New Delhi, Jan 29 (PTI) The Supreme Court on Wednesday, by a majority of 2:1, set aside the approval granted to AGI Greenpac’s resolution plan for ailing Hindustan National Glass and Industries Ltd (HNGIL), citing non-compliance with mandatory provisions under the Insolvency and Bankruptcy Code, 2016.

A bench comprising Justices Hrishikesh Roy, Sudhanshu Dhulia and S V N Bhatti was hearing a batch of appeals led by Independent Sugar Corporation Ltd against a September 18, 2023 judgement of the National Company Law Appellate Tribunal (NCLAT).

Justices Roy and Dhulia, in a majority judgement, ruled AGI Greenpac’s resolution plan was unsustainable owing to its failure to obtain a prior Competition Commission of India (CCI) approval.

It held the procedural compliance was non-negotiable, reinforcing the necessity of obtaining CCI clearance before Committee of Creditors (CoC) approval to ensure a fair competition and prevent market monopolisation.

The dispute arose during the Corporate Insolvency Resolution Process (CIRP) of HNGIL, a dominant player in India’s glass packaging industry with a market share of 60 per cent.

AGI Greenpac, the second-largest player in the sector, proposed a resolution plan to acquire 100 per cent of HNGIL’s shares.

However, this move raised concerns over an appreciable adverse effect on competition (AAEC) in the glass packaging industry, particularly in the food and beverage (80-85 per cent) and alco-beverage (45-50 per cent) segments.

The Bermuda-registered Independent Sugar Corporation Ltd. (INSCO), a competing bidder, challenged AGI Greenpac’s resolution plan, arguing the company failed to secure the CCI's approval before the CoC voted on the plan — a mandatory requirement under Section 31(4) of the IBC.

The court set aside the approval granted to AGI Greenpac’s resolution plan and ordered the restoration of all stakeholders' rights to the status quo ante as of October 28, 2022, when the CoC initially approved the plan.

The CoC was directed to reconsider the resolution plans which had the requisite CCI approval at that time, including that of INSCO.

"As India aspires to establish itself as a global manufacturing powerhouse and investment hub, it is imperative that it is able to provide a reliable, robust and competitive business environment for both domestic and international stakeholders," it said.

Justice Roy further said, "In essence, the introduction of the Green Channel route, which strives to create a level-playing field and enable new entrants to effectively compete with established players in the Indian market, is a significant step in that direction." However, to ensure entities operated with utmost confidence in the sanctity and fairness of India’s legal and regulatory system, the objectives of the IBC and the Competition Act must also necessarily be in harmony with one another, he added.

The majority judgement said while the IBC’s primary objective was the timely resolution of stressed assets with maximised value realisation for the stakeholders, the significant delay seen in the present case was both unfortunate and regrettable.

“Nevertheless, expeditious resolution cannot come at the cost of disregarding statutory provisions. Providing relief for stressed assets must necessarily align with the statutory framework, as adherence to legal principles is fundamental to a fair and just resolution process,” it said.

On the difference of opinion with Justice Bhatti, Justice Roy said such differences must be understood as useful steps towards the evolution of jurisprudence.

"I am reminded of the quote from Shakespeare’s 'The Taming of the Shrew' the theme of which we do not necessarily endorse. But there the playwright perhaps accidentally, touched the world of our adversarial litigation. He wrote - 'And do as adversaries do in law, strive mightily. But eat and drink as friends'," the judge said.

Justice Bhatti's dissenting opinion upheld NCLAT's verdict previously ruling that while CCI approval was mandatory, its prior approval before CoC’s decision was only directory.

This interpretation sought to prevent delays in insolvency resolutions due to the extended timelines involved in CCI approvals.

The majority ruling, however, said the adherence to statutory provisions was crucial for maintaining legal and regulatory integrity.

The judgment said procedural safeguards should not be bypassed for expediency and that competition concerns must be addressed in insolvency resolutions.

The further judgment called upon the legislature to address inconsistencies between the IBC and the Competition Act, 2002, ensuring a "more harmonised approach" to insolvency and competition laws.

With AGI Greenpac’s resolution plan nullified, the CoC must now reconsider other eligible resolution plans that secured the requisite approvals as of October 28, 2022. PTI SJK AMK

Prior CCI approval required: resolution plan invalidated for lacking mandatory competition clearance before creditor approval. The issue is whether a resolution plan must obtain prior Competition Commission clearance before Committee of Creditors approval. The majority found that failure to secure prior competition approval invalidated the plan, stressing procedural compliance and competition safeguards cannot be sacrificed for expedition. The majority ordered restoration to the pre-approval status and directed creditors to reconsider plans that had requisite competition approvals as of the reference date, while a dissent viewed prior approval as directory to avoid delay in resolutions.