TaxTMI 
TaxTMI 
2025 (2) TMI 19
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....dv. Mr. Chirag Shah, Adv. Ms. Ayushi 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. ....
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....hkar 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. 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 .....................
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....alco-beverage segment, is generating a key issue for adjudication since the combination 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....
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....t that preferential treatment had been granted to AGI Greenpac despite the rejection of their 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 (Rishike....
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....ion Plan to its approval by the CoC was riddled with irregularities and should have been nullified. 18.2. The 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....
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.... made the following submissions: 19.1. The IBC was introduced as an experiment to facilitate debt-ridden companies, to be taken 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, goe....
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....uences for noncompliance with the proviso, Mr. Rohatgi argues that the proviso should be deemed as directory. 21.5. Moreover, since there was no change in AGI 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 enact....
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....9.2023, the NCLAT concluded that while the approval of the CCI for the combination is mandatorily required in consonance with the proviso to Section 31 (4) of the IBC, the timing of such 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 ....
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.... the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors." 33. A proviso in a given statute 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 i....
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....IBC demand strict adherence to legislative intent, guarding against procedural overreach that may upset the framework envisioned by the Parliament. 39. Likewise, the Supreme Court in multiple cases had underscored the rule that when 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 ....
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....rreach invoking the so-called 'spirit of the law'. Principle of Plain Meaning 46. To better understand what constitutes the 'Principle of Plain Meaning', we will benefit by referring to the seminal treatise of Justice G.P. Singh on Principles of Statutory 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 ....
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....se different from their ordinary grammatical sense." 50. That words in the statute are to be understood in their natural, ordinary and popular sense. This has been underscored by Justice Frankfurter, in the following opinion: "After all legislation when not expressed in technical terms is 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....
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.... Plan, being granted the CoC's approval. 57. The learned Solicitor General appearing for the CoC, had suggested the interpretation by which the requirement of obtaining prior approval from the CCI should be construed as directory. But this would inevitably require the Court to interpret the said proviso to mean something 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 m....
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....sion for a purpose and that every part of the statute should have effect as well. JK Cotton Spinning & Weaving Mills Co. Ltd. v. State of Uttar Pradesh, 1960 SCC OnLine SC 16; Dilawar Balu Kurane v. State of Maharashtra, (2002).2 SCC 135; Ramphal Kundu v. Kamal Sharma, (2004) 9 SCC 278 In that context, in situations wherein there is no ambiguity 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....
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....d from legislative debates, committee reports and/or historical contexts may be looked at with a degree of caution, lest they obscure the plain meaning of the text or elevate subjective predilections of the judge above the clear mandate of the law. Such an inquiry into legislative history, therefore needs to be carefully undertaken as a supplement to but not as substitute of 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 fo....
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....he relevant market as well as a detailed procedure of enquiry and scrutiny of such combinations, to prevent such AAEC. Based on the same, the CCI is empowered to either approve, reject or modify such a combination or to mould it in a manner that is in consonance with the scheme of the Competition Act. Notes on Clauses, Memorandum & Scrivener's Error 71. Let us now consider another aspect which is 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....
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....ned by legal scholars in the following terms Ryan Doerfler, The Scrivener's Error, Northwestern University Law Review, Vol. 110 (2016); Justice Antonion Scalia, Common Law Courts in Civil Law System: The Role of United States Federal Courts in Interpreting the Constitution and Laws, A Matter of Interpretation: Federal Courts and the Law, 3 (Amy Gutmann, ed., 1997). : "In the literal sense, then, a "scrivener's error" 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-&agra....
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....des for prior approval of the CCI before the approval of the Resolution Plan, by the COC. This provision introduced with straightforward and clear words must be interpreted and understood as being mandatory in nature. Otherwise the object behind the enactment of the said proviso, would be defeated. 79. Bearing in mind the fact that the CCI is empowered to approve, reject and/or modify a proposed combination, a Resolution Plan approved by 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 e....
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....cessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non-compliance with the provisions, the fact that the non-compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered." 86. When a Resolution Plan containing a provision for a 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 ....
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....ch might lead to an elongated timeline going beyond 120 days. However, only one such combination proposal has been received in the past few years. 92. In the context of arguments that have been made on the disharmony between the two timelines, reference must also be made to Section 6(2) of the Competition Act. The same is reproduced as follows: "6(2). Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, 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 ....
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....s cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date - without any exception thereto - may well be an excessive interference with a litigant's fundamental right to nonarbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant's fundamental right to carry on business under Article 19(1)(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 cas....
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.... Flowing from the above, it is difficult to interpret the provisions disjunctively, as has been done by the NCLAT, in the impugned order dated 18.09.2023. Distinguishing cases relied upon by the NCLAT 100. The NCLAT in its analysis placed heavy reliance on the decision of the three-judge bench of the NCLAT in Arcelor Mittal India Pvt. Ltd. v. Abhijit Guhathakurta 2019 SCC OnLine NCLAT 920. However, this reliance is misplaced, as the factual and legal context of that case materially differs from the present matter. 101. For instance, 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 NCL....
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....missed vide Order dated 12.10.2020, as not involving any substantial question of law. However, it is well-settled that the dismissal of an SLP in limine without giving any detailed reasons do not constitute any declaration of law or binding precedent, but simply implies that the case was not considered worthy of examination for a reason, other than on merits. Supreme Court Employees' Welfare Association v. Union of India, (1989) 4 SCC 187; State of Orissa v. Dhirendra Sundar Das, (2019) 6 SCC 270 108. Besides, Vishal Vijay Kalantri v. Shailen Shah 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 i....
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....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 the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. ..." 112. The extracts of the Competition Act relevant 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 ....
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....nd the parties to the combination shall be dealt with accordingly...." 113. When the aforementioned provisions of the IBC and the Competition Act are juxtaposed together, it is clear that any combination that leads to an Appreciable Adverse Effect on Competition in the relevant market, is void. Any Resolution Plan containing provisions for a combination that results in an Appreciable Adverse Effect on Competition would therefore be not compliant with the provisions of the Competition Act. In that light, the Competition Act mandates that a notice of combination be given to the CCI and approval obtained at the earliest. 114. The provisions also make it incumbent upon the Resolution Professional to examine whether 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....
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....in any manner since the Adjudicating Authority can only approve the Resolution Plan, as has been approved by the CoC. This is made clear by Section 31(1) of the IBC. Procedural Lapses under the Competition Act 119. Before delving into the substantive aspects of the Competition law, the relevant facts and procedural trajectory that lead to the present appeal needs to be referred. Upon AGI Greenpac's Form I submission on 27.09.2022, the CCI found the information submitted to be insufficient and directed them to file a detailed Form II. On 15.03.2023, the CCI approved the proposed combination, predicated upon voluntary modifications offered by AGI Greenpac, including the divestment of an HNGIL plant located in Rishikesh, 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 ex....
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....efore not to be faulted. 127. The statutory requirement under Section 29 and Regulation 2(f) could not be bypassed and for this omission. the CCI's order (dated 15.03.2023) was procedurally deficient, undermining the fairness and completeness of the investigative process. The importance of adhering to the procedural safeguards enshrined in the Act is to ensure that all parties to a combination, are given due notice and an opportunity to present their respective case. Sections 29 and 30 of the Competition Act, 2002 when read holistically, delineate a structured procedural roadmap that the CCI must traverse when it scrutinises combinations that may exert an Appreciable Adverse Effect on Competition (AAEC) in the relevant market. 128. 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 ....
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....ements prescribed under the scheme of the Act, especially because the target company's participation is central to assessing the competitive impact of the combination. 133. While the term 'parties' may appear broad and/or encompassing all related entities associated with the combination, such an interpretation cannot dilute the inherent plurality attached to the word 'parties', as explicitly stated in the Competition Act and its Regulations. The use of the plural form signifies a clear legislative intent to address not just one entity but multiple parties directly involved in the combination process, including but not limited to the acquirer, the target, and, where applicable, the combined entity, if the combination has come into effect. 134. Plurality 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....
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....nder the resolution framework contemplated by the IBC. 138. As earlier noticed, the failure to issue a SCN under Section 29(1) to the Target Company/Corporate Debtor, constitutes a major procedural lapse with significant consequence. The statutory scheme of the Competition Act, as well as the synergistic framework of the IBC, demands that all parties to the combination are afforded a fair opportunity to participate in the decision - making process, particularly when the proposed measures bear a direct and material impact on their interests. The absence of such notice undermines the procedural sanctity of the modification process and renders the resultant approval susceptible to bona fide challenge. 139. The issuance of SCN to both the acquirer and the target 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 divestmen....
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....ided by the acquirer is found to be incorrect at any particular time. Practical Challenges with Conditional Approvals 144. Conditional approvals, by their very nature, necessitate rigorous and ongoing enforcement to ensure compliance with the prescribed conditions in both letter and spirit. For the AGI Greenpac-HNGIL combination, the absence of a robust and comprehensive monitoring mechanism reveals a significant lacuna within the regulatory framework. Such deficiencies pose considerable risk of non-compliance or deliberate circumvention, thereby defeating the entire purpose of imposing these conditions. The systemic inefficiencies apparent in this instance highlight the existing fragility of conditional approvals when not accompanied with robust enforcement mechanisms. 145. 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 ap....
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....ete with established players in the Indian market, is a significant step in that direction. However, to ensure that entities operate 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. 149. Within that context, while the IBC's primary objective is the timely resolution of stressed assets with maximised value realisation for the stakeholders, the significant delay seen in the present case is 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. 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....
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....ior approval from the CCI, as mandated under the proviso to Section 31(4) of the IBC. Consequently, the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval, cannot be sustained and is hereby set aside and quashed. 155.2. Any action taken pursuant to the Resolution Plan shall stand nullified, and the rights of all stakeholders shall be restored as per status quo ante, prior to the approval of the Resolution Plan by the CoC on 28.10.2022. 155.3. Consequently, the CoC shall reconsider the Appellant's Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans. 156. Therefore, Civil Appeal No. 6071 of 2023 is allowed in the above terms. This 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 abo....
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....two sets of appeals have been tagged and heard together. The appeals, for convenience, are disposed of by separate judgments having regard to the nature of issues of fact and law. II. BACKGROUND 3. DBS Bank, as a financial creditor, moved an application under section 7 for Corporate Insolvency Resolution Process ("CIRP") before the National Company Law Tribunal, Kolkata Bench ("Adjudicating Authority") against Hindustan National Glass and Industries Limited ("HNGIL"), the corporate debtor. On 21.10.2021, the Adjudicating Authority admitted the application filed under section 7 against HNGIL. Mr. Girish Sriram Juneja, respondent No.1, is the Resolution Professional ("RP"). 4. Annexure B of the expression of interest ("EoI") lays down the eligibility criteria for the prospective resolution applicants to satisfy. The relevant criteria are reproduced below: 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 Finan....
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.....2022, applied to CCI in Form II for approval of the proposed combination of taking over HNGIL through CIRP. A. PROCEEDINGS BEFORE THE ADJUDICATING AUTHORITY 8. On 05.11.2022, the RP moved the Adjudicating Authority for approval of the decision of the CoC Dt. 27.10.2022, viz., declaring AGI as the successful resolution applicant. On 14.11.2022, INSCO filed I.A. No.1497 of 2022 before the Adjudicating Authority for setting aside the resolution plan approved by the CoC in the e-voting Dt. 27.10.2022. The prayers in the applications filed by INSCO read as follows: "a. Order dismissing Application filed by the Resolution Professional, where the Resolution Professional has sought approval of the RP; b. Order directing the Resolution Professional to withdraw communication declaring AGI as the successful Resolution Applicant; c. Order directing the Resolution Professional to place RP before CoC for fresh reconsideration; 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 comm....
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....on Professional of EPC Constructions India Limited & Ors. (2019) SCC OnLine NCLAT 920 is erroneous, and according to the ratio in Bank of Maharashtra vs. Videocon Industries Ltd., (2022) SCC OnLine NCLAT 6 the approval of CCI prior to CoC considering the resolution plan is mandatory. The words "shall" and "prior to the approval of such resolution plan by the committee of creditors" in the proviso to section 31(4) of the IBC require that the approval of combination is available while the CoC considers the resolution plans attracting combination set out in section 5 of the Competition Act. 15. AGI and RP argued that the word 'shall' be read as 'may'. The proviso is directory and not mandatory. The statutory implication of section 6 of the Competition Act is attracted upon the approval of one or the other resolution plan by the Adjudicating Authority. Thus, on the effective date for the implementation of the CIRP, if the Resolution Plan has the approval of a combination 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 controv....
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....5.2022, through Clauses 2.6.3(c), 3.3 and 4.1.1(k), requires the resolution applicant to have prior approval of CCI for the proposed combination before the approval of the resolution plan by the CoC. 23.3. The approval of CCI for the combination is available when the CoC considers the competitive CIRP of all the eligible applicants. 23.4. AGI applied on 27.09.2022 for approval of combination under the Competition Act, in Form I. CCI rejected Form I vide order Dt. 30.09.2022. In contrast, the draft resolution plan of INSCO was accompanied by CCI's approval Dt. 22.10.2022. In other words, well before considering the resolution plan of INSCO by the CoC. 23.5. On 27.10.2022, the CoC, with a majority of 98% voting, approved the resolution plan of AGI. 23.6. Thereafter, on 03.11.2022, AGI applied for approval of combination in Form II before the CCI. On 15.03.2023, the combination of AGI with HNGIL was approved. Therefore, the submission of the resolution Dt. 27.10.2022 of the CoC approving AGI's resolution 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. Th....
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....the company in distress as a going concern and ensuring the discharge of debt(s) of a stressed company. 24.2. Therefore, the interpretation of the proviso to sub-section (4) of section 31 is adopted by looking at the statement of objects and reasons of the IBC and the statutory scheme laid out from section 4 through section 32A of the IBC. 24.3. The exclusive literal interpretation of the proviso to sub-section (4) of section 31 and holding that it is mandatory would preclude or prevent the participation of eligible resolution applicants. This would consequently provide a quick start to a resolution applicant having green channel combination approval from CCI. Further, the object of maximising the value of stressed assets with the participation of a resolution applicant with green channel approval against a resolution applicant requiring a combination approval would diminish the competitive spirit of the CIRP and the value maximization of stressed assets. The submission of draft resolution plan by all the eligible applicants, dehors combination approval, would reflect on the potential asset realization. Competition in resolution plans, voting by CoC, and appreciation of feasi....
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....tion 31: * Order of approval ensures the continuity of the business plan as a going concern after the change of management with the valid licenses, permissions, consents, etc., standing in the name of the corporate debtor. Statutory fiction of the one-year period: * Ensures change of management does not hinder the transition as a going concern. Sections 5 and 6 of the Competition Act: * If a resolution plan without combination approval is accepted, it may defeat the prescriptions of the Competition Act. The activity becomes void only if the transition is allowed to take effect without combination approval. 24.8. The resolution applicant must have the approval of CCI under sections 5 and 6 of the Competition Act to continue to run the corporate debtor as a going concern from the moment an order of approval is made under sub-section (2) of section 31 of the Act. To wit, if a resolution plan attracting sections 5 and 6 of the Competition Act is allowed to take over the affairs and business of the corporate debtor as a going concern without CCI approval, then it would be void. Therefore, the right timing for combination approval is under ....
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....e of examination under section 31(1) of the IBC by the Adjudicating Authority. The Adjudicating Authority either approves the resolution plan approved by the CoC or rejects the plan ground(s) set out in section 31 of the IBC. The consequences for noncompliance of a requirement, including combination approval, are applied at this stage. The proviso to section 31(4) must be read in the same sense and tense that corresponds to section 31(1) and (2) of the IBC. 24.15. An interested resolution applicant to whom the requirement of approval in Form II of CCI is attracted ought not to be disqualified from consideration by the CoC in spite of such an applicant satisfying the eligibility criteria stipulated by the CoC. On the one hand, the scheme in the proviso to subsection (4) of section 31 clearly delineates a condition precedent to an adjudication order under section 31(2) of the IBC and, on the other hand, the main body of section 31(4) provides for obtaining ex post facto permissions within one year under different enactments. 24.16. The RP, CoC and the resolution applicant are bound by the timelines stipulated under the IBC. The timely performance of a duty or function by CCI is....
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.... the IBC, compartmentalized the functions and duties of RP, CoC and the Adjudicating Authority. 27. The report recommended assessing the viability of a corporate debtor and noted that the economic purview presented an advantage by calling for the assessment of the viability of an enterprise or a project. An enterprise that has fastened financial failure is considered as a viable enterprise and there is possible financial re-arrangement that can earn the creditors a higher economic value in contrast to shutting down such an enterprise. On the contrary, if the cost of financial re-arrangement required to keep the enterprise going is higher than the non-performance value of future expected cash flows, then the enterprise is considered unviable or bankrupt and is better shut down as soon as possible. 28. After taking note of the emerging Indian economy, the best practices of resolution and liquidation in other economies and the model code of UNCITRAL, the report has recommended the following guiding principles to the Parliament for a new Code. Broadly, the objects sought to be achieved by the IBC are (i) provision of certainty in the market to promote efficiency and growth, (ii) ....
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....it, and balance the interests of all the stakeholders. 30.4. The Code also aims to separate commercial aspects of insolvency and bankruptcy proceedings from judicial aspects. 31. Part II of the Code deals with insolvency resolution and liquidation for corporate persons. Chapter II deals with CIRP, and in the event of the effort of Chapter II failing, Chapter III provides for the liquidation process of corporate debtors. The other chapters in the IBC are not adverted to since the issues under consideration do not attract the provisions of those chapters. 32. To sum up, the unfurling of events in Chapter I of Part II of the IBC is that sections 7 to 10 provide for the initiation of CIRP by the (i) financial creditor(s), (ii) operational creditor(s) or (iii) corporate applicant. On the application being admitted by the Adjudicating Authority, section 13 of the IBC provides for the declaration of moratorium and public announcement, and section 14 deals with moratorium prohibiting the steps for recovery, etc., against the corporate debtor. 33. With the completion of a public announcement of CIRP, section 16 of the IBC provides for the appointment of an interim resolution pro....
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....ore the stage of sub-section (4) of section 30, i.e., consideration of the resolution plan by CoC at the time of voting. The extended argument is that a combination approved post the decision taken under section 30(4) of the IBC cannot be relied upon and taking on file the approval of combination Dt. 15.03.2023 of CCI, as proposed by AGI, is an illegal exercise of jurisdiction. 37. The argument of literal construction, at first blush, appears to be simple and available to the object sought to be achieved. The RP also acted contrary to the law by bringing on record the approval of a combination of CCI proposed by AGI. 38. It is axiomatic that while applying the rule of literal construction, the words of a statute are first understood in their natural, ordinary or popular sense, and phrases and sentences are constructed according to their grammatical meaning unless such construction leads to absurdity or unless there is something in the context or in the object of the statute to suggest the contrary rule of interpretation. 39. In Madhav Rao Scindia vs. Union of India, AIR (1971) SC 530 at Page 577 it has been held that the simpler and more common the word or expression, the ....
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....ed but in their Lordships' opinion, where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system". (emphasis supplied) 44. T. L. Venkatarama Aiyyar, J in Tirath Singh vs. Bachittar Singh, AIR (1955) SC 830 stated that "where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence". The literal and purposive rules of interpretation, as well as their scope, obligation, and limitations, are prefaced for further discussion. The right consideration of issues on hand is achieved by not referring to the precedents on literal or purposive interpretation. It is axiomatic that the precedents on interpretation are specific to the ....
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....ng with an affidavit stating that he is eligible under Section 29-A] to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the [payment] of other debts of the corporate debtor; [(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in subsection (1) of Section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance....
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.... shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it : Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] [Provided also that the eligibility criteria in Section 29-A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution applicant who has not submitted resol....
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.... Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. [(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the appr....
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....f creditors." Memorandum explaining the modifications contained in the Bill to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (d) in clause 24 of the Bill, in sub-section (4) of section 31 of the Code, a new proviso is inserted "Provided that where the resolution plan contains a provision for combination as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors" so as to clarify that the approval for the combinations from Competition Commission of India has to be obtained prior to the approval of resolution plan by the Adjudicating Authority. (emphasis supplied) 54. Reference to these external aids for interpreting the proviso under consideration would arise only after completing the exercise of literal or purposive interpretation. 55. In Essar Steel India Limited (supra), this Court considered the scope and ambit of section 30(2) and (4) on the one hand and also the jurisdiction of the Adjudicating Authority/NCLAT under sections 30(4), 31 and 60(5....
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....or the revival of the corporate debtor. To put it succinctly, the ratio of Essar Steel (supra) can be understood as follows: 56.1. Since it is the commercial wisdom of the CoC that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting-up of such Committee and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, section 21(2) of the IBC mandates that the CoC shall comprise of financial creditors of the corporate debtor. 56.2. The CoC consists of financial creditors who are in the business of money lending, and the commercial angle of CIRP is within the domain of the CoC. Thus, when the CoC exercises its commercial wisdom, the adjudicating authority cannot interfere on merits with the commercial decisions taken by the CoC. 56.3. This Court also held that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and the feasibility of the proposed resolution plan. They act on the basis of....
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....tion ignores the circumstances that surround Act 26 of 2018 and Act 26 of 2019, which introduced a few amendments to both sections 30 and 31 of the IBC. 58.1. The amendment of a provision of law is appreciated by a comparison between the pre-amendment and post-amendment law. The amendment to an existing law is necessitated to supplement the gaps noted in achieving the purpose or object of the existing enactment. The Parliament, after realizing the existence of a few bottlenecks in the smooth working of the Act in achieving the object, makes amendments in the nature of additions, deletions, exceptions, provisos, etc. 58.2. IBC has undergone a few major changes to improve the working of the Code. The Parliament, in its wisdom, has not only incorporated the amendments but also the place at which the amendments are to be positioned. 59. In the said background, the Parliament has not incorporated the proviso to sub-section (4) of section 31 in the text of section 30 of the IBC. Section 30(2) of the IBC, read with Regulation 39(4) of CIRP Regulations, 2016, has provided for what is to be reported to the CoC by RP through Form H. 60. It is axiomatic to not interpret a section ....
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....ich 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 such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall ....
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.... by the committee of creditors. 62. Section 30(1) provides for the submission of a resolution plan by the resolution applicants. Section 30(2) obligates the RP to examine each resolution plan received by the RP to confirm that the resolution plan does not contravene any of the provisions of law for the time being in force. The relevant portion of Form H is reproduced hereunder : Form H Section of Code/Regulation No. Requirement with respect to Resolution Plan Clause of Resolution Plan Compliance (Yes/No) 25(23)(h) Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operations of business of the CD? Section 29A Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resolution Professional or Order, if any, of the Adjudicating Authority? Section 30(1) Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? Section 30(2) Whether the Resolution Plan- (a) provides for the payment of insolvency resolution process costs? (b) provides for the payment to the....
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....s the requirements referred to in sub-section (2) of section 30; 65.1.2. Adjudicating Authority then shall, by order, approve the resolution plan; 65.1.3. The approved plan is binding on (a) the corporate debtor, (b) employees of the corporate debtor, (c) members, (d) creditors, (e) Central and State Governments or local authorities to whom statutory dues are owned, and (f) Guarantors and other stakeholders involved in the resolution plan. 65.2. The proviso inserted by Act 26 of 2018 to section 31(1) of the IBC obligates that the Adjudicating Authority shall, before passing an order of approval of a resolution plan under sub-section (1), satisfy that the resolution plan has provisions for effective implementation. 65.3. The proviso stipulates a threshold consideration on provisions, i.e., steps and means for effective implementation of the resolution plan. 65.4. Sub-section (2) of section 31 obligates a different function or duty, i.e., to reject a resolution plan which does not confirm to the requirements referred to in sub-section (1) of section 31. Sub-section (2) of section 31 notes that if the Adjudicating Authority is not satisfied with the resolution plan, whi....
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....d grammatical tenses to present tenses used in the statute: "8. The provision is cast in the present tense. A retiring member is ineligible for renomination. "Not more than one term" qualifies "renomination". The words "retiring", used in the present tense, and "renomination" speak aloud of the intention of the legislature. If the word "retiring" was capable of being read as "retired" (sometime in the past) then there would have been no occasion to use "renomination" in the construction of the sentence. If the intention of law-framers would have been not to permit a person to be a member of the Council for more than two terms in his lifetime then a different, better and stronger framing of the provision was expected. It could have been said: "no member shall be eligible for nomination for more than two terms", or it could have been said : "a retired member shall not be eligible for nomination for more than two terms". 16. We are clearly of the opinion that sub-section (7) of Section 6 of the Press Council Act must be assigned its ordinary, grammatical and natural meaning as the language is plain and simple. There is no evidence available, either intrinsic or exter....
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....the business of the corporate debtor to a successful resolution applicant. Sub-section (4) grants a window of one year to the successful resolution applicant for obtaining permissions, licenses or permits under applicable laws. These are ex post facto operational permissions/consents/licences needed to run the business as a going concern by the successful resolution applicant and to avoid civil or penal consequences. Sub-section (4) provides for a legal fiction to continue to operate with the existing permissions/licences/consents in favour of the corporate debtor from a host of authorities by the successful resolution applicant. 70. Whereas the meaning, definition and implication of combination attracting sections 5 and 6 of the Competition Act are distinct. By keeping in perspective the language of sections 5 and 6 of the Competition Act, the combination should have the approval of CCI on the day on which the resolution applicant receives approval under section 31(1) of IBC. In the alternative, the absence of combination approval would result in the combination being void. The successful resolution applicant cannot be allowed to take over the management awaiting orders of CCI,....
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....ce not expressed by the parliament. Precisely reiterated, such interpretation, apart from causing difficulties in CIRP defeats the very object of maximization of recovery. 73. In contradistinction, section 31(4) specifically refers to due compliance with the requirements of sub-section (1) of section 31, which then refers to the requirements in sub-section (2) of section 30 with regard to approval of the resolution plan. The statutory compliance by the resolution applicant is divided into two stages viz., firstly, sub-section (4) provides a window time of one year to obtain necessary approval under any law by the resolution applicant; and secondly, having the combination approval before sub-section (2) of section 31 of IBC. This said compliance status enables the Adjudicating Authority to accept or reject a resolution plan which does not confirm to the requirements referred to in sub-section (1) of section 31. The final consideration of the resolution plans before the Adjudicating Authority arises in the manner laid down by this Court in Essar Steel (supra). The absence or presence of combination approval while a decision is taken under sub-section (4) of section 30 is not very ....
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....tive may be rebutted by other considerations, such as - the object, scope of the enactment, and the consequences flowing from such construction. The interpretation of the word 'shall' as directory has been a purposive effort of the court to sustain the object of the statute and, at the same time, ensure compliance with the requirements. This Court has interpreted 'shall' as directory to preserve the legislative effort and intent of the statute. 76.1. In Sainik Motors v. State of Rajasthan, AIR (1961) SC 1480 State of UP v. Babu Ram Upadhya, AIR (1961) SC 751 and State of MP v. Azad Bharat Finance Co., AIR (1967) SC 276 this Court has held that the word 'shall' does not always imply that a provision is mandatory. If the legislative intent or the context requires the statute to be not mandatory, then the word 'shall' is to be contextually interpreted. 76.2. This Court has also held that the ultimate rule in construing auxiliary verbs like 'may' or 'shall' is to discover the legislative intent without giving it a controlling or determinative effect. The subject matter, the purpose of the provisions, the object intended to be secured by the statute which is of prime importance, a....
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....so to section 31(4) of the IBC is interpreted and held as directory. 79. From the above discussion, it is held that the proviso to sub-section (4) of section 31 is directory and would be compliant with IBC and the Competition Act. Hence, the combination approval of CCI at the stage of consideration of the resolution plan by the Adjudicating Authority under section 31(1) would be proper and legal. Such interpretation keeps the operations of the successful resolution applicant as a going concern, without deviating from the rigour of the Competition Act, and simultaneously, a one-year window is granted to obtain licenses, permissions, consents and other regulatory approvals envisaged by a host of laws. Therefore, the proviso is interpreted purposively and held that the approval of a combination of CCI at the stage of consideration by CoC is directory and not mandatory. By operation of section 31(2) of the IBC, to avoid rejection of a fully compliant and voted resolution plan, the Adjudicating Authority confirms that the approval of the combination is available before implementing the resolution plan. At best, the use of the words "prior to" is a temporal expression whose mandatory ....
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....Vijay Kalantari NCLAT - 2020 SCC OnLine NCLAT 1013 Supreme Court - 2021 SCC OnLine SC 3243 A plain reading of the provision makes it clear the Resolution Applicant is to obtain necessary approval within one year from the date of approval of the Resolution Plan by the adjudicating authority. It is manifestly clear that a Resolution Plan containing provision for combination has been treated as a class apart requiring approval of the Competition Commission of India even prior to such Resolution Plan being approved by the Committee of Creditors. However, treating such requirement as mandatory is fraught with serious consequences. Thus, relying on ArcelorMittal (Supra), the NCLAT held section 31(4) to be directory. This Court found no reason to interfere with the NCLAT judgement. (Division Bench Decision) 3. Makalu Trading Limited NCLAT judgement 66 NCLAT - (2020) SCC OnLine NCLAT 643 Supreme Court - Civil Appeal No. 3338 of 2020, order Dt. 12 October 2020 The adjudicating authority was conscious of the CCI approval, thus, ignoring the fact that CCI approval has been obtained post CoC approval of the Resolution Plan is in line with the view taken in ArcelorMittal (S....
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....further statutory remedies under IBC in accordance with law. The outcome must be met with consequences and costs for the unsuccessful parties. The consequences of delay must also be borne in mind. In State Bank of India & Ors. vs. The Consortium of Murari Jalan and Florian Fritsch & Anr., Civil Appeal No. 5023-5024 of 2024 this Court held CIRP cannot be endlessly postponed, including under the garb of litigation. This Court further held that the completion of CIRP is imperative to avoid value erosion. The failure of the resolution process will finally result in the sale of scrap of the assets of the corporate debtor, and again, a scenario experienced under previous regimes is reflected. It is axiomatic, more particularly in commercial matters, that costs and consequences of adjudication follow the event. In corporate and commercial matters, as a corollary, the cost must follow the result. Hence, costs are awarded while dismissing the appeals and are to be credited to the account of the RP. 84.1. INSCO's C.A. 6071/2023 - dismissed with a cost of Rs.25,00,000 (Indian Rupees twenty-five lakh only). 84.2. UPGMS's C.A 6055/2023 - dismissed with a cost of Rs.10,00,000/- (Indian Rup....
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....ave the approval of the combination of the proposed resolution plan before the CoC considers the feasibility and viability of the resolution plan. 4. If the proposal of the resolution applicant contributes to horizontal or vertical relationships, then the requirements of sections 5 and 6 of the Competition Act are attracted, and due compliance is necessitated. 5. INSCO is a multinational company headquartered in Bermuda. It is engaged in consulting for agriculture, financial management, and business consultancy. AGI is engaged in manufacturing and supplying glass containers and has a substantial market share in the relevant market in India. The actual percentage of market participation of any of the parties is not noted as part of the narrative on the background circumstances. The parties to the appeal are in agreement that having the combination approval from CCI for the proposed resolution plan is attracted to both AGI and INSCO. The distinction in compliance format is that AGI must follow the Form II process for obtaining the approval of CCI for the proposed resolution plan; on the contrary, INSCO, not being a player in the relevant market in India, is subjected to the sim....
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....r the IBC. This was followed by further clarifications of AGI on 14.03.2023. CCI, on 15.03.2023, approved, under section 31(1) of the Competition Act, the modified combination of AGI. 10. The combination was approved vide order Dt. 15.03.2023 and was challenged before the NCLAT by a few aggrieved parties. NCLAT, through the order Dt. 28.07.2023, impugned in the civil appeals, dismissed the appeals and confirmed the combination approved by CCI. Hence, the civil appeals. II. THE GIST OF CCI ORDER DT. 15.03.2023 11. AGI and HNGIL are engaged in the manufacture and supply of glass containers. The activities of HNGIL and AGI involve both horizontal and vertical relationships. The CCI delineated the relevant product market as container glass packaging and noted the operation and existence of both wholesale and retail segments by AGI and HNGIL. The CCI appreciated the combined market share of HNGIL and AGI in the delineated relevant market as - (i) Alco-Beverage (40-50%) and (ii) F&B (80-85%). The combined effect of AGI and HNGIL is noted as significant players in the Alco Beverage and F&B Sector. The combination is likely to have significantly increased the level of concentratio....
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....eal No. 4937/2023 M/s Geeta and Company 4. (AT) No. 10 of 2023 Civil Appeal No. 5018/2023 HNG Workers Union 14. In Civil Appeal No. 5401 of 2023, AGI objected to the filing of appeals before NCLAT by the above appellants as they are not aggrieved persons, and the appeals, at their instance, are not maintainable. 15. To sum up the case before NCLAT, the objections are that the CCI failed to comply with the requirement of section 29(1) of the Competition Act because the CCI has not issued show cause notice to both the parties to combination, i.e., the acquirer and the target entity. Approval of the combination is vitiated and illegal inasmuch as CCI, on forming a prima facie opinion about AAEC through the combination proposed, issued a show cause notice under section 29(1) of the Competition Act to AGI. 16. CCI should have taken the investigation as mandated by section 29(1) of the Competition Act by calling for the opinion of the Director General and directing AGI to cause public notice of the proposed combination. The noncompliance with section 29(2) renders the combination approval Dt. 15.03.2023 illegal and unsustainable. The prima facie opinion formed by ....
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....ess as contemplated under Section 29, subsection (2) having not been completed by the CCI before passing the order dated 15.03.2023, the order passed by the CCI is against the procedure prescribed under Section 29 and deserved to be set aside? The process as contemplated under Section 29 of the Act was complied with since the opinion was given under Section 29(1) of the Act, and had not reached the stage of Section 29(2) of the Act. 6. Whether in spite of Respondent No.2 along with response to Show Cause Notice having offered modification to address the prima facie concern expressed in the said Show Cause Notice as per Regulation 25 (1) (a) of 2011 Regulations, the CCI was obliged to direct the parties to publish details of the combination? The CCI, after issuing show cause notice AGI suggested modification, thereafter CCI approved the combination. Sections 30 and 29 have to be read harmoniously, and it cannot mean that even if, prima facie opinion at the second stage is not formed by the CCI, the CCI should publish details of combination. 7. Whether the modifications suggested by Respondent No.2 in its reply to Show Cause Notice, adequately addressed the AA....
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....on the relevant product market in India. The Competition Act prohibits combination, leading to the monopolistic presence of a business entity and dominance over the market, the product, the price, etc., in the relevant product market. 19.3. The RP, therefore, incorporated clauses in the RFRP on the necessity of approval of combination from CCI under the Competition Act before the resolution plan is considered by the CoC. 19.4. The admitted position of the shortlisted resolution applicants is that the proposed takeover of the business entity (HNGIL) would attract a combination, and thus, the approval of the combination is required under the Competition Act. In this factual matrix, the CCI, as a regulatory statutory body, conforms to all the prescriptions of law under sections 20, 29, and 31 of the Competition Act and regulation 19 of Combination Regulations 2011. The CCI examined the details of the acquirer and the target in a perfunctory manner. 19.5. The assessment of AAEC by CCI ignored the manufacturing capacity of AGI or HNGIL in the relevant product market. The data relied on by CCI is not accurate, and the AAEC is arrived on the TPD of relevant products but not on th....
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....rence would be the extent of integration in substance. The expression 'parties to combination' used in section 29 is used in its general sense. Regulation 9 of the Combination Regulation 2011 stipulates the obligation to file notice. 20.3. CCI, on receipt of notice in Form I, called upon AGI to file a notice in Form II as the requirements attached to green channel clearance envisaged through Form I were not available to AGI. On 03.11.2022, AGI filed a notice in Form II before the CCI. 20.4. The CCI is an expert body, and the case study of a proposed combination or investigation into any breach of the provisions is examined or investigated depending upon the intricacies recorded by the CCI. In the case on hand, the examination of data by CCI conforms to the requirements of section 20 of the Competition Act. Therefore, there was no occasion to investigate the proposed combination. 20.5. The CCI issued a show cause notice Dt. 10.02.2023 to AGI to show cause why an investigation shall not be ordered. AGI filed a response Dt. 10.03.2023 and also a modification plan Dt. 14.03.2023 for consideration by CCI. CCI, after being satisfied with the reply and the modification suggested ....
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....Competition Act; and if answered in the affirmative, whether the rival contenders can raise a ground of non-service of show cause notice to the target company; and lastly, whether the approval of combination by CCI based on expert advice warrants interference? IV. DISCUSSION 22. Before proceeding with the discussion, it is important to note that the Judgement does not take into account or consider the Amendments that have been made to the Competition Act which were not notified during the applicable period. 23. Section 29 of the Competition Act 29(1)Where the Commission is of the [prima facie] opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to combination calling upon them to respond [within fifteen days] of the receipt of the notice, as to why investigation in respect of such combination should not be conducted. [(1-A) After receipt of the response of the parties to the combination under sub-section (1), the Commission may call for a report from the Director General and such report shall be submitted by the Director General wi....
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....tion in respect of such a combination should not be conducted. 23.4. A show cause notice in legal parlance means the opportunity given to the addressee to say what his case is, on the prima facie opinion formed for further steps under section 29 are warranted or not. As part of the inquisitorial exercise, the CCI verifies and applies the threshold of precautionary principle to understand whether AAEC in the proposed combination would arise or not. If section 29 is worded such that in all the cases where prima facie opinion is formed, the corollary of forming such opinion leads to calling for the DG's report, directing parties to publish details, then the expression as contained in section 29 would have been different. Section 29(1) of the Competition Act, as worded by the parliament, provides for formation of prima facie opinion, issuance of show cause notice and receiving a reply from the party. The intermediary step of show cause notice and reply provides an opportunity to satisfactorily explain the doubts entertained by CCI while forming the prima facie opinion on AAEC. In other words, the argument that the issuance of show cause notice is preceded by prima facie opinion and ....
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....e combination which is likely to cause or has caused AAEC within the relevant market in India. The prima facie opinion is required in law to set in motion the show cause notice. The CCI has jurisdiction upon being satisfied with the response as per the scheme of the section to not proceed further. The argument of the appellants would result in the show cause notice being treated as a decision to investigate the Form II application filed for approval of a combination. Under sub-section (2) of section 29, the Commission is of the prima facie opinion that the combination has or is likely to have AAEC. The distinction on the prima facie opinion being formed under sections 29(1) and 29(2) is emphasised thus: Section 29(1) of the Competition Act Section 29(2) of the Competition Act Where the Commission is of the [prima facie] opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to combination calling upon them to respond within thirty days of the receipt of the notice, as to why investigation in respect of such combination should not b....
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....ied with a reply/modification suggested by the parties. The CCI, at the stage of section 29(1), having issued a show cause notice, is entitled to objectively consider the reply given by the parties and, if not satisfied, then take the enquiry into the stage of investigation under section 29(1) to (3) of the Competition Act. The findings of NCLAT are taken note of and do not warrant interference. 32. On whether notice to parties to the combination is required or if sufficient notice is given to the acquirer/AGI, NCLAT referred to Regulation 2(f) of Combination Regulations, 2011. CCI, assailing the said finding, contends that the statutory obligation to issue notice to CCI arises under section 6(2) on the acquirer in the case of acquisition and all parties to the combination. Section 6(2) read with regulation 9(1) and (2) of the Combination Regulations 2011, stipulates the obligation to file notice on the parties to the combination. The statutory Forms I and II of Schedule II throw light on the obligation to file notice under section 6(2). According to CCI, notice to the acquirer in a combination case arising through CIRP is sufficient. Consequently, When the CCI forms its prima f....
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....other economy related issues unless there is extremely strong reason to do so." 35. Further, in Brahm Dutt v. Union of India, (2005) 2 SCC 431 this Court held that: "[W]hile considering the constitutional validity of Section 8 of the Act observed that the Commission is an expert body which had been created in consonance with international practice. The Court observed that it might be appropriate if two bodies are created for performing two kinds of functions, one advisory and regulatory, and the other adjudicatory. Though the Tribunal has been constituted by the Competition (Amendment) Act, 2007, the Commission continues to perform both the functions stated by this Court in that case. Cumulative effect of the above reasoning is that the Commission would be a necessary and/or a proper party in the proceedings before the Tribunal." 36. The appellants argue that CCI's consideration of AGI's data is inaccurate or lopsided. CCI consists of experts and specialists in different branches of trade, commerce and technology. The consideration by the experts, as rightly noted by NCLAT, must be given due weightage. In an appeal under section 53T of the Competition Act, the da....