TaxTMI 
TaxTMI 
TaxTMI 
2025 (2) TMI 19
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi Gaur, Adv. Mr. Akshat Malpani, Adv. Mr. Anubhav sharma, Adv. Ms. Nayan Gupta, Adv. Mr. Buddy Ranganadhan, Sr. Adv. Mr. Samar Bansal, Adv. Mr. Pawas Kulshrestha, Adv. Mr. Parv Garg, Adv. Mr. K.S. Rekhi, Adv. Ms. Nandini Tomar, Adv. Ms. Shefali Tripathi, Adv. Mr. Nikhil Jain, AOR Ms. Divya Jain, Adv. Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Mahesh Jethmalani, Sr. Adv. Mr. Abhimanyu Bhandari, Sr. Adv. Mr. Utsav Trivedi, Adv. Mr. Avishkar Singhvi, Adv. Mr. Avishkar Singhvi, Adv. Ms. Unnati Agrawal, Adv. Ms. Manini Roy, Adv. Mr. Piyush Tiwari, Adv. Ms. Nandini Acharya, Adv. Mr. Siddharth Seem, Adv. Ms. Mugdha Pande, Adv. Mr. Ajay Awasthi, Adv. Mr. Swapnil Singh, Adv. Ms. Dhanakshi Gandhi, Adv. Ms. Rooh-e-hina Dua, AOR Mr. Dhruv Mehta, Sr. Adv. Mr. Rajshekhar Rao, Sr. Adv. Mr. Abhijeet Sinha, Sr. Adv. Mr. Indranil Ghosh, Adv. Mr. Debabrata Das, Adv. Mr. Palzer Moktan, Adv. Ms. Aanchal Tikmani, AOR Mr. Shaunak Mitra, Adv. Mr. Aditya Shukla, Adv. Mr. Dhruv Chaddha, Adv. Mr. Saptarshi Mukherjee, Adv. Ms. Meherunissa Anand Jaitley, Adv. Mr. Harshil Wason, Adv. Ms. Mrinal Choudhry, Adv. Ms. Mehar Bedi, Adv. Mr. Advait Ghosh, Adv. Mr. Balbir Singh, Sr. Adv. Mr. Rajnish Prasad, AOR Mr. Udayan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al, Adv. Ms. Manini Roy, Adv. Mr. Piyush Tiwari, Adv. Ms. Nandini Acharya,, Adv. Mr. Siddharth Seem, Adv. Ms. Mugdha Pande, Adv. Mr. Ajay Awasthi, Adv. Mr. Swapnil Singh, Adv. Ms. Dhanakshi Gandhi, Adv. Ms. Rooh-e-hina Dua, AOR Mr. Mohit D. Ram, AOR Ms. Daisy Hannah, AOR Ms. Radhika Gautam, AOR Table of Contents FACTUAL MATRIX ........................................................................................ 2 SUBMISSIONS .............................................................................................. 9 DISCUSSION & ANALYSIS ............................................................................ 16 Objections on Locus Standi ........................................................... 16 Proviso to Section 31(4) IBC .......................................................... 17 Undertaking Interpretation: Why Literal and not Purposive? ......... 21 Principle of Plain Meaning ............................................................ 24 Different Threshold for Combinations ........................................... 33 Notes on Clauses, Memorandum & Scrivener's Error .................... 35 (Dis?)Harmony between Stipulated Timelines .........
X X X X Extracts X X X X
X X X X Extracts X X X X
....mbination of the two major players in this sector is likely to result in an Appreciable Adverse Effect on Competition [hereinafter referred to as 'AAEC'] in the glass packaging industry generally and in particular, within the subsegments of F&B and alco-beverages. 4. The main contesting party to the aforementioned proposed combination is the Bermuda-registered Appellant - Independent Sugar Corporation Ltd. [hereinafter referred to as 'INSCO'], incorporated in 1984, which also submitted their Resolution Plan for HNGIL - the Corporate Debtor/Target Company in India. 5. After the CIRP was initiated against HNGIL by DBS Bank [hereinafter referred to as 'Financial Creditor'] under Section 7 of the IBC, the Adjudicating Authority i.e., National Company Law Tribunal (Kolkata Bench), admitted the matter on 21.10.2021. An Expression of Interest [hereinafter referred to as 'EOI'] was floated on 25.03.2022, by the Resolution Professional as per Form G under Regulation 36(A)(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Within the EOI, Clauses 3.3 & 4.1.1(k) prescribed a mandatory requirement of approval from the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Form I, by the CCI. 11. However, on 28.10.2022, the CoC approved the AGI Greenpac's Resolution Plan with 98% votes, while Appellant INSCO's Resolution Plan, received 88% votes. 12. Thereafter, on 03.11.2022, AGI Greenpac submitted a detailed application (Combination Registration No. C-2022/11/983) under Form II seeking approval before CCI. At the same time, the Resolution Professional filed an IA under Section 30(6) of the IBC before NCLT Kolkata, seeking approval for AGI Greenpac's Resolution Plan while INSCO filed an IA before NCLT Kolkata challenging the approval granted to AGI Greenpac's Resolution Plan, by the COC. 13. On 10.03.2023, AGI Greenpac submitted a divestment plan to CCI in respect of one of the seven HNGIL plants (situated in Uttarakhand), as part of a voluntary modification, to comply with the requirements of Competition laws. On 15.03.2023, CCI granted an approval to AGI Greenpac's combination proposal with HNGIL (Corporate Debtor/Target Company), subject to the compliance of certain modifications including the divestment of one of the seven HNGIL plants (Rishikesh, Uttarakhand). 14. Challenging the approval to HNGIL and AGI Greenpac's Resolution Plan and se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant's counsel contends that the RP violated Section 31(4) of the IBC & its proviso, the RFRP and the RP's own e-mail dated 25.08.2022, by submitting AGI Greenpac's Resolution Plan to the NCLT for approval, without the required statutory approval from the CCI. This contradicts AGI Greenpac's undertaking before the NCLT (Clause 5.5), which stated that CCI approval would be secured prior to CoC approval and submission of the plan to the NCLT. 18.3. While Section 31(4) of the IBC permits statutory approvals within one year of NCLT approval, the proviso excludes combinations under Section 5 of the Competition Act, 2002, requiring stricter compliance. This, according to Dr. Singhvi, underscores legislative intent for stringent adherence to the proviso. 18.4. It is contended that in case of non-compliance, both the CoC and RP are empowered to re-evaluate and approve any other compliant Resolution Plans. However, despite such circumstances existing here, neither the RP nor the CoC acted as needed, rendering the process invalid. 18.5. Relying on judicial precedents, the counsel emphasises that Section 31(4) of the Insolvency & Bankruptcy Code, 2016 (IBC), mandates statutory complia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....over as going concerns, by avoiding liquidation. The Statement of Objects & Reasons of the IBC emphasises upon the need for a time-bound resolution process aimed at maximizing asset value. The CoC plays a pivotal role in assessing the feasibility and viability of a Resolution Plan from a commercial perspective. 19.2. According to Mr. Mehta, adherence to the IBC's timelines is sacrosanct and must be followed. Further, it was argued that the timelines under the IBC and the Competition Act are incompatible and must be harmonised, with Section 31(4) and its proviso being interpreted appropriately. 19.3. The interpretation suggested by INSCO, treating the proviso as 'mandatory' rather than 'directory' would undermine the IBC's scheme. It is therefore argued that the proviso is directory, as upheld by various NCLAT judgments which have not been upset by the Supreme Court. 19.4. Mr. Mehta further contended that the Green Channel approval mechanism gave INSCO an unfair head start, disadvantaging established industry players. This, it is argued, goes against providing a level-playing field and undermining legislative intent while diminishing the competitive nature of the CIRP. 19.5.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....GI Greenpac's Resolution Plan, it was argued that Plan is not conditional. In any case, these issues should not be entertained by the Supreme Court at this premature stage, as these are pending for consideration before the NCLT. 21.6. The locus standi for Appellants as the unsuccessful resolution applicant is questioned, as they lack vested rights in the CIRP. It is also argued that the workmen and operational creditors have no standing to challenge a Resolution Plan. 21.7. Highlighting the RP's lack of expertise in managing a glass furnace factory, Mr. Rohatgi emphasised upon the importance of concluding the CIRP swiftly to avoid jeopardising its survival. 22. Mr. Parag Tripathi, supplementing for AGI Greenpac, invoked the Principle of Scrivener's Error, highlighting an inadvertent drafting error in the proviso to Section 31(4) of the IBC that rendered unclear the original legislative intent. It is therefore argued that courts can pierce through the alleged obvious error and discern the true purpose behind the enactment. DISCUSSION & ANALYSIS Objections on Locus Standi 23. At the outset, the preliminary objection regarding the locus standi of the Appellant(s) to prefer the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h approval i.e., that it must be obtained prior to the approval of the Resolution Plan by the COC, should be construed as being 'directory' in nature, rather than 'mandatory'. 30. A few paragraphs from the impugned NCLAT order being relevant are extracted herein below: "... ... 33. The question of obtaining approval from the CCI only arises when Resolution Plan submitted contains a combination and require approval from the CCI. After submission of Plan, the Resolution Applicant applies for approval of combination from the CCI. It is not in his hand that as to when CCI will grant the approval. The CCI has to act as per statutory provisions of the Competition Act and it has been given 210 days to take a decision. If, we hold that prior approval of the CCI is mandatory prior to the approval of Plan by the CoC, it will lead to incongruous result, the CIRP cannot be frozen or cannot be put at halt because an application is submitted before the CCI. Looking to the timeline provided in the Code and that of the Competition Act and to hold that prior approval of CCI is required prior to approval of Plan by the CoC, mandatorily will lead to adverse effect on the CIRP... ... ... ... 34.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te may be introduced to serve various purposes, like qualifying or excepting certain provisions from the main enactment or insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable or as an optional addenda to explain the real intendment of the statutory provision. Sundaram Pillai v. V.R. Pattabiraman, (1985) 1 SCC 591 Ordinarily, however, the function of a proviso is to except something out of the enactment or to qualify something enacted therein. 34. The introduction of a proviso, specifically addressing those Resolution Plans with provisions for combination, and the use of the term 'prior' therein, makes it starkly clear that the intent of the legislature was to create an exception. This ensures that in cases containing combination proposals, the approval of the CCI i.e., the regulatory body designated to ensure fair competition in markets and preventing anti-competitive practices, should first be obtained before the same is approved by the CoC. No other provision of the IBC has been pointed out that might suggest otherwise or cause disharmony between the scheme and intent of the IBC or the said proviso to Section 31(4) of the IBC. 35. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the language of a statute is plain and unambiguous and reasonably susceptible to only one meaning, there cannot be a question of construction of the statute, as the provision would speak for itself. State of Uttar Pradesh v. Vijay Anand Maharaj, 1962 SCC OnLine SC 12 [Subbarao, J.]; Om Prakash Gupta v. Dig Vijendrapal Gupta, (1982) 2 SCC 61; Nelson Motis v. UOI, (1992) 4 SCC 711. 40. In an oft-quoted case on literal interpretation Kanailal Sur v. Paramnidhi Sadhu Khan, this Court stated as follows 1957 SCC OnLine SC 8 : "If the words used are capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the act." 41. In fact, if the statute is plain and unambiguously-worded, the consequences of such construction no longer remain a matter for the court to decide on Tamil Nadu State Electricity Board v. Central Electricity Regulatory Commission, (2007) 7 SC 636, even if they appear to be strange, surprising, unreasonable, unjust or oppressive. Mahalaxmi Mills Ltd., Bhaunagar v. CIT, Bombay, 1963 SCC OnLine SC 190; Nas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Interpretation. The respected author has explained the concept with his usual clarity in the following terms Pg. 41, 1.6. Appraisal of the Principle of Plain Meaning, Chapter 1 - Basic Principles, Justice G.P. Singh's Principle of Statutory Interpretation (15th Edition), 2016: "It may look somewhat paradoxical that plain meaning rule is not plain and requires some explanation. The rule, that plain words require no construction, starts with the premise that the words are plain, which is itself a conclusion reached after construing the words. It is not possible to decide whether certain words are plain or ambiguous unless they are studied in the context and construed. The rule, therefore, in reality means that after you have construed the words and have come to the conclusion that they can bear only one meaning, your duty is to give effect to that meaning... ... ... ... That seems to me a plain clear meaning of the statutory language in its context. Of course, in so concluding I have necessarily construed or interpreted the language. It would obviously be impossible to decide that language is 'plain' (more accurately that a particular meaning seems plain) without first construin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s addressed to common run of men and is therefore to be understood according to sense of the thing, as the ordinary man has a right to rely on ordinary words addressed." Wilma E. Addison v. Holly Hill Fruit Products, 322 US 607 51. The above pronouncements make it clear that when the words used are clear, plain and unambiguous, the courts are duty-bound to give effect to the meaning emerging out of such plain words. The intention of the legislature must be gathered from the language used and also, the words not used. It becomes imperative to understand those words in their natural and ordinary sense, and any interpretation requiring for its support addition or substitution or rejection of words as meaningless, must ordinarily be avoided. 52. Courts must always attempt to uphold a provision as it is and not invalidate it, merely because one of the possible interpretations could lead to such a result. When there is no ambiguity in the words used, the question of finding a disguised intention or purpose behind the use of a particular word (the word 'prior' in this case), would not ordinarily arise. 53. The legislative intent behind inserting the proviso to Section 31(4) of the IBC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ething different than what has been expressly mentioned in the proviso. The following decisions of this Court which support the present proposition are reproduced for ready reference: 58. In Sri Venkataramana Devaru v. State of Mysore, the Supreme Court held 1954 SCC OnLine SC 25: "25...The language of the Article being plain and unambiguous, it is not open to us to read into it limitations which are not there, based on a priori reasoning as to the probable intention of the legislature. Such intention can be gathered only from the words actually used in the statute; and in a court of law, what is unexpressed has the same value as what is unintended..." 59. In Hardeep Singh v. State of Punjab, this Court held the following (2014) 3 SCC 92: "43. The court cannot proceed with an assumption that the legislature enacting the statute has committed a mistake and where the language of the statute is plain and unambiguous, the court cannot go behind the language of the statute so as to add or subtract a word playing the role of a political reformer or of a wise counsel to the legislature. The court has to proceed on the footing that the legislature intended what it has said and even ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with respect to the provisions of a statute, the Court's interpretative exercise would be restricted. In other words, the Court is duty-bound to proceed on the footing that the legislature intended what it expressed in the statute (or proviso, in this case). Beyond that, the Court's exercise cannot be stretched to involve a re-writing, recasting or re-framing of the legislation or statute. 63. In that light, while interpreting Section 2(2) of the Arbitration and Conciliation Act, 1996, a Constitution Bench of the Supreme Court observed that in case the legislature intended to expand the scope of Part-I of the Act to arbitrations seated in foreign countries, it would have added such words in the provision itself. Therefore, for the Court to add words that are not expressly provided by the legislature in the statute itself would tantamount to a 'drastic and unwarranted rewriting or alteration of the language'. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 64. Rules of interpretation permit courts to read a certain word, term or phrase in the statute differently from its plain meaning if it leads to absurdity but the courts must always remain co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the literal interpretation of the statutory language, mindful of the risks of wandering too far afield into the uncertain waters of committee reports, memorandums and legislative debates. 68. Let us now pay attention to the Report of the Insolvency Law Committee (dated 01.03.2018), which recommended that specific timelines be incorporated in the IBC, to seek approval from government authorities as well as the CCI. The relevant extracts from the Report are as follows: "16.1... ... However, the timeline within which such approvals are required to be obtained, once a resolution plan has been approved by the NCLT, has not been provided in the Code or the CIRP Regulations. The Committee deliberated... the Code should specify that the timelines will be specified in the relevant law, and if the timeline for approval under the relevant law is less than one year from the approval of the resolution plan, then a maximum of one year will be provided for obtaining the relevant approvals, and section 31 shall be amended to reflect this... ... 16.3... ... Thus, as the CIRP period is sacrosanct, the Committee, keeping in mind the practicalities of the issue, deemed it fit to provide for a pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... brought forth by the learned counsel to indicate the legislative intent of the IBC. This is in reference to the Notes on Clauses to the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which might have some significance for the present discussion. The Notes on Clauses read as follows: "Clause 24 of the Bill seeks to amend section 31 of the Code to provide that the Adjudicating Authority shall, before passing an order for approval of resolution plan satisfy that the resolution plan has provisions for its effective implementation and that the resolution applicant shall obtain the necessary approvals required within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority or within such period as provided for in such law, whichever is later and where it contains a provision for combination for approval of the Competition Commission of India shall be obtained prior to the approval of resolution plan by the committee of creditors." 72. The Memorandum explaining modifications made in the Bill introduced to replace the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 supplements the aforementioned Notes on Clauses, stating: "(d) i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a mistake of transcription, which is to say a mismatch between original (e.g., spoken word, manuscript) and copy. Today, of course, Congress does not use actual scriveners. Indeed, the phrase "scrivener's error" came into popular usage only once reliance upon scriveners was uncommon. The phrase is thus a term of art, referring to a particular sort of legislative mistake. Specifically, and as explained more fully throughout Part I, a "scrivener's error" is a case in which the words of a legislative text diverge from what Congress meant to say. Such a case contrasts with one in which Congress simply should have said something else." 75. Assuming that there is no such error in the Memorandum and therefore the Memorandum presents a conflicting view vis-à-vis the Notes on Clauses in explaining the legislative intent behind introducing the said proviso, the implication thereof can be understood from the following passage from the three Judge Bench opinion in a similar context. In Shashikant Laxman Kale v. Union of India, the Court opined (1990) 4 SCC 366 that the final Act would be the guiding factor: "20. Strong reliance has been placed on behalf of the petitioners on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the CCI should only be placed before CoC. The 'commercial wisdom' accorded to the CoC being paramount, the legislature in our understanding, intentionally provided for a prior approval of the CCI with respect to Resolution Plans, containing combination proposals. 80. Additionally, the CCI has also been empowered under Section 31(3) of the Competition Act as well as Regulation 25(1)(A) of the Combination Regulations to direct modifications to the Resolution Plan or a combination proposal. Therefore, the approval from CCI must be obtained before the same is approved by the CoC. Otherwise, an illogical situation may arise since any modifications so directed by the CCI, would be kept out of the scrutiny of the CoC and the CoC would be forced to exercise its commercial wisdom without complete information. 81. It is for the above reasons that the legislature has devised a scheme wherein the Resolution Plan with its proposed modifications must be placed before the COC to enable it to compare all possible plans of prospective Resolution Applicants. Only then can the CoC's commercial wisdom be exercised assiduously. 82. To decide whether a particular provision should be identified as man....
X X X X Extracts X X X X
X X X X Extracts X X X X
....combination that leads to an Appreciable Adverse Effect on Competition (AAEC) is placed before the CoC for approval before securing prior approval from the CCI, the Plan is incapable of being enforced or implemented. Specific consequences in law are provided under the IBC and the Competition Act for the same. As is clear, such a major omission cannot be cured at a later stage. Therefore, approval by CoC to such a deficient Resolution Plan can have no legal implications. In the present case, the CCI-unapproved Resolution Plan does not pass the muster. The same cannot be approved by this Court as it is in violation of Sections 30(2)(e), 30(3), 30(4) and 34(4)(a) of the IBC. It therefore does 'contravene provisions of the law for the time being in force'. (Dis?)Harmony between Stipulated Timelines 87. On the aspect of a possible disharmony between the stipulated timeline to be followed under the IBC and the Competition Act, the NCLAT in the impugned order has held the proviso to Section 31(4) of the IBC, to be directory in nature since mandatory prior approval of the CoC, would lead to disruption in the CIRP timeline, as stipulated under the IBC. 88. However, it must be noted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nation, 13 [shall] give notice to the Commission, in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within14 [thirty days] of- 1. (a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be; 2. (b) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of that section. 15[(2A)No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission under sub-section(2) or the Commission has passed orders under section 31, which- ever is earlier.]" 93. The point at which the applicant is allowed to give notice to CCI of a combination, i.e., the trigger event, need not therefore be limited to when the Resolution Plan is submitted to the Resolution Professional. On the contrary, such notice can be given immediately after or within thirty (30) days of the execution of 'any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(g) of the Constitution of India. ... while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nstance, the CIRP in Arcelor commenced prior to the introduction of the proviso to Section 31(4) of the IBC. The NCLT, in Arcelor, explicitly held that the proviso could not be applied retrospectively, given that it imposed an additional procedural obligation requiring resolution applicants to furnish CCI approval, prior to submitting a Resolution Plan. As such, the amendment was deemed inapplicable to the CIRP initiated before the enactment of the proviso. In contrast, the CIRP in the present case was initiated post-enactment of the proviso, rendering the procedural requirements therein, fully applicable. 102. In fact, if we look at the impugned NCLAT reasoning it can be noticed that the NCLT in Arcelor implicitly mentioned that the clear change in procedure i.e., obtaining the prior approval of the CCI, has to be implemented prospectively. However, this additional procedural obligation cannot be imposed retrospectively in that particular case. 103. Also in that case, the CCI's approval did not address issues relating to a potential Appreciable Adverse Effect on Competition (AAEC) in the relevant market. The approval so granted by the CCI did not impose any modifications to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hah 2020 SCC OnLine NCLAT 1013 was also relied on by the NCLAT, which again is entirely misplaced as the factual and legal circumstances in that case differ fundamentally from the present matter. On the issue of the proviso to Section 31(4) of the IBC being directory in nature, Vishal Vijay Kalantri merely follows the earlier discussed and discarded ratio, in Arcelor Mittal. 109. The question of obtaining approval from the CCI did not arise in that case, as the acquisition in question, did not qualify as a 'combination' under the Competition Act, 2002. Consequently, the legal principles concerning the necessity of CCI approval and the implications of such approval, particularly in cases involving the possibility of an AAEC, were not addressed or analysed in that decision. This was challenged before a two-Judge Bench of this Court which found no reason to interfere and dismissed the Appeal at the threshold, vide Order dated 06.08.2021. 110. Therefore, the impugned NCLAT order incorrectly relied upon the aforementioned NCLAT decisions. Being distinguishable, those decisions could not have been unreservedly applied, to the present matters. Reliance on those decisions in different co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evant for the present discussion is reproduced below for ready reference: 6. Regulation of combinations. -(1) No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void. (2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission, in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within thirty days of- ... (b) execution of any agreement or other document for acquisition referred to in clause (a) and clause (d) of Section 5 or acquiring of control referred to in clause (b) of that section. (2-A) No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission under subsection (2) or the Commission has passed orders under Section 31, whichever is earlier. (3) The Commission shall, after receipt of notice under sub-section (2), deal with such n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther the Resolution Plan submitted by an applicant, complies with the 'provisions of the law for the time being in force'. Only those Resolution Plans which meet the requisite lawful criteria, can be placed before the CoC, by the Resolution Professional. Further, the Competition Act bestows upon the CCI the power to reject or modify a combination proposal. 115. In the above backdrop, prior approval of the CCI should advisedly be secured for the Resolution Plans which are to be scrutinised and approved by the CoC i.e., the body with expertise and resources to appropriately analyse the possible effects of an Appreciable Adverse Effect on Competition (AAEC), in the relevant market due to a proposed combination as well as the viability of the concerned Resolution Plan. If prior approval of the CCI is not obtained, it may lead to an incongruous situation where the CoC approves a Resolution Plan which may be in violation of Section 6 of the Competition Act i.e., causing an AAEC in the relevant market or that subsequent to such approval by CoC, the CCI rejects the said combination, thereby rendering the entire exercise futile. In other words, the Resolution Professional should not place ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to mitigate the Appreciable Adverse Effect on Competition (AAEC). 120. Vide its Order dated 28.07.2023, the NCLAT upheld the CCI's conditional approval, holding that the voluntary remedies sufficiently mitigated competitive concerns and that the absence of notice to HNGIL did not vitiate the approval, especially given the RP's non-objections. 121. The interplay between the IBC and the Competition Act presents a delicate balance. While the IBC focused on expeditious revival of distressed assets, the Competition Act ensures that the resolution process does not distort market dynamics. The critical regulatory risk that emerges at this intersection is the issue of gun-jumping - a term, denoting premature or unauthorised consummation of a transaction, prior to obtaining mandatory approvals from the CCI. 122. The Competition Act operates on a suspensory regime, under which no transaction involving a combination can be completed, without prior approval from the CCI. Such mandate ensures that competitive equilibrium in the market is not disrupted during the CIRP. In fact, Section 43A of the Act prescribes severe penalties for any attempt to consummate the transaction, prior to securing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Apart from mandating the issuance of a SCN to the concerned parties, upon the formation of a prima facie opinion that the combination in question warrants investigation, the statutory obligations in the form of Sections 29(2) to 29(6) outline the consequential steps, aimed at gathering comprehensive data from not just the acquirer and the target company, but also from other stakeholders, potentially impacted by the combination. The legislative wisdom embedded within these provisions attempts to recognise the ripple effects of the existence of an Appreciable Adverse Effect on Competition in a market, which would transcend the immediate parties to the transaction, thereby necessitating a broader consultation and data collection process. 129. Further clarity on this procedural rigour is provided by Section 30, which explicitly directs that the prima facie opinion formed under Section 29(1) must guide subsequent steps under Section 29. The procedural design mandates an expansive fact-finding mission, including consultation with stakeholders and detailed scrutiny, to ensure that the combination either withstands the muster of competitive fairness or is modified to avert any deleteriou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ality of entities ensures that all perspectives, interests, and potential implications are considered in assessing the combination's impact on competition. The exclusion of the target company from the scope of parties especially in cases of insolvency where the target retains critical relevance, would undermine the procedural safeguards, designed to achieve transparency and fairness. The term 'parties' must be understood to cover both entities participating in and directly affected by the combination, ensuring the integrity of competition assessment and compliance with statutory provisions under Sections 29(1) and 29(2). To argue otherwise would not only mutilate the term 'parties' but would also result in procedural lapses and incomplete analysis, defeating the very purpose of the regulatory oversight. 135. Those identified lapses demonstrate a departure from the procedural rigour, mandated under the Competition Act. Such deviations, if permitted, would end up compromising on the transparency and fairness requirement in a regulatory process. The failure to adhere to the procedural requirements of Sections 29(2) to 29(6) read with Section 30 of the Competition Act, undermines ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t under Section 29(1) of the Competition Act in our opinion, is a non negotiable procedural imperative. The interplay between the provisions of the Competition Act and the IBC necessitates a careful balancing of competing interests, underscoring the indispensability of procedural compliance. The lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court. Discrepancies in Data 140. Mr. Rajshekhar Rao, learned senior counsel, had highlighted material discrepancies in the operational capacity data furnished by AGI Greenpac and HNGIL, including but not limited to: 140.1. Bahadurgarh Plant: While the capacity reported to the CCI was 490 TPD, the Resolution Plan records it as 820 TPD. 140.2. Puducherry Plant: Different figures have been submitted, casting doubt on the authenticity and reliability of the data. 140.3. Aggregate Impact: Such discrepancies misrepresent the competitive dynamics and render the divestiture conditions inadequate to mitigate AAEC concerns. 141. Similar variances are observed acro....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Furthermore, conditional approvals are fundamentally illequipped to mitigate the risks that manifest during the interim period, preceding the full implementation of remedial measures. The underlying assumption that post-approval remedies will rectify present market distortions, fails to account for the practical challenges and complexities associated with enforcing such remedies, retroactively. This approach creates an enforcement lag that can result in significant and potentially irreparable harm to the competitive landscape and the interests of the stakeholders. The temporal gap between the grant of approval and the implementation of effective remedies fosters a regulatory vacuum, thereby exacerbating the likelihood of anti-competitive conduct, during this transitional phase. The failure to mitigate present risks undermine the efficacy of conditional approvals and their intended regulatory objectives. 146. The absence of mandatory oversight mechanisms, such as thirdparty audits or independent verifications, creates loopholes for the circumvention of regulatory conditions. For example: 146.1. A divestiture mandate may fail to achieve its intended purpose if the acquiring party....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ental to a fair and just resolution process. 150. In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. 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. 151. Where the provisions allow for dilution or departure from the intended scheme of the IBC or the Competition Act, it is the responsibility of the legislature to rectify such inconsistencies through appropriate legislative measures and the judiciary should not normally venture into the legislative domain. 152. Further, the indispensability of procedural safeguards as an integral component of a just legal order must be given its due weight, especially as procedural requirements are not mere f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... decision rendered in the lead case shall, mutatis mutandis, apply to connected Civil Appeal Nos. 4954 of 2023, Civil Appeal No. 4924 of 2023, Civil Appeal No. 4937 of 2023, Civil Appeal No. 5018 of 2023, Civil Appeal No. 6847 of 2023, Civil Appeal No. 6055 of 2023, Civil Appeal No. 6123 of 2023, and Civil Appeal No. 6177 of 2023. 157. Consequently, in light of the above, Civil Appeal Nos. 5401 of 2023, Civil Appeal No. 7037 of 2023, Civil Appeal No. 7038 of 2023, Civil Appeal No. 6771 of 2023, and Civil Appeal No. 7428 of 2023 are dismissed. 158. All pending applications stand disposed of in the same light. ............................... J [HRISHIKESH ROY] ............................... J. [SUDHANSHU DHULIA] JUDGEMENT CIVIL APPEAL NO. 6071 OF 2023 WITH CIVIL APPEAL NO. 6055 OF 2023WITH CIVIL APPEAL NO. 6123 OF 2023 WITH CIVIL APPEAL NO. 6177 OF 2023 WITH CIVIL APPEAL NO. 6847 OF 2023 I. TABLE OF CONTENTS I. TABLE OF CONTENTS ......................................................................... 2 II. BACKGROUND .................................................................................... 3 A. Proceedings before the Adjudicating Authority .......................
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow: 1.⁠ ⁠For Private/ Public Limited Company/ Limited Liability Partnership ("LLP") / Body Corporate/ any other PRAs (which is not a financial entity) ("Category I"): a. Minimum Tangible Net Worth ("TNW") shall be INR 250 Cr. or Consolidated Group Revenue of INR 1,000 Cr in any of 3 preceding Financial Years; b. TNW shall be in an individual capacity or at the Group Level as on 31st March 2021; c. TNW shall be computed as aggregate value of paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, and does not include reserves created out of revaluation of assets, write back of depreciation and amalgamation; and d. Group may comprise of entities where each such entity is either controlling or controlled by or under common control with the PRA. Control means at least 26% ownership. The entities must have been part of the Group for at least 3 years. 2.⁠ ⁠For financial entities including Investment Co./ Asset Management Co./ Alternative Investment Fund (AIF)/ Fund House/ Priva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsideration; d. Stay of proceedings pertaining to RP of AGI." 9. The gist of the objections of INSCO before NCLT is that the communication of CCI Dt. 15.03.2023 approving the combination of AGI with HNGIL cannot be taken on record. The communication Dt. 15.03.2023 is subject to compliance with the modification offered by AGI. The approval of CCI must be prior to the approval by the CoC. In other words, the approval of CCI for the proposed combination is mandatory and available when the CoC considers the resolution plan submitted by a resolution applicant. The ex post facto approval was granted when the consideration under section 31 of IBC was pending before the Adjudicating Authority. The proviso to section 31(4) of IBC is mandatory and not directory. 10. AGI contended that the requirement in the proviso to section 31(4) of the IBC is directory and not mandatory. The combined reading of section 31 of IBC with section 6(2) of the Competition Act would stipulate that the statutory compliance of combination must be available when a decision is taken on the proposal of the resolution applicant by the Adjudicating Authority. Thus, praying for the rejection of IA (IB) No.1497/KB/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation under the Competition Act, then the resolution plan is fully compliant. 16. The NCLAT, by the impugned common order, dismissed the appeals. 16.1. The impugned order in paragraph 19 notices the scope of controversy considered and decided by NCLAT as follows: "During the course of hearing of the appeal(s), it was made clear to the parties that the only issue which is to be decided in these appeal (s) are about the interpretation of proviso of Section 31(4), i.e., as to whether the requirement of approval of the CCI prior to approval by the CoC is mandatory. The other aspects of the approval of the resolution plan is since pending adjudication of the Adjudicatory Authority, we need not express any opinion on other submissions raised by the parties". 17. The above excerpt defines the scope of controversy in the subject appeals. The learned counsel appearing for the parties, in great detail, made submissions on several aspects which are intrinsically pending consideration before the Adjudicating Authority. The approach of NCLAT to the issues on hand is adopted and the legality of NCLAT and the Adjudicating Authority's orders is examined. III. PROCEEDINGS IN THIS COURT 18.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion plan to the Adjudicating Authority does not confirm to the statutory requirement under section 30(2)(e) read with proviso to sub-section (4) of section 31. 23.7. The NCLAT committed illegality by accepting the requirement under proviso to sub-section (4) of section 31 as directory. 23.8. The interpretation adopted by the impugned order is illegal and against the well-established canon of literal interpretation of a clear and unambiguous provision. 23.9. CCI's conditional combination approval of AGI on 15.03.2023 implies that unless the condition is complied with, there is no combination approval by CCI in favour of AGI. 23.10. The condition to hive off the Rishikesh plant is not commensurate with the resolution plan of taking over HNGIL as a going concern. 23.11. The statutory timelines under section 12 of the IBC and Regulation 40A of the CIRP Regulations, 2016 are not deviated by insisting upon prior CCI approval. 23.12. The rule of purposive interpretation would be completely inapplicable for interpreting proviso to sub-section (4) of section 31. The reliance on the memorandum explaining the modifications to the Bankruptcy Code Amendment Ordinance, 2018, is misconceive....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... combination approval, would reflect on the potential asset realization. Competition in resolution plans, voting by CoC, and appreciation of feasibility and viability are all commercial facets interwoven with one another. 24.4. The non-compliance with section 5 read with section 6 of the Competition Act, if insisted at the stage of CoC voting on the eligible proposals of resolution applicants, then the otherwise "feasible" or "viable" test of consideration of the commercial wisdom of CoC is expanded on the proposal being compliant with the laws in force. The CoC would be deprived of a proposal from a resolution applicant which may be more feasible, viable and otherwise eligible if threshold compliance of combination approval is insisted while CoC is considering the resolution plans. 24.5. The CoC, by the statutory scheme, regulations and precedents, is conferred the discretion to decide only on the commercial viability or feasibility of the resolution plans submitted by the competing and eligible resolution applicants and have the approval of the Adjudicating Authority. 24.6. A careful study of sub-sections (1) and (2) of section 31, read with the amended provision and proviso t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation approval is under section 31 but not under section 30(2) of IBC. 24.9. The proviso to sub-section (4) of section 31 is a condition precedent to sit in the chair of the corporate debtor and continue the business as a going concern, and this is an absolute requirement at the stage of consideration by the Adjudicating Authority. A resolution plan to take over the management of a corporate debtor needs two approvals, viz., one under section 30(4) and another under section 31(1) of the IBC. The approval for combination under the Competition Act is directory and not mandatory, while the offers on RFRP are pending before the COC. 24.10. The principal issues on facts are pending before the Adjudicating Authority, and the scope of these appeals has been expanded. 24.11. The view of NCLAT on the proviso to sub-section (4) of section 31 as directory is approved by this Court in the following cases : Name NCLAT Proceedings Supreme Court Proceedings Vishal Vijay Kalantri v. Shailen Shah 2020 SCC OnLine NCLAT 1013 2021 SCC OnLine SC 3243 Makalu Trading Limited and Ors. V. Rajiv Chakraborty and Ors. (2020) SCC OnLine NCLAT 643 Civil Appeal No. 3338 of 2020, order Dt. 12 O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot in the hands of a resolution applicant who applied for approval of a combination before CCI. The consideration by the CCI depends on products, nature of the industry, area and dominance in the market. The CCI, as a regulatory authority, ensures fair competition even after a combination is brought into existence. For the said purpose, the inquiry under section 20 of the Competition Act is complied with by CCI. 24.17. The respective statutory authorities can operate parallelly and harmoniously without stressing or straining the respective timelines. After hearing the learned counsel for the parties and perusing the record, the question of law taken up for consideration is - whether the proviso to sub-section (4) of section 31 is mandatory or directory at the stage of consideration of the resolution plan by the CoC? IV. POLICY UNDERLYING THE IBC 25. The BLRC report notes and acknowledges that the failure of a few business plans is integral to the process of the market economy. When business failure occurs, the best outcome for society is to have a rapid renegotiation between the financiers to finance a going concern using new arrangements of capital and restructured management.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of value of assets, (iii) striking a balance between liquidation and reorganisation, (iv) ensuring equitable treatment of similarly situated creditors, (v) provision of timely, efficient and impartial resolution of insolvency, (vi) preservation of the insolvency estate to allow equitable distribution to creditors, (vii) ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information, (viii) recognition of existing creditor rights and establishment of clear rules for ranking priority of claims, and (ix) establishment of a framework for cross-border insolvency. 29. The IBC, thus, seeks to replace the existing framework on insolvency and bankruptcy, which is enumerated below: 29.1. Companies Act, 2013 - chapter on collective insolvency resolution by way of restructuring, rehabilitation, or reorganisation of entities registered under the Act. Adjudication is by the NCLT. 29.2. Companies Act, 1956 - deals with winding up of companies. There are no separate provisions for restructuring except through Mergers & Acquisitions and voluntary compromise. Adjudication is under the jurisdiction of the High Court. 29.3. SICA, 1985 - deal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the corporate debtor by the interim resolution professional subject to further orders. The RP is appointed during the first CoC meeting under section 22 of the IBC. Following the appointment, the RP issues an RFRP from the eligible participants in the ongoing CIRP. The thrust in the exercise from the date on which an application is entertained is that time is of the essence for the completion of each one of the targeted results by the applicant, the Adjudicating Authority, RP and CoC. The timelines for completion of CIRP are prescribed and governed by section 12 of the IBC, read with the model timelines under regulation 40A of the CIRP Regulations 2016. The learned counsel appearing on both sides have advanced detailed arguments on the sanctity of timelines under IBC and the Competition Act to support their respective arguments on the combination approval as directory or mandatory when the CoC is considering the resolution plans. 34. The law on timelines is settled by this Court in Committee of Creditors of Essar Steel India Limited Through Authorised Signatory v. Satish Kumar Gupta and others, (2020) 8 SCC 531 wherein it was held that the outer limit for the completion of CIRP w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ady noted, apparently clear and simple language in its comprehensive analysis is so ambiguous at times that it presents difficulty in understanding its meaning, requirement, and purport. 40. In Commissioner of Income Tax, Orissa vs. NC Budhraja and Co., AIR (1993) SC 2529 at Page 2540 it is held that a statute cannot always be construed with the dictionary in one hand and the statute in the other. Regard must also be had to the scheme, context, and legislative history. (emphasis supplied) 41. In Corp of the City of Victoria vs. Bishop of Vancouver Island, (1921) AC 2 384 the celebrated judgment, Lord Atkinson stated: "In the construction of statutes, their words must be interpreted in their ordinary grammatical sense, unless there be something in the context, or in the object of the statute in which they occur, or in the circumstances in which they are used, to show that they were used in a special sense different from their ordinary grammatical sense. The literal interpretation leads to hardship, inconsistency or obstruct the accomplishment of the object of the statute steps in. In other words, the doctrine of purposive interpretation is taken recourse to for the purpose of givi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the first principles of the respective tools of interpretation. 44.1. The literal interpretation is not an inviolable rule. The decisions referred to supra, while underlying the principle involved in literal interpretation, had laid down that the literal interpretation, if it leads to hardship, inconsistency, defeats the working of the statute, and acts counterproductive to the purpose and object sought to be achieved by the statute. A statute must be construed in such a manner as to make it workable. 45. Literal interpretation is not the only tool to begin with while constructing a statute. The often-cited judgements on literal interpretation set out when purposive interpretation is considered and preferred over literal interpretation. In the instant appeal, both interpretations have been commended for consideration. 46. The swing is whether the literal or purposive rule of interpretation is applicable for deciding whether approval of CCI at the stage of section 30(4) of IBC is mandatory or directory. To arrive at which one of the interpretations is applicable, the summary of the idea, roadmap, implementation, and conclusion of the IBC, as well as the extent needed, is conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 1.-For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.-For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor- (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under Section 61 or Section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be spe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. enables a resolution applicant to submit a resolution plan. 49. For immediate reference, section 30(2)(c) and (4) are excerpted as under: "Section 30(2)(c) - provides for the management of the affairs of the Corporate Debtor after approval of the resolution plan; Sub-section (4) of Section 30 - The committee of creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in subsection (1) of section 53, including the priority and value of the security interest of a secured creditor] and suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces may be, to the Adjudicating Authority. 51. The Parliament, realising the need for a few amendments to IBC for the efficacious working of the Code, enacted Act Nos. 26 of 2018 and 26 of 2019. The ILRC report notes in paragraph 16.2 that the committee deliberated on a mechanism for obtaining approvals from the concerned regulators post the approval of the resolution plan but prior to the Adjudicating Authority's approval. Amendment Act 26 of 2018 explains, through clause 24 of the notes on clauses, that where there is a provision for combination, CCI approval shall be obtained prior to the approval of the resolution plan by the CoC. On the contrary, the memorandum to the 2018 Ordinance that led to Act 26 of 2018 notes that CCI approval shall be sought prior to the stage at which the resolution plan is considered by the adjudicating authority. 52. It is appropriate to refer to the amendments incorporated by Act 26 of 2018 by which sub-section (4) and the proviso were incorporated. The IBC was enacted with the intention of improving the ease of doing business in India. In line with this thinking, one of the legislative measures is the amendment to the proviso to sub-section (4) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority and is made nonjusticiable. 56.4. While the ultimate business decision lies with the CoC, such a decision should indicate adequate consideration of the objectives of the IBC. Accordingly, the adjudicating authority should ensure that the decision of the CoC takes into account the following factors: (i) the corporate debtor should continue as a going concern during the resolution process, (ii) the value of assets of the corporate debtor should be maximised, and (iii) interests of all stakeholders are balanced. 56.5. In the event that the adjudicating authority, on a review of the facts of the case, concludes that the aforesaid factors have not been considered, it may send the resolution plan back to the CoC but not alter the resolution plan of its own accord. 56.6. The jurisdiction bestowed upon NCLAT is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw for the time being in force. 61. The Parliament, guided by the real-time working of an enactment based on a report received or otherwise, had undertaken to amend IBC. The amended and unamended provisions are excerpted as follows : Section Unamended Amended 25(h) 25(2)(h) invite prospective lenders, investors, and any other persons to put forward resolution plans (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans; 30(1) 30. (1) A resolution applicant may submit a resolution plan to the resolution professional prepared on the basis of the information memorandum. (1) A resolution applicant may submit a resolution plan [along with an affidavit stating that he is eligible under Section 29-A] to the resolution professional prepared on the basis of the information memorandum. 30(2)(e) explanation (2) The resolution professional shall examine each resolution plan received by him to confirm that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.] 31(1) (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in subsection (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under subsection (4) of Section 30 meets the requirements as referred to in subsection (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of the provisions of the law for the time being in force? 63. Section 30(2)(e) of the IBC requires that the resolution plan does not contravene any provisions of the law for the time being in force. Further, the explanation to section 30(2)(e) is that the approval of shareholders for the implementation of actions is available. With a report received in Form H from the RP, the issue moves into the hands of the CoC under section 30(4). Section 30(4) of the IBC has the following facets: 63.1. The CoC approves a resolution plan by a vote of not less than sixty-six per cent of the voting share of the financial creditors. 63.2. The CoC ascertains the feasibility and viability of a resolution plan and also the manner of distribution of priorities. 63.2.1. The manner of distribution may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53. 63.2.2. The manner of distribution includes the priority and value of the security interest of the secured creditors. 63.2.3. Such other requirements as may be specified by IBBI. 64. It is noteworthy that sub-section (4) of section 30 of the IBC conspicuously does not refer to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interpretation is the grammatical usage of sentences in the appropriate syntax. Grammatical usage is one of the means, and it is by law established, not the exclusive means, by which the sense of the statute is conveyed. The words employed by the parliament are the instruments by which the parliament expects or hopes to give effect to a policy or framework. 66.1. In Gurudevdatta VKSSS Maryadit v. State of Maharashtra, (2001) 4 SCC 534 this Court, while dealing with section 27(3) of the Maharashtra Co-operative Societies Act, 1960, held that words must be given their due meaning in their grammatical sense: 26. Further we wish to clarify that it is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o if it refers to legislative intent or purpose manifested in the only manner in which a legislature can authoritatively do so in the text of the enactment. Though not to find out violability in the text of the enactment, but to keep the content consistent throughout the enactment - the court gathers the meaning of all the expressions used in the same section. In this manner, the courts have applied grammatical construction to provisions of law. 68. In sub-section (2) of section 31, the words "does not confirm to the requirements of sub-section (1) of section 31" grammatically interpreted throw light on the stage of satisfactory compliance of all the requirements of subsection (2) of section 30. The Parliament, in its wisdom, would have employed the expression "did not" in place of "does not" if the requirement is that the resolution plan is fully compliant at a stage before consideration of the resolution plans by the CoC. As part of the interpretative process, the Court ought not to lose sight of expressions which are in the present tense, such as "meets", "does not", and "satisfies" in section 31 of the IBC. The word "confirm" literally means "to verify" for both positive recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ency and ambiguity in the stage of having CCI approval. In such cases, the text of the amended and unamended sections should guide the interpretation. 71. Section 30(4) does not obligate the CoC to examine whether the resolution plan contravenes the requirements of section 30(2)(e) of the IBC. The comprehensive proposals submitted by the RP and the resolution of the CoC will disclose feasibility and viability. The proposal of the successful resolution applicant being legally compliant in a CIRP attracting CCI's approval for combination is examined by the Adjudicating Authority. 72. Essar Steel (supra) has laid down as a clear principle or ratio that the CoC is primarily concerned with feasibility, viability and the manner of distribution proposed, etc., amongst the creditors and may keep in mind section 53(1) of the Code. The insistence upon approval of CCI before CIRP reaches section 30(4) would limit the number of eligible resolution applicants, and the core objects of CIRP, intended to benefit the stakeholders through maximization of recovery, is defeated. Noted from the sense of commercial prudence, unless the resolution plan is acceptable to the CoC, a question arises as to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... noted as an example that a resolution applicant gets into the management of the corporate debtor by an order under section 31(1) of the IBC, and has combination approval for the resolution plan on that day, then the consequence of section 6 of the Competition Act, namely the combination being void, is not attracted. The purpose and object of the IBC and the subsequent amendments are to provide theoretical and practical resolution to the financial difficulties of a stressed corporate debtor for the benefit of the stakeholders of the corporate debtor. The statutory scheme is not intended to give undue advantage or hardship to the resolution applicants. 74. Yet another reason taken note is that as per the statutory scheme, the resolution plan receives two kinds of approvals, one by the CoC under subsection (4) of section 30 primarily on feasibility and viability and another from the Adjudicating Authority that the resolution plan has provisions for its effective implementation and that the resolution plan confirms to sub-section (2) of section 30, including clause (e). The proviso to sub-section (4) of section 31 needs to be carefully examined. It may be noted that the proviso to su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the context of which they appear., the operation, functions, duties, and consequences for non-performance. The rule of literal interpretation with its exceptions is noted, and the grammatical interpretation of sections 30 and 31 of IBC sets the stages of consideration of twin approvals - one by the CoC, and the other by the Adjudicating Authority - while approval or rejection is granted to the resolution plan. The combination approval as an enclosure to an applicable resolution plan at the stage of section 30(4) of the IBC is a form or procedure that does not have consequences. At the same time, the combination approval to an applicable resolution plan at the stage of consideration of the Adjudicating Authority under section 31(1) and (2) of the IBC becomes substantial. This is because, a non-compliant resolution plan can be rejected only by the Adjudicating Authority, whereas the CoC is principally concerned with the feasibility and viability. 78. When adopting a consequentialist approach, it becomes clear that the insistence upon a combination approval at the stage of Section 30(4) does not place the stakeholders at an advantageous position. Further, presenting the combination....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to work parallelly and without pressure for performance from the other in line with the duties and obligations cast through the enactments. 81. It is argued that the NCLAT in ArcelorMittal (supra), Vishal Vijay Kalantari (supra) and Makalu Trading Limited (supra) held that the requirement under proviso to sub-section (4) of section 31 is directory at the stage of CoC approval. The view of that NCLAT was confirmed by this Court in Vishal Vijay Kalantari (supra) and Makalu Trading Limited (supra) while referring to the NCLAT judgement in ArcelorMittal (supra). The argument of the appellant is that the confirmation of a view taken by the NCLAT, as above, is either distinguishable or alternatively cannot be treated as a binding precedent for deciding the controversy in these appeals. In reply, it is argued that the NCLAT has considered the crux of the issue in these matters and the Civil Appeal(s) that stood dismissed has the effect of a binding precedent on the question of whether the proviso to sub-section (4) of section 31 of the IBC is mandatory or directory. The absence of a reasoned dismissal order is no reason to re-open an otherwise established position of law. To appreciate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in precedents are the foundations on which prudent business decisions are made. The consistent view in case law enables the market players to arrange affairs in compliance with the law and the precedents. In the working of the IBC, it does not appear that the only certainty is that nothing is certain. The resolution applicant is not to be subjected to intolerable uncertainty or not knowing what comes next. While doubt is not a pleasant condition, the adjudicatory process should not multiply it. The object of IBC is to provide the institutional framework for theoretical resolution without considering liquidation as the first option. The buoyant economy needs absorption mechanisms to prevent collateral and cascading impact on the investors, depositors and financial creditors. Therefore, the idea of the IBC is to let the financial markets work. 83. The view taken by the NCLAT on the question of whether the requirement of proviso to sub-section (4) of section 31 of IBC is mandatory or directory is correct. Thus, the appeals fail. 84. On 05.11.2022, the RP moved for approval under section 30(6) of the IBC for the resolution of the CoC Dt. 27.10.2022. INSCO, on 14.11.2022, filed appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dispose of the Application filed by the Resolution Professional within 6 weeks from today. INDEPENDENT SUGAR CORPORATION LIMITED VERSUS COMPETITION COMMISSION OF INDIA AND OTHERS JUDGEMENT S.V.N. BHATTI, J. 1. The civil appeals assail the order Dt. 28.07.2023 of the National Company Law Appellate Tribunal, Principal Bench, New Delhi ("NCLAT"). The appeals arise under the Competition Act, 2002 ("Competition Act"). I. BACKGROUND 2. On 21.10.2021, the National Company Law Tribunal, Kolkata Bench ("NCLT") admitted CP (IB) 369/2020, an application filed by DBS Bank under section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against Hindustan National Glass and Industries Limited ("HNGIL"). HNGIL is the corporate debtor engaged in manufacturing and supplying glass containers. HNGIL admittedly has a substantial market presence in the relevant market in India. 3. AGI Greenpac Limited ("AGI") and Indian Sugar Corporation Limited ("INSCO") were prospective resolution applicants in the corporate insolvency resolution process ("CIRP") ordered by the NCLT in Case No. CP (IB) 369/2020. The resolution professional ("RP") issued the request for resolution plan ("RFRP") Dt. 24.05....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2.6.3(c), 3.3 and 4.1.1(k) of the RFRP. On 27.09.2022, AGI filed Form I with CCI under regulation 5(2) of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations 2011 ("Combination Regulations 2011") intimating the proposed combination of AGI and HNGIL as part of CIRP. On 30.09.2022, INSCO, a foreign player, applied in Form I for combination approval under the green channel for the proposed combination in the CIRP of HNGIL and received deemed approval vide notice C-2022/09/974. The UP Glass Manufacturers Syndicate ("UPGMS"), Appellant in Civil Appeal No.4054/2023, filed objections before the CCI to the Form I application made by AGI on 27.09.2022. On 13.10.2022, CCI directed AGI to file a notice in Form II in terms of Regulation 5(5) of the Combination Regulations 2011. On 27.10.2022, the CoC approved AGI's resolution plan by 98% vote through e-voting. 8. On 03.11.2022, AGI filed notice in Form II before the CCI for the approval of a combination of the successful resolution plan. On 17.11.2022, CCI sought additional information/documents from AGI. AGI, through the reply Dt. 08.12.2022, responded to the queries rais....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... changes in the combination details. It is contextual to note the following clauses in the modification plan Dt. 10.03.2023 and 14.03.2023. The important features of the modification to the suggested combination are stated thus: 11.1. Clause 4 - 10 years stoppage on any direct or indirect influence over the whole or part of the Rishikesh Plant. 11.2. Clause 8 - AGI shall operate at an arm's length basis from the Rishikesh Plant. 11.3. Clause 14 - From the effective date until the transfer of the Rishikesh Plant, the Plant is to be kept separate from AGI. 11.4. Clause 29 - As per regulation 27 of the Combination Regulations 2011, there shall be an independent agency to monitor the divestment business. 12. AGI presented that hiving off the Rishikesh Plant - the least loss-making and the plant that had recorded a growth of 24% in 2021-22 - would efface the risk of AAEC, as noted by CCI. The products manufactured in Rishikesh Plant have a substantial presence in the relevant market segments. For the reasons recorded in the order Dt. 15.03.2023, the voluntary modification of AGI was accepted. It is noted that the power of buyers to countervail is limited. The financial situatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Competition Commission of India dated 15.03.2023 within the meaning of Section 53B of the Competition Act, 2002? The NCLAT noted that the appellants have locus to file the appeal. The NCLAT looked at the judgement of Samir Agarwal v. CCI (2021) 3 SCC 136 in coming to a conclusion. The judgement notes that "person aggrieved" has to be read widely. 2. Whether Section 29, sub-section (1) contemplates that a Show Cause Notice to be issued to the parties to combination, i.e., both acquirer and the target entity or word 'parties' occurring in Section 29(1) has to be read singularly? Section 29(1) of the Competition Act contemplates that show cause notice has to be issued to the parties in combination. Thus, the notice has to be issued to the target and the acquirer. In the present case, show cause notice was merely issued to the acquirer - AGI. 3. Whether non-issuance of Show Cause Notice to HNGIL vitiates the order of approval granted by the Commission under Section 31, subsection (1)? The mere non-issuance of notice does not vitiate the CCI proceedings. The reasoning adopted by the NCLAT was that the RP has no objection and placed the Resolution Plan before the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Commission dated 15.3.2023 can be said to have been passed in violation of principles of natural just since the objections filed by Appellant the U.P. Glass Manufacturers Syndicate even after the order dated 22.02.2024 were not duly considered? Natural justice principles are followed when there are civil consequences. There is no entitlement given to other persons other than those given notice to participate in the proceedings. The filing of objections happens under Section 29(2), and since the stage had not arisen, UPGMS cannot claim violation of natural justice. 17. CCI filed four appeals against the findings recorded by the NCLAT on the legal obligation to issue notice to both parties to the combination and not just the acquirer under section 29(1) of the Competition Act. Hence, the batch of civil appeals against the order Dt. 28.07.2023. Sl. No. Civil Appeal No. Respondent 1. Civil Appeal 6771/2023 UPGMS 2. Civil Appeal 7428/2023 INSCO 3. Civil Appeal 7038/2023 M/s Geeta and Company 4. Civil Appeal 7037/2023 HNG Workers Union III. ARGUMENTS OF COUNSEL 18. We have heard learned Senior Counsel Shri Rajshekhar Rao, Dr. Abhishek Manu Singhvi,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g conditional approval, failed to discharge the regulatory obligation under the Competition Act, particularly section 20. 19.7. Section 29 of the Competition Act prescribes the procedures not only for issuing show cause notice for investigation but also mandates issuing directions for investigation into the proposed combination. Approval of the combination vide order Dt. 15.03.2023, without investigating the proposal under section 29(2) of the Competition Act is illegal and contrary to the mandate of section 29. 19.8. The non-publishing of the details of the proposed combination under section 29(2) denied the opportunity to the affected public to file written objections as required under section 29(3) of the Competition Act. Therefore, the conditional approval of combination under section 31 of the Competition Act is vitiated. 19.9. Shri Balbir Singh, appearing for CCI, argued against the findings recorded on the need to issue notice to parties, i.e., the acquirer and the target. He also argued to sustain the orders of CCI and NCLAT in so far as the approval of the combination is concerned. 20. Shri Mukul Rohatgi, the learned Senior Counsel appearing for AGI, principally made h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r General within such time as the CCI may direct. The steps envisaged in section 29(1A) are triggered only if the response is not satisfactory. Section 29(1A) uses the word 'may call for a report from the DG, and the DG shall submit the report within the time granted. Therefore, if the response of the parties is satisfactory, then the other stages do not arise. Explained further, if the CCI is satisfied with the response or modification of the combination already suggested, then the CCI is not under an obligation to order notice to the Director General or order parties to advertise the details of the proposed combination. The information and its veracity, as part of the regulatory mechanisms, is one of trust, and the information is relied upon to conform to the timelines stipulated by the Competition Act. The examination of a combination proposal and approval is not tantamount to deciding a lis. CCI undertakes an inquisitorial regulatory process. 20.7. The findings recorded by NCLAT are sustainable, and the concurrent findings of the competent authority are tenable and no valid or legal ground is made out to entertain the appeal. 20.8. CCI is an expert body and has the advice and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ombination [within seven days] of such direction, in such manner, as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination. (3)The Commission may invite any person or member of the public, affected or likely to be affected by the said combination, to file his written objections, if any, before the Commission [within ten days] from the date on which the details of the combination were published under sub-section (2). (4)The Commission may, [within seven days] from the expiry of the period specified in sub-section (3), call for such additional or other information as it may deem fit from the parties to the said combination. (5)The additional or other information called for by the Commission shall be furnished by the parties referred to in sub-section (4) [within ten days] from the expiry of the period specified in sub-section (4). (6) After receipt of all information and within a period of forty-five working days from the expiry of the period specified in sub-section (5), the Commission shall proceed to deal with the case in accordance with the provisions contained in s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 29(1), CCI should have called for a report from the Director General. This argument is untenable and rejected accordingly. Therefore, passing an order of approval to the proposed combination without further steps of investigation on the proposed combination of section 29 of the Competition Act is legal. 25. The admitted case of all parties is that the CCI accepted a reply and modified proposal on 10.03.2023, determining no further investigation was necessary. The core legal dispute centers on section 29(1) of the Competition Act and its procedure, specifically the phrase "is likely to cause or has caused appreciable adverse effect on competition within the relevant market in India". The CCI initially issued a show cause notice, a preliminary investigative step requiring parties to justify why an in-depth examination of the proposed combination should not be conducted. The jurisdictional nuance lies in the Commission's requirement to form a prima facie opinion before compelling a response, which involves carefully assessing whether the proposed combination might substantially impact competitive dynamics. 26. The procedural violation pointed out is that on the receipt of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he parties to the combination or the receipt of the report from Director General called under sub-section (1-A), whichever is later, direct the parties to the said combination to publish details of the combination [within seven days] of such direction, in such manner, as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination. 28. It may be noted that to form a prima facie opinion under sub-section (2) of section 29 of the Competition Act, the CCI in sequence has: 28.1. The details furnished in Form II. 28.2. Prima facie opinion formed by the CCI resulting in the issuance of show cause notice. 28.3. Reply of parties. 28.4. Further, if the CCI is not satisfied with the reply, the CCI may call for a report from the Director General. 29. The prima facie opinion formed under section 29(2) is that the CCI leaves little discretion than to order parties to the said combination to publish details of the combination and undertake further investigation. 30. On the contrary, the CCI, with the response to a show cause notice given by the parties under section 29(1) of the Compe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... debtor subjected to the resolution process represented by an RP. Irrespective of different statutory schemes in the sections relied on by CCI, it can be said that the words "it shall issue notice to the parties to show cause" cannot be restricted only to the proposed acquirer. If the plural expression on a case-to-case basis is understood as singular, then it would restrict the meaning of the language. Hence, the findings recorded by the NCLAT are affirmed. It is a matter of record that the RP, taking note of the approval of the combination proposed by AGI, filed an application before the Adjudicating Authority on 08.04.2024 for taking on file the approval of the combination and in the pending issues under section 31 of IBC. Whether the non-issuance of notice to the RP is a ground available to the appellants to challenge the approval of the combination is yet another question which is not considered and decided by the NCLAT. In the circumstances of the case, the findings recorded on this behalf, particularly, at the instance of the appellants herein. 34. In Union of India v. Cipla Ltd, (2017) 5 SCC 262 this Court, at paragraph 104 of the judgement, held on the judicial treatment ....