Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors.

Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors.

89. As far as the two timelines stipulated under the IBC and the Competition Act are concerned, the same do not usually cause any disharmony or conflict. The only exception could be in the extremely rare circumstances discussed below, influenced by external factors. But such extreme and unlikely situations cannot and should not be allowed to influence our interpretative exercise on the functioning of the legislative framework which will fit in with most cases.

90. In that context, the timeline of 210 days as stipulated under the Competition Act would be attracted only in cases which involve an extremely high degree of AAEC, mostly indicative of a complicated super-monopolistic behemoth. In fact, it must be borne in mind that CCI itself in its Annual General Report for the year 2022–2023 stated that the average time required to dispose of combination applications, is usually 21 working days. There has been no recorded instance till date where, more than 120 days were taken by the CCI to approve a combination proposal. Additionally, of the 99 combination proposals approved by the CCI, an overwhelming 85 of those were approved within 30 days and the rest 14 approvals took less than 120 days in toto. Therefore, the extreme and rare examples projected by the counsel for AGI Greenpac and CoC need not be given undue importance, in the present interpretative exercise.

91. In the rare extreme cases involving a high degree of AAEC, public consultation and behavioural remedies are ordinarily required, which might lead to an elongated timeline going beyond 120 days. However, only one such combination proposal has been received in the past few years.

92. In the context of arguments that have been made on the disharmony between the two timelines, reference must also be made to Section 6(2) of the Competition Act. The same is reproduced as follows: “6(2). Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, 13 [shall] give notice to the Commission, in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within14 [thirty days] of—

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1. (a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be;

2. (b) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of that section. 15[(2A)No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission under sub-section(2) or the Commission has passed orders under section 31, which- ever is earlier.]”

93. The point at which the applicant is allowed to give notice to CCI of a combination, i.e., the trigger event, need not therefore be limited to when the Resolution Plan is submitted to the Resolution Professional. On the contrary, such notice can be given immediately after or within thirty (30) days of the execution of ‘any agreement’ or ‘other document’, disclosing details of the proposed combination. Regulation 5(8) of the CCI (Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011 defines ‘other document’ as including any document conveying an agreement or decision to acquire control over a target company. Therefore, the submission of an application before the CCI can be done at different stages and need not necessarily wait until the Resolution Plan is submitted.

94. The argument that the application to obtain approval from the CCI can only be submitted at the stage when the Resolution Plan is submitted i.e., T + 135 days, in the timeline would be erroneous and unacceptable. The application under the statutory scheme, can be submitted at various stages, including but not limited to, at the time of Expression of Interest i.e.., T + 60 days, or issuance of RFRP i.e., T + 105 days, or even when the list of provisional Resolution Applicants is published i.e., T + 85 days. Taking this into account, submitting the combination proposal before the CCI at either of these stages, would have still resulted in the culmination of the entire process, within the stipulated time limit of 330 days, under the IBC.

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95. On the upper limit of 330 days within the CIRP timeline, it has been pertinently this Court in Committee of Creditors of Essar vs. Satish Kumar Gupta observed the following34: “124. Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before NCLT and NCLAT based upon a Latin maxim which subserves the cause of justice, namely, actus curiae neminem gravabit. 127… Given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant’s case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date — without any exception thereto — may well be an excessive interference with a litigant’s fundamental right to non-arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant’s fundamental right to carry on business under Article 19(1)(g) of the Constitution of India. … while leaving the provision otherwise intact, we strike down the word “mandatorily” as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would

34. (2020) 8 SCC 531.

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be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days... ...”

96. The attempt must therefore be to conclude the entire process of insolvency, ‘ordinarily’ within 330 days but in rare circumstances, the same can be elongated, particularly when the delay cannot be ascribed to the applicants or parties involved but the tardy process of the Tribunal or the Adjudicating Authority.

97. However, if notice for the proposed combination under Section 6(2) of the Competition Act has been given within the stipulated time and no dilatory tactics have been employed, the parties should not be held responsible for any delay on the part of the CCI, in examining the combination. The CCI, as their counsel Mr. Balbir Singh points out, has been able to approve bulk of the proposed combinations, in a time-bound and reasonable manner, as can be gleaned from the Annual General Reports and material placed on record, by Mr. Singh.

98. In the present case, even though dilatory tactics are said to have been adopted in the submission of notice under the Combination Regulations, with Form II submitted on 03.11.2022, the combination was approved on 15.03.2023 i.e., within 132 days. The recent Competition (Amendment) Act, 2023 which reduced the timeline for approving combination proposal from 210 days to 150 days and requiring the CCI to give a prima facie opinion on the likelihood of a combination causing an Appreciable Adverse Effect on Competition (AAEC) from 30 days to 15 days, is indicative of the more realistic and shorter timelines that the CCI ordinarily requires for its analysis and decision-making, pertaining to such combination proposals.

99. Flowing from the above, it is difficult to interpret the provisions disjunctively, as has been done by the NCLAT, in the impugned order dated 18.09.2023.

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Distinguishing cases relied upon by the NCLAT

100. The NCLAT in its analysis placed heavy reliance on the decision of the three-judge bench of the NCLAT in Arcelor Mittal India Pvt. Ltd. v. Abhijit Guhathakurta35. However, this reliance is misplaced, as the factual and legal context of that case materially differs from the present matter.

101. For instance, the CIRP in Arcelor commenced prior to the introduction of the proviso to Section 31(4) of the IBC. The NCLT, in Arcelor, explicitly held that the proviso could not be applied retrospectively, given that it imposed an additional procedural obligation requiring resolution applicants to furnish CCI approval, prior to submitting a Resolution Plan. As such, the amendment was deemed inapplicable to the CIRP initiated before the enactment of the proviso. In contrast, the CIRP in the present case was initiated post-enactment of the proviso, rendering the procedural requirements therein, fully applicable.

102. In fact, if we look at the impugned NCLAT reasoning it can be noticed that the NCLT in Arcelor implicitly mentioned that the clear change in procedure i.e., obtaining the prior approval of the CCI, has to be implemented prospectively. However, this additional procedural obligation cannot be imposed retrospectively in that particular case.

103. Also in that case, the CCI’s approval did not address issues relating to a potential Appreciable Adverse Effect on Competition (AAEC) in the relevant market. The approval so granted by the CCI did not impose any modifications to the Resolution Plan either. On the other hand, the present case involves substantive concerns regarding an Appreciable Adverse Effect on Competition (AAEC), which required CCI’s careful consideration and proposed modifications if any, to ensure compliance with appropriate laws.

104. Importantly, the Arcelor judgment lacks detailed reasoning or analysis by which the NCLAT concluded that the proviso to Section 31(4) is only directory. Further, this judgement was also not challenged before this Court. Consequently, its precedential value in the present context is limited, and it cannot be relied upon to determine the issues arising in this appeal.

35. 2019 SCC OnLine NCLAT 920.

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105. The reliance on the decision in Makalu Trading Ltd. v. Rajiv Chakraborty 36, is equally misplaced, as the judgment merely reiterates the findings in Arcelor Mittal, without any independent analysis or discussion on the merits of the relevant legal propositions. Pertinently, Makalu does not address the applicability of the proviso to Section 31(4) of the IBC, or engage with the legal or factual nuances, that may distinguish the cases.

106. Further, it does not also discuss the object behind the IBC or the introduction of the proviso. In fact, the CCI approval in Makalu does not pertain to a situation where a prima facie opinion regarding the existence of an AAEC was formed. The absence of such consideration underscores the limited relevance of the decision to the present matter where, significant issues pertaining to both the IBC and Competition law have been raised, requiring a thorough examination of the CCI’s observations and the implications of its approval.

107. As such, the precedential value of Makalu is insufficient, to support the NCLAT findings in the present matter, although Makalu’s decision was challenged before this Court and was dismissed vide Order dated 12.10.2020, as not involving any substantial question of law. However, it is well-settled that the dismissal of an SLP in limine without giving any detailed reasons do not constitute any declaration of law or binding precedent, but simply implies that the case was not considered worthy of examination for a reason, other than on merits.37

108. Besides, Vishal Vijay Kalantri v. Shailen Shah38 was also relied on by the NCLAT, which again is entirely misplaced as the factual and legal circumstances in that case differ fundamentally from the present matter. On the issue of the proviso to Section 31(4) of the IBC being directory in nature, Vishal Vijay Kalantri merely follows the earlier discussed and discarded ratio, in Arcelor Mittal.

109. The question of obtaining approval from the CCI did not arise in that case, as the acquisition in question, did not qualify as a ‘combination’

36. 2020 SCC OnLine NCLAT 643.

38. 2020 SCC OnLine NCLAT 1013.

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under the Competition Act, 2002. Consequently, the legal principles concerning the necessity of CCI approval and the implications of such approval, particularly in cases involving the possibility of an AAEC, were not addressed or analysed in that decision. This was challenged before a two-Judge Bench of this Court which found no reason to interfere and dismissed the Appeal at the threshold, vide Order dated 06.08.2021.

110. Therefore, the impugned NCLAT order incorrectly relied upon the aforementioned NCLAT decisions. Being distinguishable, those decisions could not have been unreservedly applied, to the present matters. Reliance on those decisions in different context, both on facts and on law, would lead to an erroneous interpretation on the applicability of the proviso to Section 31(4) of the IBC.

Relevance of CCI & its scrutiny

111. Even if the proviso to Section 31(4) of the IBC is kept aside, by virtue of the provisions incorporated under Sections 30(2)(e), 30(3) and 31(1) of the IBC, the Resolution Professional has the legal obligation to examine each Resolution Plan and determine whether it contravenes any provisions of law for the time being in force. In this context, the relevant extracts from the IBC are reproduced below: S. 30 of the Code states: “30. Submission of resolution plan. — (1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan— …(e) does not contravene any of the provisions of the law for the time being in force … (3) The resolution professional shall present to the committee of creditors for its approval such resolution

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plans which confirm the conditions referred to in sub- section (2). … (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.” S. 31 of the Code states: “31. Approval of resolution plan.—(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub- section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. …”

112. The extracts of the Competition Act relevant for the present discussion is reproduced below for ready reference:

6. Regulation of combinations. — (1) No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void. (2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission,

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in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within thirty days of— … (b) execution of any agreement or other document for acquisition referred to in clause (a) and clause (d) of Section 5 or acquiring of control referred to in clause (b) of that section. (2-A) No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission under sub- section (2) or the Commission has passed orders under Section 31, whichever is earlier. (3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in accordance with the provisions contained in Sections 29, 30 and 31. …”

31. Orders of Commission on certain combinations. — (1) Where the Commission is of the opinion that any combination does not, or is not likely to, have an appreciable adverse effect on competition, it shall, by order, approve that combination including the combination in respect of which a notice has been given under sub- section (2) of Section 6: (2) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall direct that the combination shall not take effect. (3) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition but such adverse effect can be eliminated by suitable modification to such combination, it may propose appropriate modification to the combination, to the parties to such combination. …

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(11) If the commission does not, on the expiry of a period of two hundred and ten days from the date of notice given to the commission under sub-section (2) of Section 6, pass an order or issue direction in accordance with provisions of sub-section (1) or sub-section (2) or sub-section (7), the combination shall be deemed to have been approved by the Commission. … (13) Where the Commission has ordered a combination to be void, the acquisition or acquiring of control or merger or amalgamation referred to in Section 5, shall be dealt with by the authorities under any other law for the time being in force as if such acquisition or acquiring of control or merger or amalgamation had not taken place and the parties to the combination shall be dealt with accordingly.…”

113. When the aforementioned provisions of the IBC and the Competition Act are juxtaposed together, it is clear that any combination that leads to an Appreciable Adverse Effect on Competition in the relevant market, is void. Any Resolution Plan containing provisions for a combination that results in an Appreciable Adverse Effect on Competition would therefore be not compliant with the provisions of the Competition Act. In that light, the Competition Act mandates that a notice of combination be given to the CCI and approval obtained at the earliest.

114. The provisions also make it incumbent upon the Resolution Professional to examine whether the Resolution Plan submitted by an applicant, complies with the ‘provisions of the law for the time being in force’. Only those Resolution Plans which meet the requisite lawful criteria, can be placed before the CoC, by the Resolution Professional. Further, the Competition Act bestows upon the CCI the power to reject or modify a combination proposal.

115. In the above backdrop, prior approval of the CCI should advisedly be secured for the Resolution Plans which are to be scrutinised and approved by the CoC i.e., the body with expertise and resources to appropriately analyse the possible effects of an Appreciable Adverse Effect on Competition (AAEC), in the relevant market due

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to a proposed combination as well as the viability of the concerned Resolution Plan. If prior approval of the CCI is not obtained, it may lead to an incongruous situation where the CoC approves a Resolution Plan which may be in violation of Section 6 of the Competition Act i.e., causing an AAEC in the relevant market or that subsequent to such approval by CoC, the CCI rejects the said combination, thereby rendering the entire exercise futile. In other words, the Resolution Professional should not place any Resolution Plan before the CoC, without the scrutiny of and prior approval by CCI.

116. In any case, it is well-settled that the Resolution Professional does not possess any adjudicatory powers under the IBC.39 In fact, the role of the Resolution Professional, as a facilitator of the CIPR, is almost entirely administrative in nature. Therefore, the Resolution Professional, not being an adjudicating authority, could not have mandated that the requirement of obtaining prior approval of the CCI before placing the Resolution Plan before the NCLT, can be relaxed. Granting such relaxation on a whim, oddly enough through an e-mail in the present case, was in our opinion beyond the scope of the Resolution Professional’s powers.

117. In the current case, a prima facie opinion under Section 29(1) of the Competition Act was found to the effect that AGI’s Resolution Plan, as approved by the CoC, was in contravention of Section 6 of the Competition Act. Only after the proposed divestment proposed by AGI Greenpac, did the CCI approve the proposed combination. Importantly, much before the proposed divestment and the approval to such combination was given by the CCI, the Resolution Plan was placed, voted upon and approved by the CoC. Therefore, it is apparent that AGI Greenpac’s Resolution Plan as approved by the CoC was without the requisite approval of the CCI on that date. Therefore this would be in contravention of Section 6(1) of the Competition Act for the combination in question.

118. What is also of great relevance is that after the COC’s approval, the Resolution Plan cannot be modified in any manner since the Adjudicating Authority can only approve the Resolution Plan, as has been approved by the CoC. This is made clear by Section 31(1) of the IBC.

39. Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17.

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Procedural Lapses under the Competition Act

119. Before delving into the substantive aspects of the Competition law, the relevant facts and procedural trajectory that lead to the present appeal needs to be referred. Upon AGI Greenpac’s Form I submission on 27.09.2022, the CCI found the information submitted to be insufficient and directed them to file a detailed Form II. On 15.03.2023, the CCI approved the proposed combination, predicated upon voluntary modifications offered by AGI Greenpac, including the divestment of an HNGIL plant located in Rishikesh, to mitigate the Appreciable Adverse Effect on Competition (AAEC).

120. Vide its Order dated 28.07.2023, the NCLAT upheld the CCI’s conditional approval, holding that the voluntary remedies sufficiently mitigated competitive concerns and that the absence of notice to HNGIL did not vitiate the approval, especially given the RP’s non- objections.

121. The interplay between the IBC and the Competition Act presents a delicate balance. While the IBC focused on expeditious revival of distressed assets, the Competition Act ensures that the resolution process does not distort market dynamics. The critical regulatory risk that emerges at this intersection is the issue of gun-jumping - a term, denoting premature or unauthorised consummation of a transaction, prior to obtaining mandatory approvals from the CCI.

122. The Competition Act operates on a suspensory regime, under which no transaction involving a combination can be completed, without prior approval from the CCI. Such mandate ensures that competitive equilibrium in the market is not disrupted during the CIRP. In fact, Section 43A of the Act prescribes severe penalties for any attempt to consummate the transaction, prior to securing the CCI’s approval.

123. Bearing in mind the above discussion, it appears that several procedural deficiencies have occurred in the approval process of the combination.

124. Section 29(1) of the Competition Act and Regulation 2(f) of the Competition Regulations, 2011 mandate the issuance of a Show Cause Notice [hereinafter referred to as ‘SCN’] to the ‘parties to the combination’ if and when the CCI forms a prima facie opinion that a combination is likely to cause or has caused Appreciable Adverse Effect on Competition (AAEC), within the relevant market.

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The term ‘parties to the combination’ as explicitly defined under Regulation 2(f) includes both entities entering into the combination and the combined entity, if the combination has come into effect.

125. In the present case, it is evident that the CCI, while exercising its powers under Section 29(1), failed to issue the mandatory SCN to all relevant parties, most notably, the target company itself i.e., the HNGIL. The SCN dated 10.02.2023 was issued only to the acquirer company i.e., in the present case, AGI Greenpac, although the involvement of both parties is integral, to the assessment of potential AAEC, in the relevant market. This omission constitutes a major procedural lapse, as the law clearly requires all parties to the combination to be notified of such finding by the CCI. The opportunity to respond must also be given to them.

126. The CCI was obligated to issue an appropriate SCN to both the acquirer and the target. The term ‘to the parties to the combination’ cannot be restricted to the proposed acquirer alone. The finding of the NCLAT on this aspect is therefore not to be faulted.

127. The statutory requirement under Section 29 and Regulation 2(f) could not be bypassed and for this omission. the CCI’s order (dated 15.03.2023) was procedurally deficient, undermining the fairness and completeness of the investigative process. The importance of adhering to the procedural safeguards enshrined in the Act is to ensure that all parties to a combination, are given due notice and an opportunity to present their respective case. Sections 29 and 30 of the Competition Act, 2002 when read holistically, delineate a structured procedural roadmap that the CCI must traverse when it scrutinises combinations that may exert an Appreciable Adverse Effect on Competition (AAEC) in the relevant market.

128. Apart from mandating the issuance of a SCN to the concerned parties, upon the formation of a prima facie opinion that the combination in question warrants investigation, the statutory obligations in the form of Sections 29(2) to 29(6) outline the consequential steps, aimed at gathering comprehensive data from not just the acquirer and the target company, but also from other stakeholders, potentially impacted by the combination. The legislative wisdom embedded within these provisions attempts to recognise the ripple effects of the existence of an Appreciable Adverse Effect on Competition

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in a market, which would transcend the immediate parties to the transaction, thereby necessitating a broader consultation and data collection process.

129. Further clarity on this procedural rigour is provided by Section 30, which explicitly directs that the prima facie opinion formed under Section 29(1) must guide subsequent steps under Section 29. The procedural design mandates an expansive fact-finding mission, including consultation with stakeholders and detailed scrutiny, to ensure that the combination either withstands the muster of competitive fairness or is modified to avert any deleterious market impact.

130. A compelling aspect of this statutory scheme is the deliberate use of the term ‘investigation’ in Section 29, contrasting sharply with ‘inquiry’ as employed in Section 26, which pertains to anti- competitive agreements and abuse of dominant market position. This Court in CCI v. Steel Authority of India Ltd.40 drew a pivotal distinction between these terms, underscoring that ‘investigation’ is a far-reaching exercise of evidence-gathering and fact-finding, especially when compared to an ‘inquiry’. Such an investigation, as per the mandate of Section 29(1A), is to be executed under the aegis of the Director-General, thereby reaffirming the seriousness of the scrutiny, envisaged in cases of combinations.

131. In the present matter, the procedural sanctity prescribed under the scheme has been regrettably disregarded, with the Commission failing to solicit inputs from public, affected stakeholders and those likely to be affected by such combination under Section 29(2). This omission not only contravenes the statutory intent but also diminishes the transparency and inclusivity that underpin the review mechanism for combinations. The legislative scheme unambiguously envisions an investigation that encompasses a wide array of stakeholders, as combinations inherently possess the potential to reshape market dynamics in ways that ripple across the competitive landscape.

132. The reasoning advanced by the CCI to avoid the issuance of SCN to HNGIL under Section 29(1) is unacceptable. Only because the Resolution Professional did not object to the same does not override the statutory requirements prescribed under the scheme of the Act,

40. (2010) 10 SCC 744.

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especially because the target company’s participation is central to assessing the competitive impact of the combination.

133. While the term ‘parties’ may appear broad and/or encompassing all related entities associated with the combination, such an interpretation cannot dilute the inherent plurality attached to the word ‘parties’, as explicitly stated in the Competition Act and its Regulations. The use of the plural form signifies a clear legislative intent to address not just one entity but multiple parties directly involved in the combination process, including but not limited to the acquirer, the target, and, where applicable, the combined entity, if the combination has come into effect.

134. Plurality of entities ensures that all perspectives, interests, and potential implications are considered in assessing the combination’s impact on competition. The exclusion of the target company from the scope of parties especially in cases of insolvency where the target retains critical relevance, would undermine the procedural safeguards, designed to achieve transparency and fairness. The term ‘parties’ must be understood to cover both entities participating in and directly affected by the combination, ensuring the integrity of competition assessment and compliance with statutory provisions under Sections 29(1) and 29(2). To argue otherwise would not only mutilate the term ‘parties’ but would also result in procedural lapses and incomplete analysis, defeating the very purpose of the regulatory oversight.

135. Those identified lapses demonstrate a departure from the procedural rigour, mandated under the Competition Act. Such deviations, if permitted, would end up compromising on the transparency and fairness requirement in a regulatory process. The failure to adhere to the procedural requirements of Sections 29(2) to 29(6) read with Section 30 of the Competition Act, undermines the robustness of the investigative process, rendering the CCI order (dated 15.03.2023), susceptible to a bona fide challenge.

136. In light of the voluntary modification proposed by the acquirer i.e., AGI Greenpac, pursuant to Regulation 25(1A) of the Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 [hereinafter referred to ‘Combination Regulations’], the aforementioned

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Regulation 25(1A) unequivocally mandates that a voluntary modification submitted to the CCI, must bear the imprimatur of both parties to the combination, namely, the acquirer and the target. This statutory requirement is not just a procedural formality. It is in fact a substantive safeguard, designed to ensure that interests of all stakeholders are duly represented and protected. In the present matter, the proposed modification seeks the divestment of the Target’s plant, a move that inherently attracts the provisions of the IBC. The active participation and explicit approval of the target company are indispensable pre-requisites, to the submission of any voluntary modification and steps to the contrary, cannot be countenanced.

137. Furthermore, the legislative intent underpinning Regulation 25(1A) necessitates a holistic and inclusive approach to such modifications, particularly where the proposed measures, impinge upon the operational and structural integrity of the target company. The facts of this case underscore the criticality of this requirement, as the proposed divestment scheme is a vital component of the revival of the stressed target company under the resolution framework contemplated by the IBC.

138. As earlier noticed, the failure to issue a SCN under Section 29(1) to the Target Company/Corporate Debtor, constitutes a major procedural lapse with significant consequence. The statutory scheme of the Competition Act, as well as the synergistic framework of the IBC, demands that all parties to the combination are afforded a fair opportunity to participate in the decision-making process, particularly when the proposed measures bear a direct and material impact on their interests. The absence of such notice undermines the procedural sanctity of the modification process and renders the resultant approval susceptible to bona fide challenge.

139. The issuance of SCN to both the acquirer and the target under Section 29(1) of the Competition Act in our opinion, is a non-negotiable procedural imperative. The interplay between the provisions of the Competition Act and the IBC necessitates a careful balancing of competing interests, underscoring the indispensability of procedural compliance. The lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court.

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Discrepancies in Data

140. Mr. Rajshekhar Rao, learned senior counsel, had highlighted material discrepancies in the operational capacity data furnished by AGI Greenpac and HNGIL, including but not limited to: 140.1. Bahadurgarh Plant: While the capacity reported to the CCI was 490 TPD, the Resolution Plan records it as 820 TPD. 140.2. Puducherry Plant: Different figures have been submitted, casting doubt on the authenticity and reliability of the data. 140.3. Aggregate Impact: Such discrepancies misrepresent the competitive dynamics and render the divestiture conditions inadequate to mitigate AAEC concerns.

141. Similar variances are observed across multiple plants. These discrepancies undermine the credibility of the data, relied upon for regulatory approvals, raising serious questions about the adequacy of the divestiture plans as well.

142. Any particular decision by a regulatory body is only as sound as the foundation of facts and the data, on which it is founded. The discrepancies noted above are glaring and distort the factual matrix of the case, undermining the basis on which competitive assessments and market dynamics, were evaluated. It is a cardinal principle of regulatory jurisprudence that decisions impacting market structures must be anchored in verifiable and transparent information. Here, the inconsistent capacity figures as pointed out by Mr. Rao significantly dilute the effectiveness of divestiture remedies, potentially exacerbating rather than mitigating the anti-competitive effects.

143. Transparent and accurate data disclosures are fundamental to the regulatory mechanism. The identified discrepancies compromise the very basis of the CCI’s decision-making process. It is imperative to therefore underscore that discrepancies in operational capacity data would strike at the very root of the regulatory mechanism. While we do not intend to embark on a fact-finding expedition afresh, the prima facie inconsistencies in the submitted data ought to have been examined with greater care by the NCLAT. But this was not done. Consequently, the conditional approval should have

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been revoked, especially in light of the CCI’s express mention in its order (dated 15.03.2023) that the order may be revoked if the information provided by the acquirer is found to be incorrect at any particular time.

Practical Challenges with Conditional Approvals

144. Conditional approvals, by their very nature, necessitate rigorous and ongoing enforcement to ensure compliance with the prescribed conditions in both letter and spirit. For the AGI Greenpac-HNGIL combination, the absence of a robust and comprehensive monitoring mechanism reveals a significant lacuna within the regulatory framework. Such deficiencies pose considerable risk of non- compliance or deliberate circumvention, thereby defeating the entire purpose of imposing these conditions. The systemic inefficiencies apparent in this instance highlight the existing fragility of conditional approvals when not accompanied with robust enforcement mechanisms.

145. Furthermore, conditional approvals are fundamentally ill-equipped to mitigate the risks that manifest during the interim period, preceding the full implementation of remedial measures. The underlying assumption that post-approval remedies will rectify present market distortions, fails to account for the practical challenges and complexities associated with enforcing such remedies, retroactively. This approach creates an enforcement lag that can result in significant and potentially irreparable harm to the competitive landscape and the interests of the stakeholders. The temporal gap between the grant of approval and the implementation of effective remedies fosters a regulatory vacuum, thereby exacerbating the likelihood of anti- competitive conduct, during this transitional phase. The failure to mitigate present risks undermine the efficacy of conditional approvals and their intended regulatory objectives.

146. The absence of mandatory oversight mechanisms, such as third- party audits or independent verifications, creates loopholes for the circumvention of regulatory conditions. For example: 146.1. A divestiture mandate may fail to achieve its intended purpose if the acquiring party lacks the operational capacity or genuine strategic intent to effectively compete in the market.

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146.2. Structural remedies, such as the sale of plants or other assets, may lead to unanticipated or unintended market gaps, if compliance monitoring remains inadequate.

147. In essence, the conditional approval granted by the CCI is predicated on the presumption of future compliance. While the legislative intent behind CIRP is to create a process characterised with finality and decisiveness, conditional approval appears to be a perilous deviation from the stated objectives. As underscored in the CCI’s conditional approval order, the order remains subject to revocation if the information furnished by the parties is later found to be inaccurate. This acknowledgment, however, exposes the system’s vulnerability to abuse or misrepresentation, particularly in the absence of a system, enforcing checks and balances. Further, such a conditional approval can foster uncertainty, prolong negotiations, and necessitate further modifications, thereby putting at peril the sanctity of the resolution framework.41

Conclusion

148. As India aspires to establish itself as a global manufacturing powerhouse and investment hub, it is imperative that it is able to provide a reliable, robust and competitive business environment for both domestic and international stakeholders. In essence, the introduction of the Green Channel route, which strives to create a level-playing field and enable new entrants to effectively compete with established players in the Indian market, is a significant step in that direction. However, to ensure that entities operate with utmost confidence in the sanctity and fairness of India’s legal and regulatory system, the objectives of the IBC and the Competition Act must also necessarily be in harmony with one another.

149. Within that context, while the IBC’s primary objective is the timely resolution of stressed assets with maximised value realisation for the stakeholders, the significant delay seen in the present case is both unfortunate and regrettable. Nevertheless, expeditious resolution cannot come at the cost of disregarding statutory provisions.

41. Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd., (2022) 2 SCC 401.

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Providing relief for stressed assets must necessarily align with the statutory framework, as adherence to legal principles is fundamental to a fair and just resolution process.

150. In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. For a Resolution Plan containing a combination, the CCI’s approval to the Resolution Plan, in our opinion, must be obtained before and consequently, the CoC’s examination and approval should be only after the CCI’s decision. This interpretation respects the original legislative intent, and deviation from the same would not only undermine the statute but would also erode the faith posed by the stakeholders in the integrity of our legal and regulatory framework.

151. Where the provisions allow for dilution or departure from the intended scheme of the IBC or the Competition Act, it is the responsibility of the legislature to rectify such inconsistencies through appropriate legislative measures and the judiciary should not normally venture into the legislative domain.

152. Further, the indispensability of procedural safeguards as an integral component of a just legal order must be given its due weight, especially as procedural requirements are not mere formalities to be circumvented for expediency but substantive protections designed to ensure fairness and transparency. In that light, the procedural lapses with respect to objections to the proposed combination and the consequent divestiture modification proposed within the framework of the Competition Act, 2002, seriously vitiated the integrity of the process. It is therefore reiterated and reinforced that adherence to procedural propriety is non-negotiable and that the ends cannot justify the means.

153. By upholding the mandatory nature of the statutory provision and emphasising upon the critical importance of procedural safeguards, the principle of rule of law is upheld in alignment with global best practices which underscore fairness, predictability and transparency. Such an approach not only reinforces the integrity and credibility of the legal framework but also highlights India’s commitment to fostering a regulatory environment, which is conducive to both business and innovation. Additionally, it also ensures the protection

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and enforcement of rights in an equitable manner, free from bias or favouritism.

154. Therefore, a balance between the need for expeditious relief and adherence to the statutory framework must necessarily be maintained, in order to ensure that the objectives of both, the IBC and the Competition Act are met in a manner that supports India’s long-term economic aspirations.

155. The upshot of the above discussion are the following orders: 155.1. The AGI Greenpac’s Resolution Plan is unsustainable as it failed to secure prior approval from the CCI, as mandated under the proviso to Section 31(4) of the IBC. Consequently, the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval, cannot be sustained and is hereby set aside and quashed. 155.2. Any action taken pursuant to the Resolution Plan shall stand nullified, and the rights of all stakeholders shall be restored as per status quo ante, prior to the approval of the Resolution Plan by the CoC on 28.10.2022. 155.3. Consequently, the CoC shall reconsider the Appellant’s Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans.

156. Therefore, Civil Appeal No. 6071 of 2023 is allowed in the above terms. This decision rendered in the lead case shall, mutatis mutandis, apply to connected Civil Appeal Nos. 4954 of 2023, Civil Appeal No. 4924 of 2023, Civil Appeal No. 4937 of 2023, Civil Appeal No. 5018 of 2023, Civil Appeal No. 6847 of 2023, Civil Appeal No. 6055 of 2023, Civil Appeal No. 6123 of 2023, and Civil Appeal No. 6177 of 2023.

157. Consequently, in light of the above, Civil Appeal Nos. 5401 of 2023, Civil Appeal No. 7037 of 2023, Civil Appeal No. 7038 of 2023, Civil Appeal No. 6771 of 2023, and Civil Appeal No. 7428 of 2023 are dismissed.

158. All pending applications stand disposed of in the same light.

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Judgment$

I. TABLE OF CONTENTS*

S.V.N. Bhatti, J.

I have had the opportunity to read the well-crafted judgement circulated by my Learned Brother, Justice Hrishikesh Roy. In spite of my effort to subscribe to the view taken by my Learned Brother, for the subtle distinction I noticed in interpreting the proviso to section 31(4) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), I find it apt to express my position on the same through this opinion.

1. The captioned appeals arise from the common order Dt. 18.09.2023 of the National Company Law Appellate Tribunal, Principal Bench, New Delhi (“NCLAT”) under section 62 of the IBC read with the Insolvency and Bankruptcy Amendment Act, 2018. Civil Appeal

$ Ed. Note: Judgment pronounced by Hon’ble Mr. Justice S.V.N. Bhatti in Civil Appeal No(s). 6055, 6123, 6177 and 6847 of 2023. * Ed. Note: Pagination as per the original Judgment.

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No.4924 of 2023 and connected appeals arise from the order Dt. 28.07.2023 of the NCLAT, and the controversy in these appeals arises under the Competition Act, 2002 (“Competition Act”).

2. The two sets of appeals have been tagged and heard together. The appeals, for convenience, are disposed of by separate judgments having regard to the nature of issues of fact and law.

II. BACKGROUND

3. DBS Bank, as a financial creditor, moved an application under section 7 for Corporate Insolvency Resolution Process (“CIRP”) before the National Company Law Tribunal, Kolkata Bench (“Adjudicating Authority”) against Hindustan National Glass and Industries Limited (“HNGIL”), the corporate debtor. On 21.10.2021, the Adjudicating Authority admitted the application filed under section 7 against HNGIL. Mr. Girish Sriram Juneja, respondent No.1, is the Resolution Professional (“RP”).

4. Annexure B of the expression of interest (“EoI”) lays down the eligibility criteria for the prospective resolution applicants to satisfy. The relevant criteria are reproduced below: 1.⁠ ⁠For Private/ Public Limited Company/ Limited Liability Partnership (“LLP”) / Body Corporate/ any other PRAs (which is not a financial entity) (“Category I”): a. Minimum Tangible Net Worth (“TNW”) shall be INR 250 Cr. or Consolidated Group Revenue of INR 1,000 Cr in any of 3 preceding Financial Years; b. TNW shall be in an individual capacity or at the Group Level as on 31st March 2021; c. TNW shall be computed as aggregate value of paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, and does not include reserves created out of revaluation of assets, write back of depreciation and amalgamation; and d. Group may comprise of entities where each such entity is either controlling or controlled by or under common control

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with the PRA. Control means at least 26% ownership. The entities must have been part of the Group for at least 3 years. 2.⁠ ⁠For financial entities including Investment Co./ Asset Management Co./ Alternative Investment Fund (AIF)/ Fund House/ Private Equity (“PE”) Investor/ Non-Banking Financial Co. (“NBFC”)/ or any other eligible entities (“Category II”): a. The PRAs shall, in the immediately preceding completed financial year, have the minimum On Book Asset under Management (AUM) of INR 1,000 cr. or Committed Funds of INR 1,000 Cr.; b. On Book AUM is defined as “total funds deployed” or “total value of loan book /instruments”

5. The RP on 24.05.2022 issued the Request for Submission of Resolution Plans (“RFRP”). Clauses 2.6.3(c), 3.3 and 4.1.1(k) require compliance with the mandate of sections 5 and 6 of the Competition Act by the resolution applicants to whom the combination would be attracted.

6. On 26.09.2022, AGI Greenpac Limited (“AGI”) submitted the draft resolution plan to the RP. The Appellant, Independent Sugar Corporation Limited (“INSCO”) in Civil Appeal No. 6071 of 2023, is one of the resolution applicants. INSCO received green channel combination approval on 30.09.2022 from the Competition Commission of India (“CCI”). In the e-voting of the Committee of Creditors (“CoC”), Dt. 27.10.2022, the resolution plans of AGI received 98% votes, and INSCO received 88% votes. The communication Dt. 28.10.2022 of the RP addressed to INSCO noted that AGI was declared as the successful resolution applicant.

7. On 27.09.2022, AGI applied to CCI in Form I for approval of the proposed CIRP combination of taking over HNGIL. The said approval was rejected by CCI on 22.10.2022. AGI, on 03.11.2022, applied to CCI in Form II for approval of the proposed combination of taking over HNGIL through CIRP.

A. PROCEEDINGS BEFORE THE ADJUDICATING AUTHORITY

8. On 05.11.2022, the RP moved the Adjudicating Authority for approval of the decision of the CoC Dt. 27.10.2022, viz., declaring AGI as

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the successful resolution applicant. On 14.11.2022, INSCO filed I.A. No.1497 of 2022 before the Adjudicating Authority for setting aside the resolution plan approved by the CoC in the e-voting Dt. 27.10.2022. The prayers in the applications filed by INSCO read as follows: “a. Order dismissing Application filed by the Resolution Professional, where the Resolution Professional has sought approval of the RP; b. Order directing the Resolution Professional to withdraw communication declaring AGI as the successful Resolution Applicant; c. Order directing the Resolution Professional to place RP before CoC for fresh reconsideration; d. Stay of proceedings pertaining to RP of AGI.”

9. The gist of the objections of INSCO before NCLT is that the communication of CCI Dt. 15.03.2023 approving the combination of AGI with HNGIL cannot be taken on record. The communication Dt. 15.03.2023 is subject to compliance with the modification offered by AGI. The approval of CCI must be prior to the approval by the CoC. In other words, the approval of CCI for the proposed combination is mandatory and available when the CoC considers the resolution plan submitted by a resolution applicant. The ex post facto approval was granted when the consideration under section 31 of IBC was pending before the Adjudicating Authority. The proviso to section 31(4) of IBC is mandatory and not directory.

10. AGI contended that the requirement in the proviso to section 31(4) of the IBC is directory and not mandatory. The combined reading of section 31 of IBC with section 6(2) of the Competition Act would stipulate that the statutory compliance of combination must be available when a decision is taken on the proposal of the resolution applicant by the Adjudicating Authority. Thus, praying for the rejection of IA (IB) No.1497/KB/2022 filed by the RP.

11. On 15.03.2023, CCI approved the combination application of AGI with HNGIL with a few conditions. During the pendency of IA (IB), No.1497/KB/2022 filed by INSCO for rejecting the application filed for approval of the minutes of the meeting Dt. 27.10.2022, AGI and the RP filed I.A.Nos.628 and 701/KB/2023 to place on record the combination approval order Dt. 15.03.2023 of CCI. The objection

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of INSCO proceeds that the proviso to section 31(4) mandates the resolution applicant to have prior approval of CCI on the combination proposed through the resolution plan.

12. The adjudicating authority vide order Dt. 28.04.2023 dismissed IA (IB) No.1497/KB/2022 filed by INSCO. By the order of even date, I.A. Nos. 628 and 701/KB/2023 were allowed to the extent of placing on record the CCI’s communication Dt. 15.03.2023.

B. PROCEEDINGS BEFORE NCLAT

13. The order Dt. 28.04.2023 was challenged before the NCLAT by the following parties, and details are stated thus:

Sl. Company Appeal No. Name of the appellant No.

1. Company Appeal No.807/2023 Soneko Marketing Private Limited

2. Company Appeal No.607/2023 UP Glass Manufacturers Syndicate

3. Company Appeal No.724/2023 HNG Karmachari Union and Another

14. INSCO assails the order of the Adjudicating Authority Dt. 28.04.2023 that the reliance placed on Arcelor Mittal India Pvt. Limited vs. Abhijit Guhathakurta, Resolution Professional of EPC Constructions India Limited & Ors.1 is erroneous, and according to the ratio in Bank of Maharashtra vs. Videocon Industries Ltd.,2 the approval of CCI prior to CoC considering the resolution plan is mandatory. The words “shall” and “prior to the approval of such resolution plan by the committee of creditors” in the proviso to section 31(4) of the IBC require that the approval of combination is available while the CoC considers the resolution plans attracting combination set out in section 5 of the Competition Act.

15. AGI and RP argued that the word ‘shall’ be read as ‘may’. The proviso is directory and not mandatory. The statutory implication of section 6 of the Competition Act is attracted upon the approval of one or

1. (2019) SCC OnLine NCLAT 920.

2. (2022) SCC OnLine NCLAT 6.

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the other resolution plan by the Adjudicating Authority. Thus, on the effective date for the implementation of the CIRP, if the Resolution Plan has the approval of a combination under the Competition Act, then the resolution plan is fully compliant.

16. The NCLAT, by the impugned common order, dismissed the appeals. 16.1. The impugned order in paragraph 19 notices the scope of controversy considered and decided by NCLAT as follows: “During the course of hearing of the appeal(s), it was made clear to the parties that the only issue which is to be decided in these appeal (s) are about the interpretation of proviso of Section 31(4), i.e., as to whether the requirement of approval of the CCI prior to approval by the CoC is mandatory. The other aspects of the approval of the resolution plan is since pending adjudication of the Adjudicatory Authority, we need not express any opinion on other submissions raised by the parties”.

17. The above excerpt defines the scope of controversy in the subject appeals. The learned counsel appearing for the parties, in great detail, made submissions on several aspects which are intrinsically pending consideration before the Adjudicating Authority. The approach of NCLAT to the issues on hand is adopted and the legality of NCLAT and the Adjudicating Authority’s orders is examined.

III. PROCEEDINGS IN THIS COURT

18. The civil appeals at the instance of the appellants in the impugned order are as follows:

Civil Appeal Nos. Name of the party

C.A. 6071 OF 2023 INDEPENDENT SUGAR CORPORATION LIMITED v. GIRISH SRIRAM JUNEJA & ORS

C.A. 6055 OF 2023 U.P GLASS MANUFACTURERS SYNDICATE v. GIRISH SRIRAM JUNEJA & ORS

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C.A. 6123 OF 2023 H.N.G KARAMCHARI UNION & ANR. v. GIRISH SRIRAM JUNEJA & ORS

C.A. 6177 OF 2023 SONEKO MARKETING PVT. LTD v. GIRISH SRIRAM JUNEJA & ORS

C.A. 6847 OF 2023 HNG INDUSTRIES THOZHILALAR NALA SANGAM v. GIRISH SRIRAM JUNEJA & ORS

19. Dr. Abhishek Manu Singhvi, Shri Mahesh Jethmalani, Shri Rajshekhar Rao and Shri Dhruv Mehta, learned Senior Counsel, have appeared for the appellants.

20. Shri P. Chidambaram, learned Senior Counsel, appeared for the Resolution Professional in the Civil Appeals.

21. Shri Tushar Mehta, learned Solicitor General appeared for the Committee of Creditors.

22. Shri Mukul Rohatgi and Shri Paras Tripathi, learned Senior Counsel have appeared for AGI Greenpac Ltd.

A. ARGUMENTS ON BEHALF OF THE APPELLANT

23. Arguments on behalf of the appellants are summarised as follows: 23.1. The RP and the resolution applicant are bound by the mandate of section 30(2)(e) of the IBC, stipulating that the resolution plan does not contravene any provision of law for the time being in force. 23.2. The RP in the RFRP Dt. 24.05.2022, through Clauses 2.6.3(c), 3.3 and 4.1.1(k), requires the resolution applicant to have prior approval of CCI for the proposed combination before the approval of the resolution plan by the CoC. 23.3. The approval of CCI for the combination is available when the CoC considers the competitive CIRP of all the eligible applicants. 23.4. AGI applied on 27.09.2022 for approval of combination under the Competition Act, in Form I. CCI rejected Form I vide order Dt. 30.09.2022. In contrast, the draft resolution plan of INSCO

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was accompanied by CCI’s approval Dt. 22.10.2022. In other words, well before considering the resolution plan of INSCO by the CoC. 23.5. On 27.10.2022, the CoC, with a majority of 98% voting, approved the resolution plan of AGI. 23.6. Thereafter, on 03.11.2022, AGI applied for approval of combination in Form II before the CCI. On 15.03.2023, the combination of AGI with HNGIL was approved. Therefore, the submission of the resolution Dt. 27.10.2022 of the CoC approving AGI’s resolution plan to the Adjudicating Authority does not confirm to the statutory requirement under section 30(2)(e) read with proviso to sub-section (4) of section 31. 23.7. The NCLAT committed illegality by accepting the requirement under proviso to sub-section (4) of section 31 as directory. 23.8. The interpretation adopted by the impugned order is illegal and against the well-established canon of literal interpretation of a clear and unambiguous provision. 23.9. CCI’s conditional combination approval of AGI on 15.03.2023 implies that unless the condition is complied with, there is no combination approval by CCI in favour of AGI. 23.10. The condition to hive off the Rishikesh plant is not commensurate with the resolution plan of taking over HNGIL as a going concern. 23.11. The statutory timelines under section 12 of the IBC and Regulation 40A of the CIRP Regulations, 2016 are not deviated by insisting upon prior CCI approval. 23.12. The rule of purposive interpretation would be completely inapplicable for interpreting proviso to sub-section (4) of section 31. The reliance on the memorandum explaining the modifications to the Bankruptcy Code Amendment Ordinance, 2018, is misconceived. 23.13. The proviso is used as an exception to sub-section (4) of section 31 of IBC. Being an exception, particularly in the absence of ambiguity, the golden rule of interpretation is the only tool for construing the meaning of the said proviso and not purposive interpretation for ascertaining whether

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the approval of CCI is mandatory while CoC considers the resolution plan. 23.14. The Court, while interpreting, shall not legislate or change the law which clearly reflects the will of the Parliament. The reliance on Arcelor Mittal (supra) is erroneous and illegal, even if these decisions are confirmed by this Court in the Civil Appeal(s).

B. ARGUMENTS ON BEHALF OF THE RESPONDENTS

24. The Respondents’ arguments are summarised as follows: 24.1. The Bankruptcy Law Reforms Committee (“BLRC”) was constituted to study the deficiencies in the then-prevailing laws relating to or dealing with insolvency and bankruptcy of individuals and corporate entities. The Parliament, guided by the BLRC report, enacted the IBC. The statutory scheme of IBC provides for comprehensive remedies, i.e., recovery of debt through maximization of asset value through CIRP, and in a chronic case where redemption of debt through CIRP does not make business sense for the stakeholders, then liquidation is triggered. The fulcrum of IBC is the preservation of the company in distress as a going concern and ensuring the discharge of debt(s) of a stressed company. 24.2. Therefore, the interpretation of the proviso to sub-section (4) of section 31 is adopted by looking at the statement of objects and reasons of the IBC and the statutory scheme laid out from section 4 through section 32A of the IBC. 24.3. The exclusive literal interpretation of the proviso to sub-section (4) of section 31 and holding that it is mandatory would preclude or prevent the participation of eligible resolution applicants. This would consequently provide a quick start to a resolution applicant having green channel combination approval from CCI. Further, the object of maximising the value of stressed assets with the participation of a resolution applicant with green channel approval against a resolution applicant requiring a combination approval would diminish the competitive spirit of the CIRP and the value maximization of stressed assets. The submission of draft resolution plan by all the eligible applicants, dehors combination approval,

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would reflect on the potential asset realization. Competition in resolution plans, voting by CoC, and appreciation of feasibility and viability are all commercial facets interwoven with one another. 24.4. The non-compliance with section 5 read with section 6 of the Competition Act, if insisted at the stage of CoC voting on the eligible proposals of resolution applicants, then the otherwise “feasible” or “viable” test of consideration of the commercial wisdom of CoC is expanded on the proposal being compliant with the laws in force. The CoC would be deprived of a proposal from a resolution applicant which may be more feasible, viable and otherwise eligible if threshold compliance of combination approval is insisted while CoC is considering the resolution plans. 24.5. The CoC, by the statutory scheme, regulations and precedents, is conferred the discretion to decide only on the commercial viability or feasibility of the resolution plans submitted by the competing and eligible resolution applicants and have the approval of the Adjudicating Authority. 24.6. A careful study of sub-sections (1) and (2) of section 31, read with the amended provision and proviso to sub-section (4), would demonstrate that the actual stage for statutory compliance under the Competition Act is material and relevant only when a decision approving a resolution plan is pending before the Adjudicating Authority. 24.7. The checklist for consideration by the Adjudicating Authority is that the resolution plan, approved by the CoC under sub- section (4) of section 30, satisfies the following requirements –

ᴑ Sub-section (2) of section 30: • Requires approval of the resolution plan. • Holds that the effect of approval is binding on the corporate debtor, etc.

ᴑ The proviso to sub-section (1) of section 31: • Mandates Adjudicating Authority to ensure provisions for effective implementation before passing an order of approval.

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ᴑ Sub-section (2) of section 31: • Adjudicating Authority may reject the resolution plan if it does not confirm to the requirements of sub-section (1) of section 31. • The expression “does not confirm” determines the requirements of section 30(2) of the IBC.

ᴑ Sub-section (4) of section 31: • Ensures the corporate debtor operates as a going concern. • Provides a one-year window to obtain licenses, consents and other permissions to continue operations.

ᴑ Operation of sub-section (4) of section 31: • Order of approval ensures the continuity of the business plan as a going concern after the change of management with the valid licenses, permissions, consents, etc., standing in the name of the corporate debtor.

ᴑ Statutory fiction of the one-year period: • Ensures change of management does not hinder the transition as a going concern.

ᴑ Sections 5 and 6 of the Competition Act: • If a resolution plan without combination approval is accepted, it may defeat the prescriptions of the Competition Act. The activity becomes void only if the transition is allowed to take effect without combination approval. 24.8. The resolution applicant must have the approval of CCI under sections 5 and 6 of the Competition Act to continue to run the corporate debtor as a going concern from the moment an order of approval is made under sub-section (2) of section 31 of the Act. To wit, if a resolution plan attracting sections 5 and 6 of the Competition Act is allowed to take

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over the affairs and business of the corporate debtor as a going concern without CCI approval, then it would be void. Therefore, the right timing for combination approval is under section 31 but not under section 30(2) of IBC. 24.9. The proviso to sub-section (4) of section 31 is a condition precedent to sit in the chair of the corporate debtor and continue the business as a going concern, and this is an absolute requirement at the stage of consideration by the Adjudicating Authority. A resolution plan to take over the management of a corporate debtor needs two approvals, viz., one under section 30(4) and another under section 31(1) of the IBC. The approval for combination under the Competition Act is directory and not mandatory, while the offers on RFRP are pending before the COC. 24.10. The principal issues on facts are pending before the Adjudicating Authority, and the scope of these appeals has been expanded. 24.11. The view of NCLAT on the proviso to sub-section (4) of section 31 as directory is approved by this Court in the following cases:

Name NCLAT Proceedings Supreme Court Proceedings Vishal Vijay 2020 SCC OnLine NCLAT 2021 SCC Kalantri v. 1013 OnLine SC Shailen Shah 3243 Makalu Trading (2020) SCC OnLine Civil Appeal Limited and NCLAT 643 No. 3338 of Ors. V. Rajiv 2020, order Chakraborty and Dt. 12 October Ors. 2020.

24.12. The dismissal of Civil Appeals by this Court has approved the view of the NCLAT that while combination approval is mandatory, the requirement of combination approval at the CoC stage is directory. In the realm of commerce and trade, consistency on the binding precedents is paramount, and the challenge to settled positions is unsustainable. The

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Civil Appeals are filed under section 62 of the IBC, and the approval of the view of the NCLAT by this Court has a different dimension in law. 24.13. The interpretation of the requirement in the proviso to sub- section (4) of section 31 as directory ensures the smooth initiation of CIRP on the one hand and, on the other, obtaining approval for the proposed combination from CCI before a decision is taken under sub-sections (1) and (2) of section 31 by the adjudicating authority. 24.14. The statutory compliance status and the effect of giving approval under section 31(1) and (2) of the IBC is in the exclusive domain of the Adjudicating Authority under section 31(1) and (2) of the IBC. The language of sub-section (2) of section 31 is unambiguous. The examination of requirements of sub-section (2) of section 30 is at the stage of examination under section 31(1) of the IBC by the Adjudicating Authority. The Adjudicating Authority either approves the resolution plan approved by the CoC or rejects the plan ground(s) set out in section 31 of the IBC. The consequences for non-compliance of a requirement, including combination approval, are applied at this stage. The proviso to section 31(4) must be read in the same sense and tense that corresponds to section 31(1) and (2) of the IBC. 24.15. An interested resolution applicant to whom the requirement of approval in Form II of CCI is attracted ought not to be disqualified from consideration by the CoC in spite of such an applicant satisfying the eligibility criteria stipulated by the CoC. On the one hand, the scheme in the proviso to subsection (4) of section 31 clearly delineates a condition precedent to an adjudication order under section 31(2) of the IBC and, on the other hand, the main body of section 31(4) provides for obtaining ex post facto permissions within one year under different enactments. 24.16. The RP, CoC and the resolution applicant are bound by the timelines stipulated under the IBC. The timely performance of a duty or function by CCI is not in the hands of a resolution applicant who applied for approval of a combination before CCI. The consideration by the CCI depends on products,

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nature of the industry, area and dominance in the market. The CCI, as a regulatory authority, ensures fair competition even after a combination is brought into existence. For the said purpose, the inquiry under section 20 of the Competition Act is complied with by CCI. 24.17. The respective statutory authorities can operate parallelly and harmoniously without stressing or straining the respective timelines. After hearing the learned counsel for the parties and perusing the record, the question of law taken up for consideration is – whether the proviso to sub-section (4) of section 31 is mandatory or directory at the stage of consideration of the resolution plan by the CoC?

IV. POLICY UNDERLYING THE IBC

25. The BLRC report notes and acknowledges that the failure of a few business plans is integral to the process of the market economy. When business failure occurs, the best outcome for society is to have a rapid re-negotiation between the financiers to finance a going concern using new arrangements of capital and restructured management. The re-negotiating process is known as the “Corporate Insolvency Resolution Process”. The primary object of this effort, briefly stated, is the value maximization of the corporate debtor. The CIRP keeps the corporate debtor as a going concern and runs on the theory that the value of the business is worth more than the realisation of the piecemeal distribution of assets. However, if this objective cannot be achieved, the best outcome for society is the rapid liquidation of a failing corporate debtor. When such statutory arrangements are put into place, the market process of creative construction, on the one hand, and creative destruction, on the other hand, will work smoothly with greater competitive vigour.

26. BLRC lays emphasis on a strong and mature market economy. This involves well-drafted modern laws that replace the laws of the preceding 100 years and high-performance institutions which enforce these new laws. The Committee has the end word to provide one critical building block of this process with a modern Insolvency and Bankruptcy Code and the statutory design associates institutional infrastructure, which reduces delays and transaction costs. The

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BLRC, through the IBC, compartmentalized the functions and duties of RP, CoC and the Adjudicating Authority.

27. The report recommended assessing the viability of a corporate debtor and noted that the economic purview presented an advantage by calling for the assessment of the viability of an enterprise or a project. An enterprise that has fastened financial failure is considered as a viable enterprise and there is possible financial re-arrangement that can earn the creditors a higher economic value in contrast to shutting down such an enterprise. On the contrary, if the cost of financial re- arrangement required to keep the enterprise going is higher than the non-performance value of future expected cash flows, then the enterprise is considered unviable or bankrupt and is better shut down as soon as possible.

28. After taking note of the emerging Indian economy, the best practices of resolution and liquidation in other economies and the model code of UNCITRAL, the report has recommended the following guiding principles to the Parliament for a new Code. Broadly, the objects sought to be achieved by the IBC are (i) provision of certainty in the market to promote efficiency and growth, (ii) maximization of value of assets, (iii) striking a balance between liquidation and reorganisation, (iv) ensuring equitable treatment of similarly situated creditors, (v) provision of timely, efficient and impartial resolution of insolvency, (vi) preservation of the insolvency estate to allow equitable distribution to creditors, (vii) ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information, (viii) recognition of existing creditor rights and establishment of clear rules for ranking priority of claims, and (ix) establishment of a framework for cross-border insolvency.

29. The IBC, thus, seeks to replace the existing framework on insolvency and bankruptcy, which is enumerated below: 29.1. Companies Act, 2013 – chapter on collective insolvency resolution by way of restructuring, rehabilitation, or reorganisation of entities registered under the Act. Adjudication is by the NCLT. 29.2. Companies Act, 1956 – deals with winding up of companies. There are no separate provisions for restructuring except through Mergers & Acquisitions and voluntary compromise. Adjudication is under the jurisdiction of the High Court.

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29.3. SICA, 1985 – deals with restructuring of distressed ‘industrial’ firms. Under this Act, the Board of Industrial and Financial Reconstruction assesses the viability of the industrial company and refers an unviable company to the High Court for liquidation. SICA 1985 stands repealed.

V. SCHEME OF INSOLVENCY AND BANKRUPTCY CODE, 2016

30. The statement of objects and reasons of the IBC set out the following aims: 30.1. To ensure that the framework prior to IBC for insolvency and bankruptcy, which was inadequate and ineffective, leading to undue delays in resolution, is done away with. 30.2. To effectuate an effective legal framework for timely resolution of insolvency and bankruptcy, which would support the development of credit markets and encourage entrepreneurship. The Code also aims to improve the Ease of Doing Business, and facilitate more investments leading to higher economic growth and development. 30.3. To consolidate laws regarding insolvency and bankruptcy in India to ensure the insolvency resolution of corporate persons in a time-bound manner for maximization of the value of the assets of such persons, promote entrepreneurship and the availability of credit, and balance the interests of all the stakeholders. 30.4. The Code also aims to separate commercial aspects of insolvency and bankruptcy proceedings from judicial aspects.

31. Part II of the Code deals with insolvency resolution and liquidation for corporate persons. Chapter II deals with CIRP, and in the event of the effort of Chapter II failing, Chapter III provides for the liquidation process of corporate debtors. The other chapters in the IBC are not adverted to since the issues under consideration do not attract the provisions of those chapters.

32. To sum up, the unfurling of events in Chapter I of Part II of the IBC is that sections 7 to 10 provide for the initiation of CIRP by the (i) financial creditor(s), (ii) operational creditor(s) or (iii) corporate applicant. On the application being admitted by the Adjudicating Authority, section

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13 of the IBC provides for the declaration of moratorium and public announcement, and section 14 deals with moratorium prohibiting the steps for recovery, etc., against the corporate debtor.

33. With the completion of a public announcement of CIRP, section 16 of the IBC provides for the appointment of an interim resolution professional and management of affairs of the corporate debtor by the interim resolution professional subject to further orders. The RP is appointed during the first CoC meeting under section 22 of the IBC. Following the appointment, the RP issues an RFRP from the eligible participants in the ongoing CIRP. The thrust in the exercise from the date on which an application is entertained is that time is of the essence for the completion of each one of the targeted results by the applicant, the Adjudicating Authority, RP and CoC. The timelines for completion of CIRP are prescribed and governed by section 12 of the IBC, read with the model timelines under regulation 40A of the CIRP Regulations 2016. The learned counsel appearing on both sides have advanced detailed arguments on the sanctity of timelines under IBC and the Competition Act to support their respective arguments on the combination approval as directory or mandatory when the CoC is considering the resolution plans.

34. The law on timelines is settled by this Court in Committee of Creditors of Essar Steel India Limited Through Authorised Signatory v. Satish Kumar Gupta and others,3 wherein it was held that the outer limit for the completion of CIRP was 330 days, which may be extended by the adjudicating authority in exceptional cases where the delay in litigation could not be attributed to the parties.

35. The objective of the IBC at the first instance is to ensure that the business activity of the corporate debtor as a going concern is preserved even after the appointment of a resolution professional. By an order under section 31(2) of the IBC, the corporate debtor is made over to the successful resolution applicant as approved by the Adjudicating Authority. The IBC envisages the preservation of the rights of financial creditors, operational creditors, and employees, as well as the supply of goods or services by the corporate debtor into the market.

3. (2020) 8 SCC 531.

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VI. ANALYSIS

36. The brief narrative of the working of the Code takes us to the point posed for consideration in these appeals. The appellants commend the literal rule of interpretation to the proviso and have laid much emphasis on the expressions viz., “shall”, “prior to”, and “committee of creditors”. This argument applies the golden rule of interpretation in establishing that the proviso is mandatory and must be complied with before the stage of sub-section (4) of section 30, i.e., consideration of the resolution plan by CoC at the time of voting. The extended argument is that a combination approved post the decision taken under section 30(4) of the IBC cannot be relied upon and taking on file the approval of combination Dt. 15.03.2023 of CCI, as proposed by AGI, is an illegal exercise of jurisdiction.

37. The argument of literal construction, at first blush, appears to be simple and available to the object sought to be achieved. The RP also acted contrary to the law by bringing on record the approval of a combination of CCI proposed by AGI.

38. It is axiomatic that while applying the rule of literal construction, the words of a statute are first understood in their natural, ordinary or popular sense, and phrases and sentences are constructed according to their grammatical meaning unless such construction leads to absurdity or unless there is something in the context or in the object of the statute to suggest the contrary rule of interpretation.

39. In Madhav Rao Scindia vs. Union of India,4 it has been held that the simpler and more common the word or expression, the more meanings and shades of meaning it has. As already noted, apparently clear and simple language in its comprehensive analysis is so ambiguous at times that it presents difficulty in understanding its meaning, requirement, and purport.

40. In Commissioner of Income Tax, Orissa vs. NC Budhraja and Co.,5 it is held that a statute cannot always be construed with the dictionary in one hand and the statute in the other. Regard must also be had to the scheme, context, and legislative history. (emphasis supplied)

4. AIR (1971) SC 530 at Page 577.

5. AIR (1993) SC 2529 at Page 2540.

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41. In Corp of the City of Victoria vs. Bishop of Vancouver Island,6 the celebrated judgment, Lord Atkinson stated: “In the construction of statutes, their words must be interpreted in their ordinary grammatical sense, unless there be something in the context, or in the object of the statute in which they occur, or in the circumstances in which they are used, to show that they were used in a special sense different from their ordinary grammatical sense. The literal interpretation leads to hardship, inconsistency or obstruct the accomplishment of the object of the statute steps in. In other words, the doctrine of purposive interpretation is taken recourse to for the purpose of giving full effect to the statutory provisions and the Courts must state what meaning the statute should bear rather than rendering the statute in nullity. A statute must be construed in such a manner as to make it workable.

42. In a few cases, the Courts have declined to be bound by the letter when the letter frustrates the patent purposes of the statute. Ld. Justice J.C. Shah in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar,7 noted that “it is a recognized rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature”. The limitation of the purposive role of construction is that the interpretation shall not result in legislation by the Court. Hardship, inconvenience, injustice, absurdity and anomalous results are avoided while construing the statute they need be.

43. Lord Shaw in Shannon Realities Ltd. v. St. Michel (Ville De),8 notes that “[w]here words of a statute are clear, they must, of course, be followed but in their Lordships’ opinion, where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system”. (emphasis supplied)

6. (1921) AC 2 384. 7 AIR (1963) SC 1207.

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44. T. L. Venkatarama Aiyyar, J in Tirath Singh vs. Bachittar Singh,9 stated that “where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence”. The literal and purposive rules of interpretation, as well as their scope, obligation, and limitations, are prefaced for further discussion. The right consideration of issues on hand is achieved by not referring to the precedents on literal or purposive interpretation. It is axiomatic that the precedents on interpretation are specific to the statute, language and case. The Court, in a given case before it, goes by the first principles of the respective tools of interpretation. 44.1. The literal interpretation is not an inviolable rule. The decisions referred to supra, while underlying the principle involved in literal interpretation, had laid down that the literal interpretation, if it leads to hardship, inconsistency, defeats the working of the statute, and acts counterproductive to the purpose and object sought to be achieved by the statute. A statute must be construed in such a manner as to make it workable.

45. Literal interpretation is not the only tool to begin with while constructing a statute. The often-cited judgements on literal interpretation set out when purposive interpretation is considered and preferred over literal interpretation. In the instant appeal, both interpretations have been commended for consideration.

46. The swing is whether the literal or purposive rule of interpretation is applicable for deciding whether approval of CCI at the stage of section 30(4) of IBC is mandatory or directory. To arrive at which one of the interpretations is applicable, the summary of the idea, roadmap, implementation, and conclusion of the IBC, as well as the extent needed, is considered. Literal interpretation satisfies the application of exact meaning to the words used in the proviso, but whether such application is consistent with other provisions in section 31 is to be determined. If literal interpretation leads to inconsistency with the

9. AIR (1955) SC 830.

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text and tense used in section 31, then the Court attempts to resolve it to make the section consistent in text and tense.

47. According to sub-section (26) of section 5, a resolution plan is a plan proposed by the resolution applicant for the insolvency resolution of the corporate debtor as a going concern in accordance with Part II. section 25(2)(h) sets out the duties of an RP and reads thus: (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans. (emphasis supplied)

48. Section 3010 enables a resolution applicant to submit a resolution plan.

10. 30 (1) A resolution applicant may submit a resolution plan [along with an affidavit stating that he is eligible under Section 29-A] to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan— (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the [payment] of other debts of the corporate debtor; [(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than— (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.—For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor— (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under Section 61 or Section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan;

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49. For immediate reference, section 30(2)(c) and (4) are excerpted as under: “Section 30(2)(c) – provides for the management of the affairs of the Corporate Debtor after approval of the resolution plan; Sub-section (4) of Section 30 – The committee of creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board:”

(e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. [Explanation.—For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). [(4) The committee of creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent of voting share of the financial creditors, after considering its feasibility and viability [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53,including the priority and value of the security interest of a secured creditor], and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] [Provided also that the eligibility criteria in Section 29-A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.] (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.

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50. With the approval of the CoC under section 30(4) of the IBC, section 3111 is triggered; thus, taking the matter for approval or rejection, as the circumstances may be, to the Adjudicating Authority.

51. The Parliament, realising the need for a few amendments to IBC for the efficacious working of the Code, enacted Act Nos. 26 of 2018 and 26 of 2019. The ILRC report notes in paragraph 16.2 that the committee deliberated on a mechanism for obtaining approvals from the concerned regulators post the approval of the resolution plan but prior to the Adjudicating Authority’s approval. Amendment Act 26 of 2018 explains, through clause 24 of the notes on clauses, that where there is a provision for combination, CCI approval shall be obtained prior to the approval of the resolution plan by the CoC. On the contrary, the memorandum to the 2018 Ordinance that led to Act 26 of 2018 notes that CCI approval shall be sought prior to the stage at which the resolution plan is considered by the adjudicating authority.

52. It is appropriate to refer to the amendments incorporated by Act 26 of 2018 by which sub-section (4) and the proviso were incorporated. The IBC was enacted with the intention of improving the ease of doing business in India. In line with this thinking, one of the legislative measures is the amendment to the proviso to sub-section (4) of section 31 of the IBC.

11. 31. Approval of resolution plan.—(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan: [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),— (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. [(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.]

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