Supreme Court: While considering this appeal filed by the resolution applicants wherein, they challenged the dismissal of their appeals concerning approval of Resolution Plan submitted by Sarda Energy and Minerals Limited (SEML) for SKS Power Generation Limited (corporate debtor) by the National Company Law Appellate Tribunal (NCLAT); the Division Bench of B.V. Nagarathna* and R. Mahadevan, JJ., emphasised that the core of Insolvency and Bankruptcy Code, 2016 (IBC) is the doctrine of commercial wisdom, i.e., a conscious legislative choice to vest decisive authority in the Committee of Creditors (CoC) comprising financial creditors who bear the economic consequences of failure. Therefore, judicial intervention beyond the narrow statutory confines undermines both predictability and finality. Recognising this, the IBC deliberately confines judicial review to strict statutory compliance under Sections 30(2) and 61(3).
The Court cautioned that IBC represents a conscious legislative choice to privilege speed, certainty, and creditor-driven decision-making over exhaustive judicial scrutiny. “Experience shows that unsuccessful bidders will always try to spin commercial decisions of the CoC as procedurally faulty in order to secure a second shot through litigation by filing applications or making representations”. It was emphasised that, courts need to remain vigilant against any temptation to expand the scope of review beyond the narrow boundaries prescribed by IBC.
“The doctrine of commercial wisdom thus embodies both institutional discipline and legislative intent: insolvency resolution must be efficient, market-responsive and guided by those best placed to evaluate commercial risk”.
Background:
By its impugned order dated 1 October 2024, NCLAT had affirmed the order of National Company Law Tribunal (NCLT) vide which it had allowed application filed by the corporate debtor’s Resolution Professional (RP) for approval of Resolution Plan submitted by SEML. By the same order NCLT had rejected the applications filed by other unsuccessful resolution applicants i.e., Torrent, Vantage and Jindal (appellants).
The appellants had contended that SEML had modified its Resolution Plan after the negotiation process had concluded and the commercial offers by all resolution applicants stood frozen. The appellants further submitted that while the CoC’s commercial wisdom is generally accorded primacy, it is well-settled that such commercial wisdom must be exercised strictly within the four corners of the IBC. Commercial wisdom of the CoC is ordinarily nonjusticiable, this immunity cannot extend to decisions that are patently capricious, arbitrary, and/or irrational.
Per contra, the respondents argued that the legislature has consciously kept any factual determination or adjudication on matters pertaining to commercial decision making by the CoC outside the scope of Sections 61(3) and 62 of IBC.
Issues framed:
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Whether the clarifications furnished by SEML pursuant to queries raised by the RP in relation to the treatment and replacement of BGs and the option of upfront payment, resulted in any enhancement or modification of SEML’s Resolution Plan?
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Whether, the Resolution Plan having been approved by the NCLT and the NCLAT and implemented as on date, any interference is permissible by Supreme Court at this stage in the instant case?
Court’s Assessment:
Perusing the appeals and the issues framed, the Court firstly stated that an appeal to the Supreme Court under Section 62 IBC is available only on a question of law. Furthermore, an appeal provided under Section 61 IBC before the NCLAT is available only on 5 grounds enshrined in the provision.
The Court opined that the appellants’ appeal before the NCLAT did not fit into the grounds under Section 61. The Court pointed out that it was admitted that RP admitted fact that in the present case, the RP has acted strictly on the instructions of the CoC. During the evaluation of the Resolution Plans submitted by the resolution applicants, the CoC identified certain ambiguities and directed the RP to seek clarifications from all the resolution applicants. Pursuant to the CoC’s directions, the RP issued emails seeking clarifications from all the resolution applicants including SEML on certain specific aspects vis-à-vis each resolution applicant and plan. The RP did not take any independent or unilateral decision; he merely communicated the CoC’s queries and placed all responses including that of SEML before CoC.
The Court stated that where the RP acts on the instructions of the CoC, such conduct cannot, by any stretch of imagination, be characterised as a “material irregularity” within the meaning of Section 61(3)(ii) IBC. “To hold otherwise would be to conflate the statutorily distinct roles of the RP and the CoC and to indirectly subject decisions of the CoC to judicial review, contrary to the scheme of the IBC”. The Court further found that appeals before Supreme Court on a conjoint reading of Sections 61 and 62 IBC are also not tenable since no question of law pertaining to any of the five grounds specified in Section 61 IBC arises for consideration.
The Court noted that though the present appeals could have been dismissed at threshold only on the basis of the concurrent findings of the NCLT and the NCLAT and non-application of Section 62 of the IBC, nonetheless, the Court deemed it fit to examine the contentions advanced on their merits.
Perusing the appellants’ contentions regarding alleged modification of the commercial offer by SEML, the Court pointed out that SEML’s Resolution Plan from its inception, contemplated that the entire margin money of Rs 180.05 crores lying with the issuing banks would ultimately flow to the CoC for payment to secured financial creditors. The Court thus did not find any force in the appellants’ contention that SEML had enhanced its offer for replacement of BGs from Rs 103.39 crores to Rs 180 crores. The contention was held to be wholly erroneous.
The Court concluded that neither of the issues raised by the appellants establish any modification of the Resolution Plan or any material irregularity in the conduct of the RP. “What remains is, in substance, a challenge to the commercial decision taken by the CoC. The IBC leaves no scope for judicial intervention even here”.
The Court reiterated that commercial wisdom of the CoC enjoys primacy and cannot be supplanted by judicial review. Neither the NCLT, nor the NCLAT nor even Supreme Court is empowered to substitute its assessment in place of the commercial decision arrived at by a requisite majority of the CoC.
The Court further cautioned that the present appeals typify the growing strategic use of the judicial system by unsuccessful resolution applicants, who seek to reopen almost every commercial decision under the guise of procedural impropriety. This converts the corporate resolution process into a protracted adversarial contest and erodes the value of the Corporate Debtor. Such an approach incentivises delay, rent-seeking, and strategic obstruction and is fundamentally inconsistent with the economic logic and statutory design of the IBC.
Since the Resolution Plan was approved by both the NCLT and the NCLAT and has since been implemented, there was no chance for Court’s intervention. Hence the appeals were dismissed and NCLAT’s impugned judgment was affirmed.
In its concluding remarks, the Court cautioned, excessive judicial review in the CIRP carries significant economic costs that run counter to the objects of IBC. The IBC is premised on the recognition that delay and uncertainty are value-destructive in distressed situations. When commercial decisions taken by the CoC are subjected to expansive judicial scrutiny, resolution timelines lengthen, transaction costs rise, and the going-concern value of the Corporate Debtor erodes. The consequence therefore is not merely delay, but a tangible loss of economic value for all stakeholders. Furthermore, the expectation of expansive judicial review distorts incentives for future bidders. Excessive review also encourages strategic litigation. Stakeholders with little to no economic interest in the Corporate Debtor may resort to litigation as a bargaining tool to delay implementation of the Resolution Plan or extract concessions, thereby converting the insolvency process into an adversarial contest. Such conduct takes the process away from its objective of value maximisation.
[Torrent Power Ltd. v. Ashish Arjunkumar Rathi, 2026 SCC OnLine SC 325, decided on 27-2-2026]
*Judgment by Justice BV Nagarathna
Advocates who appeared in this case:
Mrs. Gauri Rasgotra, Adv., Mr. Manish Kharbanda, Adv., Ms. Charu Mathur, AOR, Ms. Priyashree Sharma Ph, Adv., Ms. Ekta Gupta, Adv., Mr. Shivansh Agarwal, Adv., Ms. Neha Maniktala, Adv., Mr. Karan Singh Duggal, Adv., Mr. S. S. Shroff, AOR, M/s. D.S.K. Legal, AOR, Mr. Samir Malik, Adv., Mr. Shahan Ulla, Adv., Mr. Jash Shah, Adv., Mr. Varun Kalra, Adv., Mr. Pranav Khana, Adv., For Appellant(s)
Mr. N. Venkatraman, A.S.G., Mr. Gopal Jain, Sr. Adv., Mr. Madhav Kanoria, Adv., Ms. Srideepa Bhattacharyya, Adv., Ms. Srideepa Bhattachharyya, Adv., Ms. Neha Shivhare, Adv., Mr. Vikash Kumar Jha, Adv., M/s. Cyril Amarchand Mangaldas, AOR, Mr. Ramakant Rai, Adv., Mr. Somesh Srivastava, Adv., Ms. Drishti Kaushik, Adv., M/s. Trilegal Advocates On Record, AOR, Mr. Neeraj Kishan Kaul, Sr. Adv., Mr. Mahesh Agarwal, Adv., Mr. Manu Krishnan, Adv., Ms. Pooja Mahajan, Adv., Ms. Geetika Sharma, Adv., Mr. Savar Mahajan, Adv., Ms. Sanjivani Pattjoshi, Adv., Mr. Uday Aditya Jetly, Adv., Mr. Uday Aditya Jetley Pocha, Adv., Mr. Toshiv Goyal, Adv., Mr. Saurabh Bachhawat, Adv., Mr. Varun Tyagi, Adv., Mr. Srivatsava Reddy Beerapall, Adv., Mr. E. C. Agrawala, AOR, Mr. Aman Malik, AOR, For Respondent(s)