Supreme Court Upholds Primacy of CoC’s Commercial Wisdom in Torrent Power Ltd. Insolvency Case, Judicial Review Limited to Statutory Compliance, Not Merits of CoC Decisions, Rules Apex Court
In a landmark judgment, the Supreme Court of India has reaffirmed the primacy of the Committee of Creditors’ (CoC) commercial wisdom in insolvency proceedings, dismissing appeals by Torrent Power Ltd. and others against the approval of Sarda Energy and Minerals Limited’s (SEML) resolution plan for SKS Power Generation (Chhattisgarh) Limited. The appellants, comprising unsuccessful resolution applicants, had contended that SEML's resolution plan was modified post-bidding, leading to material irregularities. However, the court, led by Justices B.V. Nagarathna and R. Mahadevan, emphasized the limited scope of judicial review in insolvency cases, which is confined to ensuring statutory compliance and procedural fairness.
The judgment reiterated that courts are not empowered to substitute their assessment for the commercial decisions of the CoC, which are based on viability and feasibility assessments and are crucial for the efficient functioning of the insolvency resolution process. The court noted that SEML’s clarifications did not constitute a modification or enhancement of the resolution plan's commercial offer. The ruling also highlighted the importance of a time-bound insolvency process, warning against the strategic use of litigation by unsuccessful bidders to delay resolutions and undermine the economic objectives of the Insolvency and Bankruptcy Code (IBC).
The judgment aligns with the Supreme Court’s consistent stance in previous rulings, including the Essar Steel case, asserting that the commercial wisdom of the CoC cannot be supplanted by judicial review. By upholding the concurrent findings of the NCLT and NCLAT, the Supreme Court has reinforced the legislative intent of the IBC, aimed at maximizing asset value and ensuring the swift resolution of insolvency cases.
Bottom Line:
Commercial wisdom of the Committee of Creditors (CoC) is paramount and non-justiciable - Courts cannot substitute their assessment over the commercial decisions of the CoC under the CIRP process.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 30, 31, 61, 62
Torrent Power Ltd. v. Ashish Arjunkumar Rathi, (SC) : Law Finder Doc id # 2859770
