The Supreme Court in a landmark judgment has held that Section 31(4) of the Insolvency and Bankruptcy Code, 2016 is mandatory and not a directory.
The Bench comprising of Justice Hrishikesh Roy, Justice Sudhanshu Dhulia, and Justice S.V.N. Bhatti in a 2:1 ratio held that when the language of a provision is clear and unambiguous, the literal interpretation is the best way to understand the intention behind enacting a particular provision.
Justice Roy further observed that as India is focusing on a robust, competitive environment, the introduction to the green channel route which strives to create a level playing field is the way forward. He observed that the objectives of the IBC and Competition Act must be in harmony to one another. Further, he also observed that though significant delay in this case is unfortunate and regrettable, expeditious resolution cannot come at the cost of disregarding statutory provisions.
Justice Dhulia concurred with Justice Roy’s judgment while Justice Bhatti delivered a dissenting judgment. Justice Bhatti held that the proviso to section 31(4) should be interpreted purposively. Justice Bhati also held that the approval of a combination of CCI at the stage of consideration by the CoC is directory and not mandatory.
The majority held that AGI Greenpac’s Resolution Plan is unsustainable as it failed to secure prior approval from the CCI as mandated in the proviso to Section 31(4) of IBC. Consequently, the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval cannot be sustained and is set aside and quashed.
Any action taken pursuant to the said approval stands nullified, rights of all stakeholders shall be restored as per status quo on 28.10.2022. NCLT shall reconsider the Appellants resolution plan and any other resolution plan which possesses the necessary CCI approval as of 28.10.2022 i.e., the date on which CoC voted upon the Resolution Plan.
Dr. Abhishek Manu Singhvi, Mr. Mahesh Jethmalani along with Utsav Trivedi, and Manini Roy for M/s TAS LAW represented the Independent Sugar Corporation Limited.
Dushyant Dave, Sr. Advocate along with Chirag Shah, Advocate and Yadunath Bhargavan, Advocate represented HNG Nalasangam.
