INDEPENDENT SUGAR CORPORATION LTD. VS GIRISH SRIRAM JUNEJA  & ORS: CASE SUMMARY

The Supreme Court in Independent Sugar Corporations Ltd. Vs. Girish Sriram Juneja & Ors (Civil Appeal No. 6071 /2023) held that obtaining approval by Competition Commission of India prior to the approval of the resolution plan by the Committee of Creditors is mandatory in cases where there is provision for combination under the Resolution Plan. The objectives of the IBC and the Competition Act must necessarily be in harmony with one another. Expeditious resolution cannot come at the cost of disregarding statutory provisions

BRIEF FACTS

CIRP was initiated in the matter of  Hindustan National Glass and Industries Ltd. (HNGIL)  vide order dated 21.10.2021.  HNGIL is  having 60% market share in glass packaging industry. During CIRP, Several Resolution Applicants including  Independent Sugar Corporations Ltd. (INSCO), the appellant herein and AGI Greenpac submitted their Resolution Plans. Resolution Applicant, AGI Greenpac Ltd. is the second largest glass packaging company in India. The combination between AGI Greenpac and HNGIL would have  potential market share of 80-85% in F&B segment.

The RP in e-mail communication dated 25.08.2022 granted relaxation to Resolution Applicants to procure CCI approval after CoC approval of the Resolution Plan but before approval by Adjudicating Authority. AGI Greenpac submitted application on 27.09.2022 before CCI seeking approval of combination which was rejected by the CCI. Subsequently, Resolution Plan was submitted for approval of CoC by AGI Greenpac. At the time of submission of Resolution Plan. AGI Greenpac neither has approval of CCI nor any pending application before CCI.   

CoC approved AGI Greenpac Resolution Plan with 98% while Resolution Plan of INSCO received 88% votes.

AGI Greenpac again filed application before CCI for approval on 03.11.2022. On 10.03.2023  AGI Greenpac filed divestment plan in respect of one of the plants before CCI and subsequently CCI approved the combination on 15.03.2023.

Resolution Professional filed application for approval of Resolution Plan before Adjudicating Authority. The Appellant filed an objection. On 28.04.2023, Resolution Plan of AGI Greenpac was approved by Adjudication Authority and objection filed by INSCO was rejected.

Appellant filed an appeal before NCLAT which was dismissed. The NCLAT observed that although approval by CCI was mandatory, it prior approval by CoC was only directory. The timeline for CCI to decide upon a combination proposal is much longer and should not lead to a situation where the CIRP is frozen or halted because of a pending application before the CCI. INSCO also challenged the CCI approval before NCLAT which was also dismissed.

The decisions of NCLAT were challenged before the Supreme Court.

FINDINGS OF THE SUPREME COURT

The Supreme Court noted that the Appellant has locus standi to file appeal before the supreme court under IBC as “any person aggrieved” can file appeal.  Similarly, the Appellant has locus standi to file an appeal under Competition Act as “any enterprise or any person aggrieved” can file an appeal. The Appellant as an unsuccessful resolution applicant satisfies the requirement of being aggrieved.

The Supreme Court noted that Section 31 (4) has been inserted by Insolvency and Bankruptcy Code (Amendment) Act, 2018 which provides that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under the Act prior to the approval of the such resolution plan by the Committee of Creditors.

The Supreme Court noted that the above provision makes it abundantly clear that the proviso  creates an exception for those Resolution Plans that contain provisions for combination. The language used therein appears to be clear, precise & straightforward. As such, to understand the legislative intent, the rule of plain reading or literal interpretation should find favour rather than the rule of purposive interpretation as is suggested by the other side. The Courts should not arrogate the legislature’s role by filling gaps in statutory text. Where there is no ambiguity in the words used, the question of finding a disguised intention or purpose behind the use of a particular word would not ordinarily arise.

The Supreme Court noted that a timeline was incorporated to plug a loophole and provide for a schedule to obtain necessary approvals, which was hitherto not provided. At the same time, a distinction was drawn between necessary approvals required to be received from different statutory bodies and regulatory authorities vis-à-vis the CCI’s approval. In case of other statutory bodies, a timeline of one year subsequent to the CoC’s approval to the Resolution Plan was deemed to be sufficient, whereas the timeline for procuring the CCI’s approval was brought ahead in the sense that the same was required to be obtained prior to the approval of the Resolution Plan by the CoC.

The Supreme Court observed that to ensure that entities operate with utmost confidence in the sanctity and fairness of India’s legal and regulatory system, the objectives of the IBC and the Competition Act must also necessarily be in harmony with one another. Expeditious resolution cannot come at the cost of disregarding statutory provisions. Providing relief for stressed assets must necessarily align with the statutory framework, as adherence to legal principles is fundamental to a fair and just resolution process.

The Supreme Court set aside the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval and status quo ante was restored.

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