IBC | For Resolution Plan Involving Combination, Prior Approval Of Competition Commission Mandatory Before CoC Examination : Supreme Court

The Supreme Court on January 29, by 2:1 majority, observed that a resolution plan under the Insolvency and Bankruptcy Code, containing a proposed combination(a merger or amalgamation of entities), should only be placed before the Committee of Creditors (CoC), after it has been approved by the Competition Commission of India (CCI).In this regard, the Court referred to Section 31(4) proviso of the IBC. This proviso talks about the approval of the resolution plan and its proviso reads as:“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.”Taking a cue from this, the Court pointed out that the use of 'prior' makes it clear that the legislature's intent was to create an exception.“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.,” the Bench of Justices Hrishikesh Roy and Sudhanshu Dhulia observed.However, Justice SVN Bhatti disagreed, saying that the condition for prior approval from the CCI was not mandatory."it is held that the proviso to sub-section (4) of section 31 is directory and would be compliant with IBC and the Competition Act. Hence, the combination approval of CCI at the stage of consideration of the resolution plan by the Adjudicating Authority under section 31(1) would be proper and legal. Such interpretation keeps the operations of the successful resolution applicant as a going concern, without deviating from the rigour of the Competition Act, and simultaneously, a one-year window is granted to obtain licenses, permissions, consents and other regulatory approvals envisaged by a host of laws. Therefore, the proviso is interpreted purposively and held that the approval of a combination of CCI at the stage of consideration by CoC is directory and not mandatory," Justice Bhatti held.To provide a brief factual background, the present appellant had submitted its Resolution Plan for the Corporate Debtor, Hindustan National Glass and Industries Ltd. (HNGIL). Subsequently, as per the requirement, the present respondent AGI Greenpac submitted an application with the CCI informing about a combination with HNGIL. However, the CCI declared the same as not valid. Thereafter, final Resolution Plans were submitted for consideration by the CoC and the respondent's plan was approved.Following this, CCI approved the above combination proposal. The same was made subject to compliance of certain modifications including a divestment plan submitted by the respondent.Challenging the same, the appellant approached the NCLT, which ultimately upheld the approval. In appeal, the NCLAT also upheld the approval stating that although the requirement of approval by the CCI was mandatory in nature, its prior approval was only directory. Apart from this, the appellant had also challenged the CCI approval before the NCLAT. However, it was also upheld. Against this background, the matter came before the Supreme Court.At the outset, the Bench considered the objection regarding the appellant's locus standi. Examining the relevant provisions, the Court said that once the resolution process is initiated, the proceedings become in rem in nature.Similarly, under the Competition Act, the term 'any person aggrieved' must be interpreted widely. The Court reasoned that any person bringing information regarding a violation of the Competition Act would come under this term.“In light of the same, the expression 'any person aggrieved' in the context of the IBC has been held to be indicative of there being no rigid locus requirements to institute an appeal challenging an order of the NCLT before the NCLAT or an order of the NCLAT before this Court.”“Therefore, the term 'any person aggrieved' appearing in Section 62 of the IBC and Section 53T of the Competition Act must be understood widely and not in a restricted fashion.,” the Court said.In view of this, the Court concluded that the present appellant, as an unsuccessful resolution applicant whose plan was not approved, would come under the scope of an aggrieved person.Having said this, the Court went on to determine whether the proposal should have been approved by the CCI before the resolution plan was approved by the CoC. In this regard, the Court explained that since the language used in Section 30, is clear and unambiguous, literal interpretation will apply and not purposive interpretation. It also...

IBC | For Resolution Plan Involving Combination, Prior Approval Of Competition Commission Mandatory Before CoC Examination : Supreme Court

Gyanvi Khanna

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