Abstract
The introduction of the Insolvency and Bankruptcy Code, 2016 (IBC) signifies an important change to the Indian regulatory framework for corporate insolvency resolution by introducing a single time-bound system for the resolution of financially distressed corporations. The IBC aims to achieve the optimal value of the corporate estate, ensure the efficient resolution of insolvency cases, and maintain a balance between the interests of stakeholders. An important part of the IBC system is the incorporation of the “commercial wisdom” of the Committee of Creditors (CoC), enabling the creditors to exercise primary control over the approval of the resolution plan while limiting the scope for judicial intervention.
Despite the regulatory system’s intentions, the judicial authorities continue to play an important role in the supervision of the insolvency resolution process. Judicial officials frequently vary from guidelines because they feel that intervention is essential to keeping appropriate processes, maintaining compliance with appropriate regulations, & protecting those who will ultimately bear the burdens of resolving an insolvency. Recent years have seen an increasing level of scrutiny by courts towards judicial interventions – this has called into question how such interventions will affect the efficiency with which cases are resolved.
This paper will review all instances of judicial intervention within the context of the new corporate insolvency framework found in the IBC legislation; particularly, how such judicial interventions were addressed through the decision rendered in Kalyani Transco v. Bhushan Power and Steel Ltd. Based upon a review of the decision rendered therein and predetermined sections of the IBC, this article will provide analysis concerning the effectiveness of judicial intervention for improving accountability within the regulatory system while continuing to address the historical autonomy that has been afforded creditors under traditional methods for dealing with insolvent corporate entities (i.e. commercial insolvencies).
Introduction
Corporate Insolvency in India has long been a matter of concern from a legal and economic point of view. Until the introduction of the Insolvency and Bankruptcy Code, 2016 (IBC), in India, various laws were in place to govern corporate insolvency, including the Sick Industrial Companies (Special Provisions) Act, 1985; the Recovery of Debts Due to Banks and Financial Institutions Act, 1993; and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Such a multi-pronged approach to corporate insolvency in India often gave rise to conflicting jurisdictions, thereby leading to delays in the resolution of corporate debt situations. As a result, it became extremely difficult for creditors to recover their dues, and corporate debtors faced a decline in the overall value of their assets due to lengthy legal proceedings[1].
Keeping in view these inefficiencies in corporate debt resolution in India, the Indian Parliament enacted a comprehensive code of corporate insolvency in India through the Insolvency and Bankruptcy Code, 2016. The IBC aims to ensure a time-bound resolution of corporate debt situations, maximise the overall value of corporate assets, ensure easy access to credit, and balance the interests of various stakeholders in corporate debt situations in India[2]. An integral feature of IBC is the creditor-driven approach, where, during the Corporate Insolvency Resolution Process (CIRP), decision-making authority vests in the hands of the Committee of Creditors (CoC)[3]. Such a feature of IBC is a reflection of the Indian Parliament’s intent to ensure commercial decisions in IBC proceedings are left to creditors and judicial intervention in approving a resolution plan is kept to a minimum.
Within the institutional mechanism established under the IBC, the National Company Law Tribunal is responsible for handling cases of corporate insolvency. At the same time, the National Company Law Appellate Tribunal has been granted appellate jurisdiction to hear appeals against the decisions of the National Company Law Tribunal[4].
The Supreme Court of India has been conferred with appellate jurisdiction over the decisions of the National Company Law Appellate Tribunal. In a series of landmark judgments, the Indian judiciary has clarified the scope and objectives of the IBC. In the judgment delivered in the case of Swiss Ribbons Pvt. Ltd. v. Union of India, the Supreme Court upheld the constitutional validity of the IBC and emphasised the importance of the prompt resolution of insolvency cases[5]. In another judgment delivered in the case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the Supreme Court reasserted the view that “commercial wisdom” of the Committee of Creditors falls outside the judicial review mechanism[6].
Despite the legislative intent to restrict judicial intervention under the IBC, the Indian judiciary and judicial authorities have been actively involved in the process of ensuring that the requirements of the law are met. The increased involvement of judicial authorities has given rise to concerns over the extent of judicial oversight that can be permitted under the IBC. Excessive judicial intervention may undermine the autonomy of creditors and impact the smooth resolution process, while inadequate judicial oversight may lead to procedural injustices to stakeholders.
Kalyani Transco v. Bhushan Power deals with several issues surrounding how much the courts should involve themselves in the corporate insolvency processes. The matter dealt with considerable financial claims by the parties involved in the insolvency resolution processes, as well as competing interests from all parties who provided funding to Bhushan Power. There is a fine line between the level of court or judge involvement in the insolvency resolution process and the creditors’ level of autonomy regarding the management of their own assets. This article will look at the evolving scope of judicial intervention under the IBC and attempt to determine if the level of such intervention enhances or interferes with the principle of commercial wisdom, which is one of the primary purposes of the Code[7].
[1] See generally Sick Industrial Companies (Special Provisions) Act, No. 1 of 1986 (India); Recovery of Debts Due to Banks and Financial Institutions Act, No. 51 of 1993 (India); Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, No. 54 of 2002 (India)
[2] Insolvency and Bankruptcy Code, No. 31 of 2016, pmbl. (India)
[3] Id. §§ 21, 30(4)
[4] Id. §§ 61–62
[5] Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17.
[6] Comm. of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531.
[7] Kalyani Transco v. Bhushan Power and Steel Ltd, 2025 INSC 621; Civil Appeal No. 1808 of 2020