Supreme Court Mandates CCI Approval Before Insolvency Resolution Plans Involving Mergers
Date
1/30/2025 2:08:27 PM
(MENAFN- KNN India)
New Delhi, Jan 30 (KNN) In a game-changing ruling, India's Supreme Court has significantly altered the country's insolvency landscape by mandating that any resolution Plan involving mergers or acquisitions (termed "combinations") must first obtain approval from the Competition Commission of India (CCI) before being reviewed by the Committee of Creditors (CoC).
This decision, passed by a three-judge bench, reinforces the importance of competitive markets and ensures that antitrust concerns are addressed early in the insolvency process.
Under the Insolvency and Bankruptcy Code (IBC), companies undergoing Corporate Insolvency Resolution Process (CIRP) receive bids from potential buyers.
These Resolution Plans are then evaluated by the CoC before being presented to the National Company Law Tribunal (NCLT) for final approval.
However, the Supreme Court's ruling now dictates that if the plan involves substantial market changes-such as mergers or acquisitions-the CCI's approval is essential before the CoC can consider the proposal.
The case stemmed from a dispute over the approval of a Resolution Plan for Hindustan National Glass and Industries Ltd. (HNGIL), where CCI had greenlit the merger with AGI Greenpac without following the due process.
The Court emphasised that the CCI must issue a Show Cause Notice (SCN) to both the acquirer and the target company, particularly when the combination could have significant effects on market competition.
The failure to do so was deemed a procedural lapse that could undermine the fairness of the approval process.
This ruling highlights the intersection of insolvency and competition law, requiring businesses to comply with both frameworks.
Legal experts note that by mandating CCI approval upfront, the Court aims to prevent market distortions that could arise from large players acquiring distressed assets without full antitrust scrutiny.
The decision is expected to have wide-reaching implications for insolvency cases involving large-scale mergers, with experts stressing that businesses must now prioritise compliance with competition laws to avoid penalties or delays in resolution processes.
(KNN Bureau)
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