Supreme Court Upholds Mandatory CCI Approval in Insolvency Resolutions, Ensuring Competitive Fairness

The case of Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors. addresses the interplay between the Insolvency and Bankruptcy Code, 2016 and the Competition Act, 2002, focusing on the timing of Competition Commission of India (CCI) approval in corporate insolvency resolution processes. It arose from the CIRP of Hindustan National Glass and Industries Ltd. (HNGIL), where AGI Greenpac Ltd. was approved as the Successful Resolution Applicant by the Committee of Creditors (CoC) despite lacking prior CCI approval.

Independent Sugar Corporation Ltd. (INSCO) challenged this, citing potential anticompetitive market dominance by AGI. The key issue was whether the proviso to Section 31(4) of the IBC, mandating prior CCI approval for combinations under Section 5 of the Competition Act, is mandatory or directory. INSCO argued that “shall” and “prior” indicate a mandatory requirement, rendering AGI’s plan invalid without prior CCI approval. AGI and the CoC contended the proviso is directory, citing practical delays and NCLAT precedents allowing post-CoC approval.

The Supreme Court’s majority, led by Justice Hrishikesh Roy, ruled the proviso to Section 31(4) mandatory, emphasizing the plain meaning of “shall” and “prior” to ensure CoC decisions account for CCI’s anti-competitive assessment. Procedural lapses, like the CCI’s failure to notify both parties under Section 29(1) of the Competition Act, invalidated AGI’s plan, leading to its rejection and allowing related appeals. Justice S.V.N. Bhatti dissented, favoring a directory interpretation to align with the IBC’s time-bound resolution goals. The ruling hinges on Sections 30(2)(e) and 31(4) of the IBC and Sections 5, 6, and 29 of the Competition Act, rejecting directory interpretations to uphold legislative intent. This case is pivotal for enforcing strict statutory compliance in insolvency proceedings, ensuring competitive fairness.