The National Company Law Tribunal (NCLT), in an order in the Hindustan National Glass & Industries Ltd. insolvency proceedings, held that obtaining clearance from the Competition Commission of India (CCI) under Section 6 of the Competition Act, 2002, is not a mandatory precondition for the Committee of Creditors (CoC) to approve a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLAT affirmed this position, ruling that the CCI approval requirement is directory rather than mandatory in the insolvency context.
Background
Under Section 6 of the Competition Act, 2002, certain combinations — including acquisitions, mergers, and amalgamations exceeding prescribed thresholds — require prior approval from the CCI. Separately, under Section 31 of the IBC, a resolution plan approved by the CoC with the requisite majority is submitted to the NCLT for approval. The intersection of these two statutory requirements has been a contentious area of insolvency law.
The question that arose in the Hindustan National Glass matter was whether a resolution applicant must obtain CCI clearance before the CoC votes on the resolution plan, or whether the CoC can approve the plan subject to CCI clearance being obtained subsequently. This question has significant practical implications because the corporate insolvency resolution process operates under strict timelines mandated by the IBC, and CCI merger review processes can take several months.
Key Holdings
The NCLT and NCLAT established the following position:
CCI clearance is directory, not mandatory, at CoC stage: The requirement to obtain CCI approval under Section 6 of the Competition Act does not operate as a mandatory precondition for the CoC to vote on and approve a resolution plan. The CoC may approve the plan subject to the condition that CCI clearance will be obtained subsequently.
Conditional approval permissible: The tribunals held that a resolution plan may be approved by the CoC and submitted to the NCLT with a condition that the plan's implementation is contingent on CCI clearance. This approach harmonises the IBC's strict timeline requirements with the Competition Act's regulatory oversight.
IBC timelines take priority: The tribunals recognised that requiring CCI clearance before CoC approval would risk breaching the IBC's statutory timelines for completing the resolution process, potentially pushing viable resolution plans into liquidation due to procedural delays.
NCLT approval also conditional: The NCLT may approve a resolution plan under Section 31 of the IBC subject to the condition that CCI clearance is obtained before the plan is implemented. If CCI clearance is not obtained or is denied, the plan would not be capable of implementation.
Implications for Practitioners
This ruling provides significant clarity for insolvency professionals, resolution applicants, and their advisors. The practical effect is that resolution applicants no longer need to complete the CCI review process before submitting their plans to the CoC, thereby saving valuable time within the IBC's tight resolution timelines.
Insolvency professionals should structure resolution plans with appropriate conditionality clauses addressing CCI clearance. Legal advisors to resolution applicants must, however, ensure that CCI applications are filed concurrently with the submission of the resolution plan to the CoC, so that the regulatory process can proceed in parallel.
For competition law practitioners, the ruling underscores that CCI review remains an essential requirement for plan implementation — the directory characterisation relates only to the sequencing of approvals, not to the substantive obligation of obtaining CCI clearance. A resolution plan that triggers Section 6 thresholds cannot be implemented without CCI approval.