The Supreme Court has upheld the approval of Sarda Energy and Minerals Limited’s resolution plan for SKS Power Generation (Chhattisgarh) Limited, reaffirming that the “commercial wisdom” of the Committee of Creditors (CoC) is paramount and cannot be interfered with in the absence of material irregularity under the Insolvency and Bankruptcy Code, 2016.
Case Details
- Case Title: Torrent Power Ltd. v. Ashish Arjunkumar Rathi & Others
- Court: Supreme Court of India
- Bench: Justice B.V. Nagarathna
- Judgment Citation: 2026 INSC 206
- Decision Date: 2026
- Civil Appeal Nos.: 11746–11747 of 2024, 11689–11690 of 2024, 12994–12995 of 2024
Supreme Court on Commercial Wisdom of CoC Under IBC
In a detailed judgment, the Supreme Court once again underscored that the Insolvency and Bankruptcy Code, 2016 (IBC) marks a decisive shift from a court-centric insolvency regime to a creditor-driven process. The Court began with a strong reaffirmation of legislative intent:
“The IBC recognises that decisions on viability, valuation, and acceptable haircuts are inherently commercial, not judicial. Courts, therefore, do not substitute their assessment for that of the CoC.”
The Court observed that the doctrine of commercial wisdom embodies both institutional discipline and legislative intent, requiring insolvency resolution to remain efficient and market-responsive.
Background
The Corporate Insolvency Resolution Process (CIRP) was initiated against SKS Power Generation (Chhattisgarh) Limited under Section 7 of the IBC upon an application filed by Bank of Baroda. The National Company Law Tribunal (NCLT), Mumbai Bench-IV, admitted the petition on 29 April 2022.
During the CIRP:
- Expressions of Interest were invited.
- Multiple resolution applicants, including Torrent Power Limited, Vantage Point Asset Management, Jindal Power Limited, and Sarda Energy and Minerals Limited (SEML), submitted plans.
- An inter-se bidding process was conducted.
- SEML’s resolution plan was approved with 100% voting share by the CoC in its 31st meeting.
The Resolution Professional thereafter filed an application under Section 30(6) seeking approval of SEML’s plan. The NCLT approved it, and the NCLAT affirmed the decision. The unsuccessful applicants then approached the Supreme Court under Section 62 of the IBC.
Alleged Modification of SEML’s Resolution Plan
The appellants contended that SEML had modified its commercial offer after conclusion of negotiations in violation of the Process Note and Request for Resolution Plan (RFRP). Two specific allegations were raised:
- SEML allegedly increased its commitment towards replacement of bank guarantees (BGs) from ₹103.39 crore to ₹180.05 crore.
- SEML allegedly converted a deferred payment of ₹240 crore into an upfront payment.
According to the appellants, these amounted to material irregularities warranting judicial interference.
Supreme Court’s Analysis on “Material Irregularity” Under Section 61(3)
The Court first examined the statutory framework under Sections 61 and 62 of the IBC. It noted that appeals against approval of a resolution plan are limited to five specific grounds, including:
- Contravention of law,
- Material irregularity by the Resolution Professional,
- Non-provision for operational creditors,
- Non-payment of CIRP costs in priority,
- Non-compliance with Board-specified criteria.
The Court found that the only ground remotely invoked was “material irregularity” under Section 61(3)(ii). However, it held:
“Where the RP acts on the instructions of the CoC, such conduct cannot, by any stretch of imagination, be characterised as a ‘material irregularity’.”
The Resolution Professional had merely communicated clarifications sought by the CoC from all applicants. There was no unilateral decision or deviation from statutory duties.
Issue 1: Treatment of Bank Guarantees- No Enhancement of Offer
The Court carefully examined the email correspondence between the RP and SEML dated 8 May 2023 and 10 May 2023.
SEML’s resolution plan had originally provided that:
- The margin money of ₹180.05 crore backing all bank guarantees would be returned to the Corporate Debtor and utilised for secured financial creditors.
- Fresh infusion of ₹103.39 crore was required only for continuing certain bank guarantees (Serial Nos. 1 to 5).
- Other guarantees (Serial Nos. 6 and 7) were to be extinguished along with underlying liabilities.
The clarification merely explained that until cancellation of certain guarantees, replacement margin money would be provided to ensure banks were not left unsecured.
The Court concluded:
“The payment to the CoC was Rs.180.49 crores before clarification and remained Rs.180.49 crores even after the clarification.”
Thus, there was no enhancement of the commercial offer.
Issue 2: Deferred vs Upfront ₹240 Crore- No Modification
SEML’s plan provided:
- ₹240 crore as deferred payment via Non-Convertible Debentures (NCDs) with 10% coupon.
- An alternative option allowing the CoC to take ₹240 crore upfront.
The RP sought clarification on whether “discounted amount of ₹240 crore” meant a further discount.
SEML clarified that ₹240 crore already represented the discounted present value of ₹301.64 crore payable over time. Therefore, there was no additional discount nor any enhancement.
The Court observed that the option structure existed from inception and remained unchanged.
Concurrent Findings of NCLT and NCLAT
The Supreme Court emphasized that both the NCLT and the NCLAT had concurrently held:
- No modification of the resolution plan,
- No material irregularity,
- No breach of Process Note or RFRP.
Citing settled principles, the Court reiterated that interference with concurrent findings under a special statute is impermissible unless findings are perverse, arbitrary, or in violation of mandatory statutory provisions.
No such circumstance existed.
Commercial Wisdom of CoC Reaffirmed
In emphatic terms, the Court reiterated that judicial authorities cannot sit in appeal over commercial decisions of the CoC:
“The IBC leaves no scope for judicial intervention… What remains is, in substance, a challenge to the commercial decision taken by the CoC.”
The Court reaffirmed that even a higher financial bid does not compel acceptance. The CoC is not obligated to choose the numerically highest offer if it finds another plan more viable and feasible.
Implementation of the Resolution Plan
An additional factor weighed by the Court was that SEML’s resolution plan had already been fully implemented and payments made to creditors.
Interference at this stage would disrupt completed transactions and undermine certainty in insolvency resolution.
Final Decision
The Supreme Court dismissed all the civil appeals filed by Torrent Power Limited, Vantage Point Asset Management, and Jindal Power Limited, holding that:
- No material irregularity was established.
- No question of law arose under Section 62.
- Commercial wisdom of the CoC cannot be re-examined.
- The resolution plan was validly approved and implemented.
The approval of SEML’s resolution plan stood confirmed.
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