Competition Commission Approval in Insolvency Resolution: The Mandatory Nature of Prior CCI Approval Under Section 31(4) of IBC

Introduction

The intersection of insolvency law and competition regulation has emerged as one of the most debated areas in Indian corporate jurisprudence. When a financially distressed company undergoes resolution under the Insolvency and Bankruptcy Code, 2016, questions often arise about the timing and necessity of obtaining regulatory approvals, particularly from the Competition Commission of India. The Supreme Court’s landmark ruling in January 2025 has now definitively settled this question, establishing that when a resolution plan involves mergers or acquisitions crossing statutory thresholds, prior CCI approval under IBC resolution plans must be secured before the Committee of Creditors even considers the plan.[1]

The Insolvency and Bankruptcy Code was enacted to provide a time-bound mechanism for resolving corporate insolvency while maximizing asset value and balancing stakeholder interests. The Code mandates completion of the Corporate Insolvency Resolution Process within a strict timeline of 330 days, including extensions. This temporal constraint has often been cited as conflicting with other regulatory requirements, particularly those under the Competition Act, 2002, which governs combinations that may adversely affect market competition.

The Legislative Framework

Section 31 of the Insolvency and Bankruptcy Code governs the approval of resolution plans by the National Company Law Tribunal. Once a resolution plan is approved by the Committee of Creditors (CCI) under Section 30(4) of IBC and meets the requirements specified in Section 30(2), the Adjudicating Authority may approve it through an order. This approval becomes binding on the corporate debtor, its employees, members, creditors, guarantors, and all other stakeholders involved in the resolution plan.

The critical provision at the heart of the recent controversy is the proviso to Section 31(4) of the Insolvency and Bankruptcy Code. This proviso, inserted through the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from June 6, 2018, states: “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.”[2]

The Competition Act, 2002 regulates combinations through Sections 5 and 6. Section 5 defines what constitutes a combination, including acquisitions, mergers, and amalgamations that exceed specified asset or turnover thresholds. Under Section 6, any person or enterprise proposing to enter into a combination must give notice to the Competition Commission disclosing details of the proposed combination within thirty days after board approval but before consummation. The Commission then has a stipulated timeline to examine whether the combination would cause an appreciable adverse effect on competition in the relevant market.[3]

The Competing Interpretations

For several years following the 2018 amendment, divergent views emerged regarding whether the proviso to Section 31(4) was mandatory or merely directory in nature. The practical implications of this distinction were significant. If the requirement was merely directory, the Committee of Creditors could approve a resolution plan subject to subsequent Competition Commission approval, allowing the insolvency process to move forward without delay. If mandatory, the resolution applicant would need to secure prior CCI approval before even presenting the plan to the Committee of Creditors, potentially extending the already tight timelines under the IBC.

The National Company Law Appellate Tribunal initially adopted a liberal interpretation in several decisions. In the case of ArcelorMittal India Private Limited versus Abhijit Guhathakurta, the Appellate Tribunal held that the proviso requiring Competition Commission approval prior to Committee of Creditors approval was directory rather than mandatory. The Tribunal reasoned that it was always open to the Committee of Creditors to approve a resolution plan subject to such approval by the Commission, which could be obtained prior to approval of the plan by the Adjudicating Authority.[4]

This interpretation was reiterated in subsequent decisions, including the September 2023 judgment in Soneko Marketing Private Limited versus Girish Sriram Juneja. The Appellate Tribunal observed that the timeline provided in the Insolvency and Bankruptcy Code for completing the Corporate Insolvency Resolution Process was very stringent and could not be extended beyond 330 days. In contrast, the timeline under the Competition Act for obtaining approval from the Competition Commission was more flexible and could extend up to 210 days or more in complex cases. The Tribunal concluded that requiring prior CCI approval under IBC resolution plans before Committee of Creditors consideration could disrupt the insolvency process and potentially conflict with the objectives of the Code.

The Supreme Court Settles the Question

The definitive resolution of this interpretative conflict came with the Supreme Court’s judgment in Independent Sugar Corporation Limited versus Girish Sriram Juneja, delivered on January 29, 2025. The case arose from the Corporate Insolvency Resolution Process of Hindustan National Glass and Industries Limited, a dominant player commanding approximately 60 percent market share in India’s glass packaging industry. AGI Greenpac Limited, the second-largest company in the sector, submitted a resolution plan that would result in a combination controlling an estimated 80 to 85 percent of the market, raising substantial competition concerns.

A three-judge bench of the Supreme Court, by a two-to-one majority, overturned the Appellate Tribunal’s interpretation. Justice Hrishikesh Roy, writing for the majority and concurred with by Justice Sudhanshu Dhulia, applied the principle of plain meaning interpretation to hold that the proviso to Section 31(4) clearly and unambiguously mandates Competition Commission approval prior to Committee of Creditors approval when a resolution plan involves a combination.[1]

The majority opinion emphasized that when statutory language is plain, clear, and unambiguous, courts must adopt a literal interpretation. The provision explicitly uses the word “prior,” which leaves no room for alternative interpretation. The Court rejected arguments that such interpretation would frustrate the objectives of the Insolvency and Bankruptcy Code, noting that the legislature itself had inserted this requirement with full awareness of the Code’s time-bound nature. If the legislature intended a different meaning, it would have used different language.

The Supreme Court addressed concerns about timeline conflicts by observing that the Competition Commission typically approves combination proposals within 21 working days in straightforward cases, with no recorded instance exceeding 120 days. The Court noted that the Competition (Amendment) Act, 2023 had further reduced the aggregate review period from 210 days to 150 calendar days, making delays less likely than previously argued.[5]

Rationale Behind Mandatory Prior CCI Approval Under IBC Resolution Plans

The Supreme Court’s reasoning for requiring prior CCI approval under IBC resolution plans rests on several foundations. First, the Competition Commission possesses the authority to approve, reject, or impose modifications on proposed combinations. If a resolution plan receives Committee of Creditors approval before competition clearance, and the Commission subsequently requires modifications, the entire process must restart. This undermines the certainty and finality that the insolvency resolution process seeks to achieve.

Second, a resolution plan that would result in an appreciable adverse effect on competition cannot be lawfully implemented unless the Competition Commission grants approval beforehand. Allowing such plans to receive Committee of Creditors approval without prior competition scrutiny would put the cart before the horse, potentially approving plans that can never be legally executed.

Third, the Court emphasized that the Resolution Professional functions in an administrative capacity and lacks adjudicatory powers. The Professional cannot waive, modify, or relax statutory requirements, including the obligation to obtain prior Competition Commission approval. Any attempt to grant informal relaxations through email communications or procedural workarounds exceeds the Professional’s authority and remains legally untenable.

The Supreme Court also highlighted that obtaining Competition Commission approval is not necessarily time-consuming. Parties can file combination notices at various stages of the Corporate Insolvency Resolution Process, not merely after submitting the resolution plan. Strategic planning and early filing can ensure that competition approval aligns with the insolvency timeline without causing undue delay. The Court refused to hold parties responsible for delays attributable to the Commission’s examination process, noting that the 330-day timeline for resolution remains intact, with extensions permitted only in exceptional circumstances arising from tribunal delays rather than party inaction.

Dissenting Opinion and Alternative Perspective

Justice S.V.N. Bhatti, in dissent, advocated for a purposive rather than strictly literal interpretation of the proviso. The dissenting opinion emphasized that statutory interpretation should ensure workability and avoid disrupting the fundamental objectives of legislation. Justice Bhatti argued that the majority’s rigid interpretation could frustrate the Insolvency and Bankruptcy Code’s core purpose of providing time-bound resolution, particularly in cases where competition review might extend beyond the statutorily mandated timelines.

The dissent suggested that substantial compliance rather than strict compliance should suffice, allowing the Committee of Creditors to approve plans subject to subsequent Competition Commission clearance. This approach, according to the dissenting view, would better balance the twin objectives of expeditious insolvency resolution and protection of competitive markets.[6]

Procedural Aspects and Competition Law Compliance

The Supreme Court’s judgment also addressed several procedural irregularities in the Competition Commission’s approval process that had occurred in the underlying case. The Court emphasized that the Commission must issue a show cause notice to the target company under Section 29(1) of the Competition Act when concerns arise about the combination’s impact on competition. This notice requirement cannot be bypassed, as it forms an essential element of natural justice.

Additionally, when voluntary modifications such as divestment are proposed to address competition concerns, Regulation 25(1A) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 requires approval from the target company. In the Hindustan National Glass case, the Resolution Professional had proposed divestment without obtaining such approval from the target company, rendering the modification procedurally defective.

The judgment clarified that combination notices under Section 6(2) of the Competition Act can be filed at different stages of the Corporate Insolvency Resolution Process. There is no requirement that filing occur only after resolution plan submission. This flexibility allows resolution applicants to initiate the competition approval process early, potentially securing clearance before or simultaneously with Committee of Creditors consideration.

Implications for Corporate Restructuring

The Supreme Court’s ruling has far-reaching implications for corporate restructuring in India. Resolution applicants must now factor Competition Commission approval timelines into their planning from the outset. Early engagement with the Commission becomes crucial, requiring resolution applicants to prepare combination notices and supporting documentation well before presenting plans to the Committee of Creditors.

The decision also impacts the commercial wisdom of Committees of Creditors. While the Supreme Court has consistently upheld the primacy of creditor committees’ commercial judgment, that wisdom must now operate within the framework established by the proviso to Section 31(4). Committees cannot approve plans involving combinations without prior competition clearance, regardless of their commercial assessment of the plan’s merits.

For target companies in competitive industries, the judgment provides additional protection against combinations that might harm market competition. Stakeholders opposing resolution plans on competition grounds now have stronger legal foundation for their objections, as plans lacking prior Competition Commission approval are legally incapable of implementation regardless of Committee of Creditors support.[7]

Reconciling Insolvency and Competition Objectives

The tension between expeditious insolvency resolution and thorough competition scrutiny reflects broader challenges in balancing different regulatory objectives. The Insolvency and Bankruptcy Code prioritizes time-bound resolution and value maximization. The Competition Act prioritizes market health and consumer welfare. The Supreme Court’s judgment recognizes that both objectives carry statutory force and neither can be subordinated to the other.

The judgment implicitly endorses a sequential approach: resolution applicants must first satisfy competition law requirements before seeking approval from insolvency stakeholders. This sequencing ensures that only legally implementable plans reach the Committee of Creditors, avoiding situations where substantial time and resources are invested in plans that ultimately cannot proceed due to competition concerns.

Critics might argue that this approach privileges competition considerations over insolvency resolution, potentially extending timelines and reducing the pool of viable resolution applicants. However, the Supreme Court’s analysis suggests that properly planned resolution processes need not suffer significant delays. The Commission’s track record of relatively swift approvals in non-problematic cases, combined with the ability to file combination notices early in the resolution process, provides mechanisms for managing timelines effectively.[8]

Future Directions and Legislative Considerations

The Supreme Court’s judgment, while settling the immediate interpretative question, has prompted discussions about potential legislative refinements. Some commentators have suggested creating an expedited approval mechanism specifically for combinations arising from insolvency resolution, perhaps through a deemed approval provision if the Competition Commission fails to decide within a shortened timeline. The Insolvency Law Committee had previously recommended such an approach, suggesting a 30-day window for Competition Commission approval in insolvency cases.

Another proposed solution involves expanding the green channel approval mechanism to cover certain insolvency-driven combinations. The green channel currently allows automatic approval for specific categories of combinations that are unlikely to raise competition concerns. Applying the failing firm defense more liberally in insolvency contexts could facilitate faster approvals while maintaining adequate competition oversight. The failing firm defense recognizes that allowing a failing company to be acquired, even by a competitor, may harm competition less than allowing the firm to exit the market entirely through liquidation.

The Competition (Amendment) Act, 2023 has already taken steps to reduce approval timelines, changing the aggregate review period from 210 working days to 150 calendar days. Further amendments could establish clearer timelines specifically for insolvency-related combinations, providing certainty to resolution applicants while ensuring adequate time for competition analysis.[9]

Conclusion

The Supreme Court’s decision in Independent Sugar Corporation Limited versus Girish Sriram Juneja represents a watershed moment in the evolution of Indian insolvency and competition law. By holding that prior CCI approval under IBC resolution plans must be obtained before the Committee of Creditors considers a resolution plan, the Court has established clear guidance for resolution applicants, insolvency professionals, and creditor committees navigating the intersection of these two regulatory frameworks.

The judgment reflects a commitment to statutory interpretation based on plain meaning, rejecting arguments for liberal construction that would require reading words into the statute that the legislature did not include. This approach provides certainty and predictability, even if it imposes additional procedural requirements on resolution applicants. The decision acknowledges that multiple regulatory objectives can coexist, requiring careful coordination rather than subordination of one to another.

Going forward, successful navigation of insolvency resolution processes involving combinations will require early strategic planning, prompt filing of combination notices, and realistic assessment of competition approval timelines. Resolution professionals must educate Committee of Creditors members about these requirements to avoid investing time and resources in plans that lack the prerequisite competition clearance. The judgment ultimately strengthens the integrity of both the insolvency resolution process and competition regulation, ensuring that corporate restructuring proceeds on legally sound foundations while protecting market competition and consumer welfare.

References

1. Supreme Court of India. Independent Sugar Corporation Limited v. Girish Sriram Juneja & Ors., Civil Appeal No. 6071 of 2023, decided on January 29, 2025. Available at: https://indiankanoon.org/doc/117249167/
2. The Insolvency and Bankruptcy Code, 2016, Section 31(4) as amended by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018. Available at: https://ibclaw.in/section-31-approval-of-resolution-plan/
3. The Competition Act, 2002, Sections 5 and 6. Available at: https://www.cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf
4. Bar and Bench. “CoC can approve Resolution Plan subject to subsequent approval by CCI, NCLAT,” December 18, 2019. Available at: https://www.barandbench.com/news/coc-can-approve-resolution-plan-subject-to-subsequent-approval-by-cci-nclat
5. PwC India. “Provisions of Competition (Amendment) Act, 2023 and Rules pertaining to combinations under the Competition Act, 2002,” September 11, 2024. Available at: https://www.pwc.in/assets/pdfs/news-alert/regulatory-insights/2024/
6. Drishti Judiciary. “Independent Sugar Corporation Limited v. Girish Sriram Juneja (2025) – Insolvency and Bankruptcy Code, 2016.” Available at: https://www.drishtijudiciary.com/landmark-judgement/insolvency-and-bankruptcy-code-2016-ibc/independent-sugar-corporation-limited-v-girish-sriram-juneja-2025
7. Mondaq. “‘Prior’ CCI Approval Of Resolution Plans: A Case For Legislative Amendment,” May 2, 2025. Available at: https://www.mondaq.com/india/corporate-and-company-law/1618750/
8. India Corp Law. “Beyond the Judgement: Examining Mandatory Prior CCI Approval in Insolvency Through a Global Lens,” February 2025. Available at: https://indiacorplaw.in/2025/02/beyond-the-judgement-examining-mandatory-prior-cci-approval-in-insolvency-through-a-global-lens.html
9. Competition Commission of India. “Regulation of Combinations (Section 5 & 6).” Available at: https://www.cci.gov.in/regulation-of-combination