Highest Bid Need Not Win: Commercial Wisdom of CoC Is Supreme Under IBC: Supreme Court Refuses to Reopen Approved Resolution Plan

“To Treat Clarifications as Modifications Would Indirectly Subject CoC’s Decisions to Judicial Review”, In a powerful reaffirmation of the creditor-driven architecture of the Insolvency and Bankruptcy Code, 2016, the Supreme Court dismissed a batch of appeals filed by unsuccessful resolution applicants challenging the approval of a Resolution Plan in the CIRP of SKS Power Generation (Chhattisgarh) Limited.

Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan held that the so-called “post-bid clarifications” did not amount to modification of the commercial offer and that no “material irregularity” under Section 61(3)(ii) of the IBC was made out.

The Court categorically ruled that once the Resolution Professional acts strictly on the instructions of the Committee of Creditors, no irregularity can be attributed, and courts cannot re-evaluate bids under the guise of judicial review.

Appeal Under Section 62 Lies Only on a Question of Law

The unsuccessful resolution applicants approached the Supreme Court under Section 62 of the IBC after the NCLAT affirmed the NCLT’s approval of the Resolution Plan submitted by Sarda Energy and Minerals Limited (SEML).

At the very threshold, the Court emphasized the limited appellate framework under the Code. Section 61 permits an appeal before the NCLAT only on five specific grounds, including “material irregularity” by the Resolution Professional. Section 62 permits an appeal before the Supreme Court only on a “question of law.”

The Bench observed that the present challenge did not satisfy either threshold. 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’ within the meaning of Section 61(3)(ii). 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.”

Thus, even before examining merits, the Court found the appeals legally unsustainable.

Allegation of Post-Bid Modification

The Corporate Debtor, SKS Power Generation (Chhattisgarh) Ltd., entered CIRP following admission of a Section 7 petition filed by Bank of Baroda.

After inter-se bidding and negotiations governed by a Process Note dated 13 April 2023, SEML’s Resolution Plan received 100% approval of the CoC. The RP, acting on CoC instructions, sought clarifications via email dated 08 May 2023, to which SEML responded on 10 May 2023.

The unsuccessful bidders alleged that SEML modified its commercial offer after conclusion of negotiations by enhancing its bank guarantee commitment and converting a deferred payment into an upfront payment.

Both the NCLT and NCLAT rejected these contentions, leading to the present appeals.

“No Enhancement of Offer”: Court Rejects Bank Guarantee Argument

One of the principal allegations was that SEML initially committed only Rs. 103.39 crores towards bank guarantees but later enhanced it to Rs. 180.05 crores through a clarification.

The Supreme Court meticulously examined Clauses 6.3.14 and 6.3.15 of the Resolution Plan and held that from inception the Plan contemplated that the entire margin money of Rs. 180.05 crores would flow back to the Corporate Debtor and be utilized for payment to secured financial creditors.

The Court clarified that Rs. 103.39 crores represented only the fresh infusion required to continue certain bank guarantees. The remaining Rs. 76.61 crores pertained to guarantees proposed to be extinguished, with margin money to be released and passed on to the CoC.

The Bench concluded:

“The payment to the CoC was Rs.180.49 crores before clarification and remained Rs.180.49 crores even after the clarification.”

Accordingly, it held that there was no enhancement of the commercial offer and no breach of the Process Note.

Deferred Payment vs Upfront Payment: “No Conversion, Only Clarification”

The second allegation was that SEML converted a deferred payment of Rs. 240 crores into an upfront payment after negotiations had closed.

The Court examined Clause 6.3.2(b) and noted that SEML had offered two options: issuance of NCDs of Rs. 240 crores carrying 10% coupon, aggregating to Rs. 301.64 crores over three years, or payment of Rs. 240 crores upfront as discounted NPV.

The RP had merely sought clarification whether Rs. 240 crores would be further discounted if taken upfront.

SEML clarified that Rs. 240 crores was already the discounted present value and no further discount would apply.

Rejecting the allegation of modification, the Court held:

“Quite clearly, SEML had not converted Rs.240 crores deferred into Rs.240 crores upfront… It was the CoC’s choice to either take a higher value later or take its present value upfront.”

Thus, there was no alteration of financial terms.

“Highest Bid Need Not Be Accepted”: Commercial Wisdom Reaffirmed

The appellants strongly argued that their bids were higher and therefore ought to have been accepted in the interest of value maximisation.

The Court rejected this submission, reiterating the settled position from K. Sashidhar, Essar Steel, Kalparaj Dharamshi, Pratap Technocrats and Kalyani Transco that commercial wisdom of the CoC is non-justiciable.

The Bench underscored that the legislature deliberately insulated commercial decision-making from judicial scrutiny. It held that courts cannot undertake comparative evaluation of bids or substitute their assessment for that of the CoC.

It reiterated that once the NCLT is satisfied about compliance with Section 30(2), it must approve the plan, and appellate review cannot enter the domain of commercial merits.

“Strategic Litigation by Unsuccessful Bidders Must Not Derail CIRP”

In a significant institutional observation, the Court cautioned against the increasing trend of unsuccessful bidders invoking judicial forums to secure a “second shot.”

The Bench observed:

“The appeals before us typify the growing strategic use of the judicial system by unsuccessful resolution applicants…”

It warned that excessive judicial review erodes asset value, lengthens timelines, distorts incentives, and undermines predictability of the insolvency regime.

Reinforcing the philosophy of Swiss Ribbons, the Court stressed that the IBC prioritises speed, certainty, and revival of corporate debtors, not prolonged adversarial contests.

Finality and Implementation: No Scope for Belated Interference

The Court also noted that the Resolution Plan had already been approved by both tribunals and fully implemented.

It emphasized that predictability and finality are essential to a robust insolvency regime and that belated interference would defeat the very object of the Code.

Appeals Dismissed, NCLAT Judgment Affirmed

The Supreme Court dismissed all the appeals and affirmed the NCLAT’s judgment dated 01 October 2024. It held that no material irregularity was established, no modification of the Resolution Plan occurred, and no question of law arose under Section 62.

In doing so, the Court once again sent a clear message that under the IBC, commercial wisdom of the CoC reigns supreme and judicial review remains strictly confined within statutory limits.

Date of Decision: 27 February 2026