CCI Approval Before CoC Approval: A Landmark Ruling in Corporate Insolvency Resolution

Introduction

In a landmark decision that will have long-lasting implications for India's corporate insolvency landscape, the Supreme Court of India has clarified a critical procedural requirement under the Insolvency and Bankruptcy Code, 2016 (IBC). In Independent Sugar Corporation Ltd v. Girish Sriram Juneja and Ors (2025 SCc OnLine Sc 181), the Court was tasked with determining whether approval from the Competition Commission of India (CCI) must be obtained before a resolution plan involving a merger or acquisition is presented to the Committee of Creditors (CoC). This analysis explores the background of the case, the legal issues in contention, the Court’s reasoning in both the majority and dissenting opinions, and the broader ramifications for insolvency and competition law in India.

Factual Background

The dispute arose during the Corporate Insolvency Resolution Process (CIRP) initiated against Hindustan National Glass and Industries Ltd (HNGIL). Two resolution plans were submitted during the process—one by Independent Sugar Corporation Limited (INSCO) and the other by AGI Greenpac Limited. The core controversy centered on AGI Greenpac’s resolution plan, which was presented to the CoC for approval before obtaining the mandatory CCI clearance. Given the merger's potential to create a combined entity with dominant market shares—estimated at 80–85% in the food and beverages segment and 45–50% in the alco-beverage segment—regulatory scrutiny was inevitable. Although AGI subsequently obtained conditional CCI approval by proposing modifications such as divesting a key plant to mitigate anti-competitive concerns, the fact that the resolution plan had already been approved by the CoC prompted INSCO to challenge the process.

The Legal Issue: Mandatory Versus Directory Nature of CCI Approval

At the center of the Supreme Court’s deliberations was the interpretation of the proviso to Section 31(4) of the IBC. This provision explicitly requires that any resolution plan involving a combination must secure CCI approval prior to the CoC’s approval. The legal debate hinged on whether this requirement is mandatory—meaning it must be strictly adhered to before any CoC decision is made—or directory, allowing for some flexibility in timing provided that CCI approval is eventually obtained before the resolution plan is finally sanctioned by the National Company Law Tribunal (NCLT). This distinction is critical, as a mandatory interpretation would invalidate any resolution plan presented without prior CCI approval, whereas a directory interpretation would permit a degree of leeway.

The Majority Opinion: Upholding Strict Compliance

In their majority opinion, Justices Hrishikesh Roy and Sudhanshu Dhulia firmly held that the language of the proviso is clear and unambiguous. They stressed that the term “prior” unequivocally indicates that CCI approval must be obtained before the CoC considers any resolution plan involving a merger or acquisition. This interpretation aligns with the clear language used in the statute and is supported by extrinsic materials such as the explanatory memorandum and notes accompanying the IBC amendments. The Court underscored that the IBC, particularly under Section 30(2)(e), mandates that only those resolution plans compliant with all applicable statutory and regulatory requirements should be presented to the CoC. Allowing a resolution plan to be approved without prior CCI clearance would not only contravene the IBC and the Competition Act but also risk facilitating anti-competitive mergers that could distort market dynamics.

The majority further noted that the CCI’s average processing time of approximately 21 days is well within the statutory limits provided under the IBC and should not unduly delay the insolvency process. Instead, obtaining CCI approval in advance serves as an essential safeguard against potential anti-competitive outcomes. The Justices also criticized the procedural lapse observed in the case—specifically, the issuance of a show-cause notice solely to AGI and not to the Corporate Debtor—arguing that such deviations undermine the regulatory framework and the intended sequence of approvals.

The Dissenting Opinion: Advocating for Flexibility

In contrast, Justice S.V.N. Bhatti dissented, arguing for a more flexible, directory interpretation of the proviso. He maintained that if CCI approval is eventually secured before the final approval from the NCLT, the resolution plan should be considered legally tenable. According to his view, the primary role of the CoC is to evaluate the commercial viability of the resolution plan rather than to enforce strict legal compliance—a function that rightly belongs to the NCLT. Justice Bhatti expressed concern that rigid enforcement of the requirement could lead to unnecessary delays in the insolvency process, thereby disadvantaging resolution applicants who might offer superior commercial terms but have not yet secured CCI clearance at the time of the CoC’s decision. He further argued that the procedural requirements under Section 29 of the Competition Act provide the CCI with sufficient discretion to determine when a detailed investigation is necessary, and that the absence of a show-cause notice to the Corporate Debtor did not, in his view, render the process defective.

Implications of the Supreme Court Ruling

The Supreme Court’s decision has far-reaching implications for the corporate insolvency process in India. First, by mandating that CCI approval must be secured prior to CoC approval for any resolution plan involving a merger, the ruling invalidates any such plan that does not meet this criterion. In the present case, AGI Greenpac’s resolution plan was quashed, and all actions taken under it were declared null and void, thereby restoring the status quo for all stakeholders involved.

Moving forward, resolution applicants must now secure CCI approval at the earliest possible stage—ideally at the time of submitting an expression of interest—to ensure that their plans comply with all statutory requirements before being presented to the CoC. This proactive approach is essential not only for avoiding subsequent legal challenges but also for preserving the integrity of the insolvency process. The ruling reinforces the statutory framework designed to safeguard against anti-competitive mergers, ensuring that the market remains fair and competitive. Additionally, the decision may influence bidding strategies, as potential resolution applicants will need to factor in the additional time and procedural steps required to obtain CCI clearance. In the broader context, the ruling highlights the need for possible legislative or procedural reforms aimed at streamlining the approval process, thereby balancing the dual objectives of expediency and robust regulatory oversight.

Conclusion

The Supreme Court’s ruling in Independent Sugar Corporation Ltd v. Girish Sriram Juneja and Ors represents a significant milestone in India’s insolvency jurisprudence. By affirming that CCI approval must be obtained prior to CoC approval for resolution plans involving mergers, the Court has reinforced the importance of strict statutory compliance and the prevention of anti-competitive outcomes. Although the dissenting opinion raises valid concerns regarding potential delays and the need for procedural flexibility, the majority’s decision prioritizes the integrity of the legal framework and the protection of fair competition. As legal practitioners, insolvency professionals, and policymakers adjust to this clarified framework, it will be crucial to monitor its impact on the speed and efficiency of corporate resolutions. Ultimately, this ruling serves as a potent reminder that the twin goals of procedural efficiency and legal rigor must be pursued concurrently to ensure a sustainable and equitable corporate insolvency process.