Kiran Raj

The Supreme Court Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan dismissed civil appeals filed by unsuccessful resolution applicants who challenged the approval of a resolution plan by the Committee of Creditors in an insolvency proceeding, holding that the commercial wisdom of the CoC is non-justiciable and that clarifications sought from resolution applicants during the evaluation process did not amount to any modification of the approved plan. The Court cautioned that unsuccessful resolution applicants are increasingly weaponising judicial proceedings to contest commercial decisions of the CoC under the pretext of procedural irregularity, thereby prolonging the insolvency process and eroding the value of the corporate debtor — conduct the Court found to be fundamentally at odds with the statutory design and economic objectives of the Insolvency and Bankruptcy Code, 2016.

The appeals arose from the Corporate Insolvency Resolution Process of SKS Power Generation (Chhattisgarh) Limited initiated on an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by a financial creditor. The National Company Law Tribunal admitted the application and appointed an Interim Resolution Professional, who was later confirmed as Resolution Professional. Expressions of Interest were invited, and multiple resolution applicants, including the appellants and Sarda Energy and Minerals Limited, submitted resolution plans. After negotiations and issuance of a Process Note governing inter-se bidding, the Committee of Creditors conducted voting in its 31st meeting and approved the resolution plan of Sarda Energy and Minerals Limited with 100% vote share.

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Applications filed by unsuccessful resolution applicants alleging post-negotiation modification of commercial terms relating to bank guarantees and deferred payments were rejected by the NCLT. The NCLAT affirmed the approval of the plan, holding that no material irregularity was established. The appellants approached the Supreme Court under Section 62 of the Code, contending that clarifications issued after the negotiation process altered the commercial offer and breached the Process Note and RFRP.

The Supreme Court addressed the foundational principle governing insolvency proceedings, observing that the Insolvency and Bankruptcy Code, 2016 marks a fundamental shift in India's insolvency regime: from a court-centric model to a creditor-driven process. The Court recorded that the doctrine of commercial wisdom represents "a conscious legislative choice to vest decisive authority in the Committee of Creditors, comprising financial creditors who bear the economic consequences of failure."

On the limited role of adjudicating authorities, the Court stated that decisions on viability, valuation, and acceptable haircuts are inherently commercial, not judicial, and that courts do not substitute their assessment for that of the CoC. It observed that "the adjudicating authority performs a supervisory role, ensuring statutory compliance and procedural fairness but refrains from second-guessing economic bodies."

On the primacy of the CoC's commercial wisdom, the Court observed: "The law having been settled that the commercial wisdom of the CoC enjoys primacy and cannot be supplanted by judicial review. Neither the NCLT, nor the NCLAT nor even this Court is empowered to substitute its assessment in place of the commercial decision arrived at by a requisite majority of the CoC."

On the question of whether the RP's conduct amounted to material irregularity, the Court held: "Where the RP acts on the instructions of the CoC, such conduct cannot, by any stretch of imagination, be characterised as a material irregularity within the meaning of Section 61(3)(ii). To hold otherwise would be to conflate the statutorily distinct roles of the RP and the CoC and to indirectly subject decisions of the CoC to judicial review, contrary to the scheme of the IBC."

Addressing the growing misuse of judicial proceedings by unsuccessful resolution applicants, the Court observed: "The appeals before us typify the growing strategic use of the judicial system by unsuccessful resolution applicants, who seek to reopen almost every commercial decision under the guise of procedural impropriety. This converts the corporate resolution process into a protracted adversarial contest and erodes the value of the Corporate Debtor. Such an approach incentivises delay, rent-seeking, and strategic obstruction and is fundamentally inconsistent with the economic logic and statutory design of the IBC."

The Court further stated: "The IBC represents a conscious legislative choice to privilege speed, certainty, and creditor-driven decision-making over exhaustive judicial scrutiny. Experience shows that unsuccessful bidders will always try to spin commercial decisions of the CoC as procedurally faulty in order to secure a second shot through litigation by filing applications or making representations. However, courts need to remain vigilant against any temptation to expand the scope of review beyond the narrow boundaries prescribed by the IBC."

On the dangers of strategic litigation, the Court observed: "Excessive review also encourages strategic litigation. Stakeholders with little to no economic interest in the Corporate Debtor may resort to litigation as a bargaining tool to delay implementation of the Resolution Plan or extract concessions, thereby converting the insolvency process into an adversarial contest. Such conduct takes the process away from its objective of value maximisation."

The Court concluded by recording: "Predictability and finality are thus essential to maintaining a robust insolvency regime. Judicial intervention beyond the narrow statutory confines undermines both predictability and finality. Recognising this, the IBC deliberately confines judicial review to strict statutory compliance under Sections 30(2) and 61(3). Respecting these limits will preserve the economic sense of the IBC and ensure that insolvency remains a predictable, time-bound, and market-driven process."

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The Court concluded: “In view of the foregoing, we do not find any merit in the appeals. With the above observations, these appeals are dismissed. Therefore, the Impugned Judgment dated 01.10.2024 passed by the NCLAT is affirmed. We however refrain from imposing costs.”

Case Title: Torrent Power Ltd. v. Ashish Arjunkumar Rathi & Others
Neutral Citation: 2026 INSC 206
Case Number: Civil Appeal Nos.11746-11747 of 2024 (with connected appeals)
Bench: Justice B.V. Nagarathna and Justice R. Mahadevan