SUPREME COURT ON COMMERCIAL WISDOM OF COC
CASE SUMMARY- The Supreme Court in Torrent Power Ltd. vs. Ashish Arjunkumar Rathi & Others examined whether clarifications provided by a successful resolution applicant amounted to modification of its resolution plan during the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 . Unsuccessful bidders alleged discrimination and material irregularity.
The Court held that the clarifications did not alter the commercial terms of the resolution plan and that the Resolution Professional acted on directions of the Committee of Creditors. Reaffirming the doctrine of commercial wisdom, the Court ruled that judicial authorities cannot interfere with CoC decisions unless statutory violations or procedural irregularities exist. Consequently, the appeals were dismissed.
| ASPECTS | DETAILS |
| Case Title | Torrent Power Ltd. vs. Ashish Arjunkumar Rathi & Others |
| Introduction | The case deals with the scope of judicial review over decisions of the Committee of Creditors during the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code. The dispute arose after unsuccessful resolution applicants challenged the approval of a resolution plan. |
| Factual Background | CIRP was initiated against SKS Power Generation (Chhattisgarh) Ltd. Several resolution applicants including Torrent Power, Vantage, and Jindal submitted plans. The CoC approved the plan of Sarda Energy & Minerals Ltd with 100% vote. Unsuccessful applicants alleged that SEML modified its offer after the bidding process. |
| Legal Issues | 1. Whether clarifications given by SEML constituted modification of the resolution plan. 2. Whether courts can interfere with the commercial wisdom of the Committee of Creditors. |
| Applicable Law | Insolvency and Bankruptcy Code, 2016 - Sections 30, 31, 61, and 62 governing resolution plan approval and appeals. |
| Analysis | The Court analyzed emails and plan clauses and concluded that SEML only clarified treatment of bank guarantees and deferred payments. The Court emphasized that the Resolution Professional merely acted on CoC directions. Judicial review is limited and does not extend to evaluating commercial viability of competing plans. |
| Conclusion | The Supreme Court dismissed the appeals, holding that there was no modification of the resolution plan and no material irregularity in the process. |
| Current Scenario | The resolution plan approved by the CoC has already been implemented and payments have been made to creditors. The judgment strengthens the principle that courts should not interfere with commercial decisions of creditors under IBC. |
"Courts cannot substitute the commercial wisdom of the Committee of Creditors in insolvency resolution unless there is a clear statutory violation."
SOURCE - SUPREME COURT OF INDIA
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