CoC Commercial Wisdom Final, Courts Cannot Interfere Under IBC: Supreme Court

The Supreme Court of India has said that the commercial wisdom of the Committee of Creditors (CoC) has primacy and cannot be overridden through judicial review. It clarified that decisions taken by the CoC cannot be interfered with by the NCLT, the NCLAT, or even the Apex Court.

A Bench of Justice B V Nagarathna and Justice R Mahadevan held that when a resolution professional acts on the instructions of the CoC, such conduct cannot be termed a “material irregularity” under Section 61(3)(ii) of the Insolvency and Bankruptcy Code (IBC). Court said that treating it otherwise would blur the distinct roles assigned to the resolution professional and the CoC, and indirectly open CoC decisions to judicial review, which goes against the scheme of the IBC.

Court stressed that predictability and finality are essential for a strong insolvency framework. It noted that where two adjudicating authorities have taken the same view, interference is not warranted unless the decision ignores mandatory legal provisions, relies on irrelevant considerations, or is clearly arbitrary or perverse.

It further observed that judicial intervention beyond the limited scope provided in the statute weakens both predictability and finality. The IBC, the bench said, deliberately restricts judicial review to checking compliance with Sections 30(2) and 61(3). Respecting these limits is necessary to ensure that insolvency resolution remains time-bound, predictable, and driven by market considerations.

Court dismissed civil appeals filed by Torrent Power Ltd against the October 1, 2024 order of the National Company Law Appellate Tribunal (NCLAT), which had upheld the August 13, 2024 order of the National Company Law Tribunal (NCLT), Mumbai Bench-IV.

The NCLT had approved the resolution plan submitted by Sarda Energy and Minerals Limited for SKS Power Generation (Chhattisgarh) Limited, based on an application filed by its resolution professional, Ashish Arjunkumar Rathi. At the same time, intervention applications filed by Torrent Power Limited, Vantage Point Asset Management Pvt Ltd, and Jindal Power Limited were rejected.

The Bench noted that the resolution plan had already been approved by both the NCLT and the NCLAT and had been implemented, leaving no scope for interference by the court.

It also remarked that such appeals reflect a growing trend where unsuccessful resolution applicants attempt to challenge commercial decisions by presenting them as procedural issues. This, the Court said, turns the insolvency process into a prolonged dispute and reduces the value of the corporate debtor, while encouraging delay and strategic obstruction.

Explaining the framework of the IBC, Court said the law marks a shift from a court-driven system to a creditor-driven process. The doctrine of commercial wisdom gives decision-making authority to financial creditors, who bear the economic consequences. Questions of viability, valuation, and acceptable losses are commercial in nature and not for courts to reassess.

Court clarified that the role of adjudicating authorities is limited to ensuring legal compliance and procedural fairness, without second-guessing the commercial decisions of the CoC.

It emphasised that the doctrine of commercial wisdom reflects both legislative intent and institutional discipline, ensuring that insolvency resolution remains efficient and market-oriented. The IBC prioritises speed, certainty, and creditor-led decisions over extensive judicial scrutiny.

The Bench cautioned that unsuccessful bidders often try to portray commercial decisions as procedurally flawed to gain another opportunity through litigation. Courts, it said, must resist expanding the scope of review beyond what the law permits.

Court also warned that excessive judicial scrutiny encourages strategic litigation, where parties with little economic stake use court proceedings to delay resolution or extract concessions, undermining the objective of maximising value.

It added that the IBC was introduced to address long-standing gaps in India’s insolvency system by providing a predictable and time-bound resolution process. Predictability helps market participants plan better, while finality prevents delays and ensures that resources are quickly put to productive use.

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Case Title: Torrent Power Ltd Vs Ashish Arjunkumar Rathi & Others

Bench: Justices B V Nagarathna and R Mahadevan

Date of Judgment: February 27, 2026