IBC | SUPREME COURT WARNS AGAINST OVERREACH IN JUDICIAL REVIEW, DECRIES ATTEMPTS TO REOPEN COC DECISIONS BY FAILED BIDDERS:

The Supreme Court of India on Thursday expressed serious concern over the increasing tendency of unsuccessful resolution applicants to challenge nearly every commercial decision taken by the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court observed that such challenges are often presented as allegations of procedural impropriety, but in reality, amount to attempts to secure a second opportunity through litigation. According to the Court, this practice converts the corporate insolvency resolution process into a prolonged adversarial exercise, undermines value maximisation, and runs counter to both the economic rationale and statutory framework of the IBC.

A Bench comprising Justices B.V. Nagarathna and R. Mahadevan cautioned that judicial review of CoC decisions must remain strictly confined to the narrow limits prescribed under the IBC. The Court noted that the IBC represents a deliberate legislative shift that prioritises speed, certainty, and creditor-driven decision-making over exhaustive judicial scrutiny. It highlighted that experience has shown unsuccessful bidders frequently attempt to recharacterise purely commercial determinations of the CoC as procedural defects in order to delay the process or reopen concluded issues. The Court stressed that expanding the scope of judicial review beyond statutory boundaries would defeat the very objectives of the insolvency regime.

The Bench further observed that excessive judicial intervention encourages strategic litigation. Stakeholders with little or no genuine economic interest in the corporate debtor may use litigation as a bargaining tool to delay implementation of resolution plans or extract concessions. Such conduct, the Court held, diverts the insolvency process from its central objective of value maximisation and transforms it into a forum for rent-seeking and obstruction. The Court emphasised that predictability and finality are essential features of a robust insolvency framework, and judicial interference beyond the scope of the IBC erodes both. Recognising this, the IBC deliberately confines judicial scrutiny to compliance with statutory requirements, and respecting these limits is essential to preserving the market-driven and time-bound nature of the insolvency process.

These observations were made while dismissing appeals filed by Torrent Power Ltd., Vantage Point Asset Management Pvt. Ltd., and Jindal Power Ltd., all of whom were unsuccessful resolution applicants. The appeals challenged the approval of the resolution plan submitted by Sarda Energy and Minerals Ltd. for SKS Power Generation (Chhattisgarh) Ltd.. The Court found no material irregularity under Section 61(3) of the IBC and noted that the resolution plan had already been implemented. Consequently, it affirmed the decisions of the NCLT and NCLAT approving the plan.

Reiterating the doctrine of commercial wisdom, the Court held that decisions of the CoC enjoy primacy and cannot be supplanted by judicial bodies, including the NCLT, NCLAT, or the Supreme Court itself. The IBC, the Court noted, marks a clear departure from a court-centric insolvency model to a creditor-driven framework, where financial creditors, who bear the economic consequences of failure, are entrusted with decisive authority. Issues relating to viability, valuation, and acceptable haircuts are inherently commercial in nature and lie outside the domain of judicial assessment.

On the facts of the case, the Court rejected the appellants’ contention that the Resolution Professional had committed material irregularity. It observed that the Resolution Professional acted strictly on the instructions of the CoC, merely conveying its queries to all resolution applicants and placing their responses before it. Such conduct, the Court held, could not be construed as material irregularity, as doing so would blur the statutorily distinct roles of the Resolution Professional and the CoC, and indirectly subject commercial decisions of the CoC to impermissible judicial review. The Court concluded that the appeals disclosed no statutory ground for interference and raised no substantial question of law, leaving no scope for further intervention.