Introduction
The recent Supreme Court ruling in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors.[i] is a landmark decision that has reignited the debate on statutory interpretation in insolvency law. The case revolved around whether prior approval from the Competition Commission of India (‘CCI’) under the proviso to s. 31(4) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’), was a mandatory prerequisite before a resolution plan could be approved by the Committee of Creditors (‘CoC’). The dispute arose from the Successful Resolution Applicant’s (SRA) resolution plan for the Corporate Debtor (‘CD’), which was approved by the CoC without obtaining prior CCI clearance. This procedural lapse led the Supreme Court, by a majority, to rule that prior approval was mandatory, while the dissenting opinion held that flexibility was permissible to ensure commercial efficiency.
This decision directly impacts how regulatory approvals interact with time-bound resolution processes under the IBC. By bringing two fundamental rules of statutory interpretation – literal interpretation and purposive interpretation – into direct conflict, the ruling highlights how different interpretative approaches can yield entirely different legal outcomes.
Brief Facts
Insolvency proceedings were initiated by the National Company Law Tribunal, Kolkata Bench (‘NCLT’) under s. 7 of the IBC against Hindustan National Glass and Industries Ltd. – the CD and a major player in India’s glass packaging industry with a 60% market share. Accordingly, the Resolution Professional (‘RP’) issued an expression of interest (EOI), which prescribed a mandatory requirement for obtaining CCI approval before the CoC could approve the resolution plan.
Two key entities emerged as contenders – the Appellant, a Bermuda-based company, and AGI Greenpac Ltd., a leading glass container manufacturer and the 2nd largest competitor in India after the CD. In response to an email from the Appellant seeking clarification regarding the timeline for obtaining CCI approval, the RP relaxed the requirement, allowing resolution applicants to obtain CCI approval after the CoC’s approval but before filing the application before NCLT.
Under the Competition Act, 2002 (‘Act of 2002’), any merger or acquisition that could significantly impact market competition requires prior approval from the CCI. Given that the CD and AGI Greenpac together would control a major portion of the relevant market, their combination raised concerns of an Appreciable Adverse Effect on Competition (‘AAEC’)[ii].
AGI Greenpac submitted an application to the CCI proposing to acquire 100% of the CD’s shareholding and business, but CCI rejected the application on 22.10.2022. Meanwhile, the resolution plans were placed before the CoC for approval. AGI Greenpac filed a fresh application before CCI on 03.11.2022, which remained pending at the time of CoC voting. On 28.10.2022, the CoC approved AGI Greenpac’s resolution plan with 98% votes, while the Appellant’s plan secured 88% votes.
The Appellant objected, arguing that AGI Greenpac had not obtained prior CCI approval, which violated s. 31(4) of the IBC, as well as the conditions originally set by the RP. On 10.03.2023, AGI Greenpac submitted a divestment proposal to the CCI, offering to sell one of the CD’s seven plants to address competition concerns. On 15.03.2023, the CCI granted conditional approval to AGI Greenpac.
The Appellant challenged the CoC’s approval of AGI Greenpac’s resolution plan, alleging a series of contradictions and preferential treatment in the approval process. The NCLT dismissed the challenge, holding that subsequent CCI approval sufficed. The Appellant then appealed before the National Company Law Appellate Tribunal (‘NCLAT’), which upheld the NCLT’s decision, ruling that while CCI approval was necessary, obtaining it before CoC approval under s. 31(4) of IBC was directory, not mandatory.
Dissatisfied with this ruling, the Appellant approached the Supreme Court, arguing that s. 31(4) of IBC expressly required prior CCI approval before CoC approval, and failure to comply rendered AGI Greenpac’s resolution plan void. The Supreme Court was thus tasked with deciding whether the proviso to s. 31(4) of IBC, which mandates prior approval from CCI for a resolution plan containing a provision for combination, is directory or mandatory.
Held
The Supreme Court, by a 2:1 majority, upheld the literal interpretation of s. 31(4) of IBC, ruling that prior approval from the CCI is a mandatory requirement under the provision. The minority view, however, favoured a purposive interpretation, emphasizing flexibility in ensuring commercial efficiency. This judgment highlights a fundamental clash between two principles of statutory interpretation, demonstrating how a change in interpretative approach can alter the reading, meaning, decision, and overall impact of a legal provision.
Majority Opinion (Justices Hrishikesh Roy & Sudhanshu Dhulia)
Applying the rule of literal interpretation, the majority held that the proviso to s. 31(4) of the IBC imposes a mandatory condition. Consequently, AGI Greenpac’s resolution plan was deemed unsustainable due to the lack of prior CCI approval, rendering CoC’s approval void. The Court ruled that s. 31(4) must be interpreted literally, as the phrase ‘prior approval’ in the proviso was clear and unambiguous, and the word ‘shall’ indicated a mandatory obligation. Thus, it was stated that allowing post facto approval would defeat the statutory objective.
The Court emphasized that legislative intent must be derived from the plain reading of the text, stating that if the legislature intended otherwise, it would have drafted the provision differently. The argument for purposive interpretation was rejected, as the Court held that its role is to apply the law as written, not to rewrite it. This distinction between adjudication and legislation was reinforced.
The majority also strongly criticized the CCI for failing to adhere to procedural safeguards under the Act of 2002, particularly in relation to ss. 29 and 30, which govern the scrutiny of combinations. It was noted that the CCI failed to issue a mandatory show-cause notice (‘SCN’) to the CD, as required under s. 29(1) and reg. 2(f) of the Combination Regulations, 2011. It was observed that the SCN was only issued to AGI Greenpac, thereby violating statutory requirements and depriving the CD of the opportunity to present its case.
The Court also noted that CCI failed to solicit public or stakeholder inputs as required under s. 29(2) of the Act of 2002, further diminishing transparency in the competition review process. The ruling flagged serious concerns regarding conditional approvals granted by CCI, stating that such approvals require continuous oversight and rigorous enforcement. The Court warned that permitting such procedural lapses and regulatory leniency could set a dangerous precedent, allowing acquiring companies to bypass critical competition safeguards, ultimately compromising market fairness and the integrity of the IBC framework.
The majority opined that the purpose of insolvency resolution is to ensure a clean, legally sound, and definite transfer of assets, and a resolution plan that is legally non-compliant at the CoC approval stage cannot be later cured, as this would undermine stakeholder confidence in insolvency resolutions.
Dissenting Opinion (Justice S.V.N. Bhatti)
Applying the rule of purposive interpretation, Justice Bhatti held that the proviso to s. 31(4) imposes a directory condition, and since CCI approval was obtained before final adjudication, there was no material violation in AGI Greenpac’s resolution plan. This opinion argued that strict literal interpretation would hinder the efficiency of the resolution process under IBC.
Justice Bhatti emphasized that IBC is a time-sensitive statute, and requiring CCI approval before CoC approval could delay the process beyond statutory timelines. He noted that the Act of 2002 allows CCI up to 210 days to decide on a combination, while IBC mandates completion of the insolvency process within 330 days. Thus, requiring prior approval could derail insolvency proceedings due to regulatory delays, diminishing the value of the distressed asset.
The dissent further highlighted that competition authorities worldwide allow conditional approvals, which enable transactions to proceed while ensuring market safeguards. It also stated that a strict requirement for prior approval could be misused by rival resolution applicants to delay and sabotage resolution plans.
It was further held that since s. 31(4) does not prescribe penalties for failing to obtain prior CCI approval; it should be interpreted as a directory, allowing flexibility. Justice Bhatti also opined that while the CoC plays a pivotal role in resolution processes, commercial flexibility should be upheld to prevent unnecessary delays in insolvency resolution, even if CCI approval remains pending.
Our Analysis
At the heart of the ruling lies a conflict between literal interpretation and purposive interpretation, both of which offer distinct approaches to statutory construction. In the majority opinion, the judges adhered to the principle that the language of a statute must be given its natural meaning unless it results in absurdity. This approach aligns with established jurisprudence, which holds that when the words of a statute are clear and unambiguous, they must be applied as they stand without adding or subtracting from their meaning. This ruling also reflects strict adherence to legislative intent, preventing the judiciary from engaging in statutory modifications that should be left to Parliament instead.
The majority’s approach to statutory interpretation bears an uncanny resemblance to one of the fundamental rules in the game of golf – play the ball as it lies. Much like how the fundamental rules of golf prohibit altering the ball’s position to gain an unfair advantage, the Court emphasized that statutory language must be applied as written, without judicial modification or embellishment. After all, just like golf, the rule of law demands precision, not convenience.
Moreover, the majority’s stance prevents regulatory uncertainty, ensuring that resolution applicants do not circumvent crucial approvals to gain an undue advantage. Notably, the Court stated that the RP could not have unilaterally relaxed a statutory condition over a casual email to resolution applicants. While purposive interpretation might allow a more flexible application of the law, it also introduces uncertainty and subjectivity, which could be exploited by corporate entities to subvert statutory safeguards. Even otherwise, considering the purpose behind inserting the proviso to s. 31(4), it is evident that its intended function was to require prior CCI approval for resolution plans containing proposed combinations. This ensures that the CoC evaluates legally tenable plans rather than hypothetical or speculative ones. Therefore, the literal approach emerges as a more comprehensive and legally watertight interpretation, ensuring compliance without creating repugnancy or redundancies in statutory interpretation.
In contrast, Justice Bhatti’s dissenting opinion argued that legislative foresight is inherently limited and that statutes should be interpreted in a way that aligns with their objectives. Given that IBC mandates completion of the resolution process within 330 days, while CCI can take up to 210 days to process combination applications, he contended that a strict reading of s. 31(4) could lead to procedural bottlenecks. However, the majority opinion effectively addresses this concern, pointing out that CCI’s Annual General Report for 2022-23 states that most combination approvals are processed within 21 days, with no recorded instance of a combination approval taking longer than even 120 days. This substantially reduces the risk of regulatory delays affecting the insolvency resolution timeline.
While it is correct that a statutory provision must be interpreted to advance its objective rather than frustrate it, the dissenting opinion fails to address the express statutory requirement of ‘prior approval’, which remains unambiguous. If the legislature intended a more flexible approach, it could have expressly drafted the provision to allow post facto approval or omitted the term ‘prior’ altogether. Furthermore, merely because the proviso does not specify penal consequences for non-compliance does not render it a directory. In fact, the proviso can be read to imply that a resolution plan without CCI approval cannot even be placed before the CoC, which itself functions as an implicit penalty for non-compliance. Even otherwise, if statutory rigidity leads to unintended consequences, the legislative process remains open to amendments, but such flexibility cannot be assumed through judicial interpretation alone.
End Notes
[i] 2025 SCC OnLine SC 181, dated: 29.01.2025.
[ii] Under s. 3(3) of the Competition Act, 2002, AAEC refers to anti-competitive agreements that distort market competition. It is presumed when enterprises or associations engaged in identical or similar trade fix prices, restrict production, supply, or markets, divide markets or customers, or engage in bid rigging. Such agreements, including cartels, limit competition, inflate prices, and reduce consumer choice. The presumption is rebuttable, allowing parties to prove otherwise.
Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.