The Supreme Court noted that the law must ensure three interdependent economic freedoms, including entering the market, continuing business operations under conditions of competitive neutrality, and exiting the market. File | Photo credit: The Hindu
The Insolvency and Bankruptcy Code (IBC) represented a conscious legislative choice that favored speed, certainty and creditor-driven decision-making over “exhaustive” judicial review, the Supreme Court said.
“Experience shows that unsuccessful bidders will always seek to brand the business decisions of the Committee of Creditors (CoC) as procedurally flawed in order to secure a second try through litigation…Courts, however, must remain wary of any temptation to expand the scope of review beyond the narrow limits prescribed by the IBC,” wrote a recent Bench of Justices BV Nagarathna and R. Mahadevan judgment.
The judgment was based on appeals filed against an order of the National Company Law Appellate Tribunal (NCLAT) in a matter relating to the approval of a resolution plan submitted by the firm.
“The IBC represents a conscious legislative choice that favors speed, certainty and creditor-driven decision-making over exhaustive judicial review,” Justice Nagarathna observed.
The court reiterated the settled law that the commercial wisdom of the CoC takes precedence and cannot be superseded by judicial review.
“Neither the National Company Law Tribunal nor the NCLAT nor this Court is empowered to substitute its assessment in place of the commercial decision arrived at by the requisite majority of the CoC,” observed Justice Nagarathna.
The court said that the very premise of the IBC was to avoid delay and uncertainty. Excessive scrutiny has also fueled strategic litigation.
“When the business decisions taken by the CoC are subjected to extensive judicial scrutiny, resolution times increase, transaction costs increase and the going concern value of the corporate debtor declines. The result is therefore not mere delay but a tangible loss of economic value to all parties involved,” the court said.
The court noted that the law must ensure three interdependent economic freedoms, including entering the market, continuing business operations under conditions of competitive neutrality, and exiting the market.
An effective insolvency resolution system protected viable firms through early reorganization while also ensuring the quick liquidation and exit of non-viable businesses, the court said.
Published – March 3, 2026 11:03 PM IST
