IBC | Primacy Of Commercial Wisdom Doesn't Mean Every Decision Of CoC Will Be Immune From Judicial Scrutiny : Supreme Court

The Supreme Court has underscored that while the commercial wisdom of the Committee of Creditors remains paramount, it is not immune from judicial scrutiny where issues of statutory illegality or jurisdictional error arise.

“…it is necessary to state that primacy of commercial wisdom does not mean that every action taken in the insolvency process is altogether immune from scrutiny in every situation. Where a challenge is laid in an appropriate proceeding on a legally sustainable foundation, such as statutory illegality or a jurisdictional infirmity, the matter would naturally be considered in accordance with law.”, observed a bench of Justices Vikram Nath and Sandeep Mehta.

The bench made the aforesaid observation as a parting remark while hearing a Miscellaneous Application (MA) seeking revival of a dismissed SLP, premised on subsequent developments arising after its dismissal. The earlier SLP had declined to interfere with the insolvency proceedings and upheld the CoC's decision to approve withdrawal of the CIRP under Section 12A of the IBC. This decision was later challenged by the applicant through the MA on the grounds that his financial offer was higher and had not been considered by the CoC, thereby rendering the decision to withdraw the CIRP legally unsustainable.

While rejecting the plea as not maintainable, citing Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power, Rajasthan Ltd., 2024 LiveLaw (SC) 241, the Court addressed the broader issue of the scope of judicial review over CoC decisions, adding a significant caveat to its well-established deference to creditor autonomy.

The Court clarified that while commercial decisions of the CoC, such as evaluating competing offers, approving an OTS, or negotiating financial terms, are non-justiciable and cannot be interfered with by courts. The legal aspects of such decisions remain open to scrutiny where there is a violation of statutory provisions under the IBC, procedural irregularity, or jurisdictional overreach by the CoC or adjudicating authority.

Noting that the CoC's decision to refuse the Applicant's offer was taken on a commercial side, the Court refused to interfere with the commercial decision-making power of the CoC. Thereby upholding the CoC's decision of withdrawal of the CIRP.

“In these proceedings, which arise out of a disposed of SLP in a civil revision concerning an Agreement to Sell, this Court cannot be called upon to sit over the comparative financial attractiveness of rival offers or to substitute its own view for the business decision taken by the CoC in the statutory process under the IBC. The mere assertion by the applicant that its offer was higher would not, by itself, furnish a ground to reopen the dismissal of the SLP or to unsettle steps taken in a separate insolvency framework.”, the court observed.

Accordingly, the MA was dismissed.

Headnote

Insolvency and Bankruptcy Code, 2016 – Section 12A – Recall of Order – Maintainability – Commercial Wisdom of CoC - The Supreme Court dismissed a Miscellaneous Application (MA) seeking to recall a prior order dated 25.02.2025 that had dismissed a Special Leave Petition (SLP) - The applicant sought recall based on subsequent events, specifically a settlement reached under Section 12A of the IBC and the withdrawal of the Corporate Insolvency Resolution Process (CIRP) - Supreme Court reiterated that the decision to accept a settlement or a commercial course of action under Section 12A falls within the "collective commercial wisdom" of the Committee of Creditors (CoC) - held that a higher offer by an applicant does not, by itself, provide a ground to unsettle steps taken within the insolvency framework or to reopen the dismissal of an SLP.

Practice and Procedure – Miscellaneous Application for Recall – An application for recall of an order dismissing an SLP cannot be used as a "second innings" to litigate issues that were not part of the original proceedings - noted that the original SLP arose from a suit for specific performance, whereas the MA attempted to introduce new grievances related to separate insolvency proceedings - While fraud can vitiate proceedings, such a claim must be proven and cannot be invoked on mere assertion. [Paras 10-15]

Cause Title: M/S.LAMBA EXPORTS PVT. LTD. VERSUS M/S.DHIR GLOBAL INDUSTRIES PVT. LTD. AND ORS.

Citation : 2026 LiveLaw (SC) 286

Click here to download judgment

Appearance:

For Applicant(s)/ Petitioner(s) :Mr. Gopal Shankaranarayan, Sr. Adv. Mr. Jasbir Singh Malik, Adv. Ms. Prachi Sohi, Adv. Ms. Pooja Devi, Adv. Mr. Varun Punia, AOR

For Respondent(s) :Mr. Siddhartha Dave, Sr. Adv. Mr. Mriganga Dutta, Sr. Adv. Mr. Anuroop Chakravarti, Adv. Mr. M S Vishnu Sankar, Adv. Ms. Athira G. Nair, Adv. Mr. Venugopal Pillai, Adv. Mr. Anand Kumar Soni, Adv. M/s Lawfic, AOR Mr. Gopal Jain, Sr. Adv. Ms. Ekta Choudhary, AOR Ms. Rushali Sikand, Adv. Mr. Ankur Anand, Adv. Mr. Mandeep Kalra, AOR Ms. Radhika Narula, Adv. Ms. Anushna Satapathy, Adv. Ms. Chitrangada Singh, Adv. Mr. Yashas J, Adv. Ms. Gauri Rajput, Adv. Mr. Vaibhav Yadav, Adv. Mr. Paras Mohan Sharma, Adv.