The Supreme Court has clarified that although the commercial wisdom of the Committee of Creditors (CoC) enjoys primacy under the Insolvency and Bankruptcy Code (IBC), courts can still examine it where a case involves statutory illegality or a jurisdictional error.
A Bench of Justice Vikram Nath and Justice Sandeep Mehta made this observation while considering a Miscellaneous Application (MA) that sought revival of a Special Leave Petition (SLP) dismissed earlier.
The Bench observed:
“…it is necessary to state that primacy of commercial wisdom does not mean that every action taken in the insolvency process is altogether immune from scrutiny in every situation. Where a challenge is laid in an appropriate proceeding on a legally sustainable foundation, such as statutory illegality or a jurisdictional infirmity, the matter would naturally be considered in accordance with law.”
Background Of The Matter
The Court made this observation as a parting remark while hearing the MA, which the applicant filed on the basis of developments that arose after dismissal of the earlier SLP. In that earlier SLP, the Court had refused to interfere with the insolvency proceedings and had upheld the CoC’s decision to approve withdrawal of the Corporate Insolvency Resolution Process (CIRP) under Section 12A of the IBC.
Later, the applicant approached the Court through the MA and argued that his financial offer was higher. He also contended that the CoC had not considered that offer and that, therefore, the decision to withdraw the CIRP had become legally unsustainable.
Court Rejects MA As Not Maintainable
The Supreme Court, however, rejected the plea as not maintainable. For this, it relied on Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power, Rajasthan Ltd., 2024 LiveLaw (SC) 241.
Even so, while rejecting the application, the Court addressed the broader question concerning the extent of judicial review over decisions of the CoC. In that context, it added an important qualification to the well-settled principle of deference to creditor autonomy.
Commercial Decisions And Legal Scrutiny
The Court clarified that commercial decisions of the CoC such as evaluating competing offers, approving a one-time settlement (OTS), or negotiating financial terms remain non-justiciable. Therefore, courts cannot interfere with such business decisions merely because another financial offer appears more attractive.
At the same time, the Bench made it clear that legal aspects of such decisions can still invite scrutiny where a party establishes violation of statutory provisions under the IBC, procedural irregularity, or jurisdictional overreach by the CoC or the adjudicating authority.
No Interference With CoC’s Decision In Present Case
On the facts of the case, the Court found that the CoC had refused the applicant’s offer on the commercial side. Therefore, it declined to interfere with that decision-making power and upheld the CoC’s decision to withdraw the CIRP.
The Court observed:
“In these proceedings, which arise out of a disposed of SLP in a civil revision concerning an Agreement to Sell, this Court cannot be called upon to sit over the comparative financial attractiveness of rival offers or to substitute its own view for the business decision taken by the CoC in the statutory process under the IBC. The mere assertion by the applicant that its offer was higher would not, by itself, furnish a ground to reopen the dismissal of the SLP or to unsettle steps taken in a separate insolvency framework.”
MA Dismissed
Accordingly, the Supreme Court dismissed the Miscellaneous Application.
Cause Title: M/s. Lamba Exports Pvt. Ltd. versus M/s. Dhir Global Industries Pvt. Ltd. and Ors.
Appearance
For Applicant(s)/Petitioner(s): Mr. Gopal Shankaranarayan, Senior Advocate; Mr. Jasbir Singh Malik, Advocate; Ms. Prachi Sohi, Advocate; Ms. Pooja Devi, Advocate; Mr. Varun Punia, AOR.
For Respondent(s): Mr. Siddhartha Dave, Senior Advocate; Mr. Mriganga Dutta, Senior Advocate; Mr. Anuroop Chakravarti, Advocate; Mr. M. S. Vishnu Sankar, Advocate; Ms. Athira G. Nair, Advocate; Mr. Venugopal Pillai, Advocate; Mr. Anand Kumar Soni, Advocate; M/s Lawfic, AOR; Mr. Gopal Jain, Senior Advocate; Ms. Ekta Choudhary, AOR; Ms. Rushali Sikand, Advocate; Mr. Ankur Anand, Advocate; Mr. Mandeep Kalra, AOR; Ms. Radhika Narula, Advocate; Ms. Anushna Satapathy, Advocate; Ms. Chitrangada Singh, Advocate; Mr. Yashas J, Advocate; Ms. Gauri Rajput, Advocate; Mr. Vaibhav Yadav, Advocate; Mr. Paras Mohan Sharma, Advocate.
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