation. The duty of the Resolution Professional (RP) is to confirm that the plan “does not contravene any of the provisions of the law”. Non-compliance with the proviso makes the plan deficient and unable to “pass muster” under IBC provisions like Sections 30(2)(e) and 31(1).
5. Procedural Lapses in CCI Approval: The Court highlighted several procedural deficiencies in AGI’s conditional CCI approval, including the CCI’s failure to issue a mandatory Show Cause Notice (SCN) to the target company, HNGIL, as required under Section 29(1) of the Competition Act. The procedural safeguards, including notification to all parties (acquirer and target) and stakeholder consultation, are essential to ensure fairness and prevent anti-competitive practices.

Conclusion

The Supreme Court conclusively established that the requirement for obtaining prior CCI approval for a combination is a mandatory prerequisite that must be fulfilled before the CoC votes on a Resolution Plan. The NCLAT’s interpretation, which reduced this requirement to a directory obligation, was deemed erroneous and contrary to the clear statutory mandate and legislative intent. The approval of AGI Greenpac’s Resolution Plan without this mandatory prior clearance was set aside, and the matter was returned for reconsideration of the eligible plans.