Torrent Power Ltd. Vs Ashish Arjunkumar Rathi & Others (Supreme Court of India)
Summary: 1. The Supreme Court, in Torrent Power Ltd. Vs Ashish Arjunkumar Rathi & Others, delivered a significant judgment reaffirming the primacy of the commercial wisdom of the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code, 2016 (IBC). The dispute arose from the corporate insolvency resolution process (CIRP) of SKS Power Generation (Chhattisgarh) Limited, initiated pursuant to an application filed by Bank of Baroda under Section 7 of the IBC. The National Company Law Tribunal (NCLT), Mumbai Bench, admitted the insolvency application on 29 April 2022. Following the invitation of expressions of interest, seven prospective resolution applicants, including Torrent Power Limited, Vantage Point Asset Management Pte. Ltd., Jindal Power Limited and Sarda Energy and Minerals Limited (SEML), participated in the resolution process. After negotiations and evaluation of competing proposals, the CoC approved SEML’s resolution plan with 100% voting share. The unsuccessful applicants challenged the approval, alleging irregularities in the bidding process, discriminatory treatment and unauthorised modifications to SEML’s commercial offer. The Supreme Court was consequently required to examine whether clarifications sought by the Resolution Professional amounted to material changes in the approved resolution plan and whether the judiciary could interfere with the commercial decision of the CoC.
2. The resolution process involved several rounds of negotiations, culminating in an inter-se bidding exercise conducted on 19 April 2023 under the Process Note dated 13 April 2023. The participating applicants were required to submit revised resolution plans by 28 April 2023, incorporating the commercial terms finalised during negotiations. Subsequently, at its 29th meeting on 6 May 2023, the CoC directed the Resolution Professional to seek clarifications regarding certain aspects of the submitted plans without permitting changes to the agreed commercial terms. Accordingly, emails dated 8 May 2023 were issued to the resolution applicants, including SEML. After considering the clarifications, the CoC voted on the competing plans, and SEML’s proposal, together with its addendum dated 10 May 2023, received unanimous approval. SEML accepted the Letter of Intent and furnished a performance bank guarantee of ₹150 crore. The Resolution Professional thereafter approached the NCLT for approval under Sections 30(6) and 31(1) of the IBC. Although the NCLT initially remitted the matter for reconsideration, the proceedings were subsequently restored following appellate intervention. On 13 August 2024, the NCLT approved SEML’s resolution plan and rejected the objections of Torrent and Vantage. The NCLAT affirmed that decision on 1 October 2024, leading to the appeals before the Supreme Court.
3. Torrent Power’s principal objection concerned the alleged post-bid enhancement of SEML’s financial commitments. Torrent contended that SEML had originally undertaken to provide fresh funds of approximately ₹103.39 crore towards replacement of specified bank guarantees but subsequently increased its commitment to approximately ₹180.05 crore through clarifications furnished on 10 May 2023. According to Torrent, the additional amount relating to bank guarantees at Serial Nos. 6 and 7 represented an impermissible enhancement of the commercial offer after the bidding process had concluded. Torrent further alleged that SEML had converted a deferred payment component of ₹240 crore into an upfront payment, thereby improving the attractiveness of its proposal after the commercial terms had been frozen. Torrent maintained that such modifications violated the Request for Resolution Plan (RFRP), the Process Note and the principles governing fair competition among resolution applicants. Vantage separately argued that its proposal offered an upfront payment of ₹2,191.43 crore and was commercially superior to SEML’s plan. Jindal contended that its bid, including the proposed equity upside, exceeded SEML’s offer. The unsuccessful applicants therefore submitted that the CoC’s decision was arbitrary, discriminatory and inconsistent with the objective of value maximisation under the IBC.
4. The Supreme Court examined the treatment of bank guarantees and rejected the allegation that SEML had enhanced its financial commitment after the bidding process. The Court considered the relevant clauses of SEML’s resolution plan, the Resolution Professional’s email dated 8 May 2023 and SEML’s clarification dated 10 May 2023. It noted that the original plan already contemplated the release of margin money aggregating to approximately ₹180.05 crore for the benefit of secured financial creditors. The amount of ₹103.39 crore related specifically to fresh margin money proposed for certain continuing bank guarantees, whereas the remaining bank guarantees were to be extinguished, resulting in the release of their corresponding margin money. The subsequent clarification explained the treatment of these remaining guarantees and the associated margin money. It did not introduce an additional financial commitment or alter the underlying commercial proposal. The Court also considered that the Resolution Professional had sought clarifications from all participating applicants pursuant to the CoC’s directions. Consequently, the allegation of selective treatment or discrimination lacked a sufficient factual foundation. The Court distinguished between a clarification explaining an existing contractual obligation and a substantive modification introducing a new commercial offer, finding that SEML’s response belonged to the former category.
5. The second controversy concerned the deferred payment component of ₹240 crore. The Supreme Court examined the financial structure of SEML’s proposal and the distinction between the nominal amount payable over time and its net present value (NPV). The plan contemplated deferred payments aggregating to approximately ₹301.64 crore, whose discounted present value was ₹240 crore. It also provided the CoC with an option to receive ₹240 crore upfront instead of accepting the deferred payment structure. The clarification furnished by SEML merely confirmed that, if the CoC exercised the upfront payment option, the amount of ₹240 crore would not be subjected to any further discount. The Court found that this clarification neither increased the consideration nor substituted a new payment arrangement for the existing proposal. Both alternatives had already been contemplated within the resolution plan, and the clarification only removed uncertainty concerning their financial treatment. Accordingly, the Court agreed with the NCLT and NCLAT that the commercial terms remained unchanged. The competing applicants’ arguments based on the relative attractiveness of their bids could not justify judicial substitution of the CoC’s assessment of feasibility, viability, payment structure and commercial risk.
6. On the scope of judicial review, the Supreme Court emphasised that an appeal against approval of a resolution plan under Section 61(3) of the IBC is confined to the grounds expressly prescribed by Parliament. These include contravention of applicable law, material irregularity in the exercise of powers by the Resolution Professional, non-compliance with prescribed treatment of operational creditors, failure to provide priority repayment of insolvency resolution process costs and non-compliance with other requirements specified by the Insolvency and Bankruptcy Board of India. Further, an appeal to the Supreme Court under Section 62 is maintainable only on a question of law arising from the NCLAT’s order. The Court held that the Resolution Professional had acted strictly on the CoC’s instructions and had not independently altered the bidding process or the resolution plan. Such conduct could not constitute material irregularity under Section 61(3)(ii). Relying on Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, Pratap Technocrats Private Limited v. Monitoring Committee of Reliance Infratel Limited and other precedents, the Court reiterated that adjudicating authorities cannot reassess the commercial merits of a resolution plan merely because another applicant claims to have submitted a financially superior proposal. The jurisdiction of the NCLT and NCLAT is statutory and supervisory, not an unrestricted power to reconsider business decisions taken by financial creditors.
7. The Supreme Court ultimately dismissed the appeals filed by Torrent Power, Vantage and Jindal and affirmed the NCLAT’s judgment dated 1 October 2024. It also considered the fact that SEML’s resolution plan had already been approved by the adjudicating authorities and implemented. The Court cautioned against the growing tendency of unsuccessful resolution applicants to challenge commercial decisions of the CoC by presenting ordinary disagreements over valuation, bid evaluation or financial structuring as procedural irregularities. Such litigation, the Court observed, can undermine the central objectives of the IBC by prolonging insolvency proceedings, increasing transaction costs, weakening investor confidence and eroding the going-concern value of distressed businesses. The Court explained that an effective insolvency regime requires predictability, finality and timely resolution, and that excessive judicial intervention can discourage prospective bidders from participating in future insolvency processes. Referring to the legislative objectives recognised in Swiss Ribbons Private Limited v. Union of India, the Court reaffirmed that the IBC prioritises the revival of viable businesses and maximisation of asset value through time-bound, creditor-driven resolution. The judgment establishes that higher financial bids do not automatically confer a right to approval and that judicial interference remains confined to demonstrable statutory violations or legally recognised irregularities. The appeals were dismissed without costs.
Cases Discussed
1. Swiss Ribbons Private Limited Vs Union of India — (2019) 4 SCC 17; Supreme Court. The judgment was referred to for the fundamental objectives of the IBC, particularly time-bound insolvency resolution, preservation of going-concern value, revival of corporate debtors and maximisation of asset value. The Court relied on these principles while explaining the economic consequences of excessive judicial interference in insolvency proceedings.
2. K. Sashidhar Vs Indian Overseas Bank — (2019) 12 SCC 150; Supreme Court. The Court relied on this decision to reaffirm that the commercial wisdom of the CoC is not open to judicial reconsideration on merits. The NCLT’s scrutiny of an approved resolution plan is confined to compliance with the statutory requirements of the IBC, particularly Section 30(2).
3. Committee of Creditors of Essar Steel India Limited Vs Satish Kumar Gupta — (2020) 8 SCC 531; Supreme Court. This decision was discussed in relation to the limited scope of judicial review of commercial decisions taken by the CoC. The Court reiterated that adjudicating authorities must examine whether the statutory parameters concerning the corporate debtor’s continued operation, value maximisation and stakeholder interests have been considered, without substituting their own commercial assessment for that of the CoC.
4. Kalparaj Dharamshi Vs Kotak Investment Advisors Limited — (2021) 10 SCC 401; Supreme Court. The decision was cited in the respondents’ submissions concerning the scope of Section 61(3)(ii) of the IBC. It was relied upon for the proposition that actions of a Resolution Professional bearing the approval of the CoC cannot ordinarily justify interference with the CoC’s commercial decision.
5. Pratap Technocrats Private Limited Vs Monitoring Committee of Reliance Infratel Limited — (2021) 10 SCC 623; Supreme Court. The Court relied on this precedent to emphasise that the jurisdiction of the NCLT under Section 31 is expressly defined by statute. The adjudicating authority cannot exercise an independent equitable jurisdiction to reconsider the commercial merits of a resolution plan approved by the requisite majority of the CoC.
6. Kalyani Transco Vs Bhushan Power & Steel Limited — 2025 SCC OnLine SC 2093; Supreme Court. The Court referred to this decision concerning the limited circumstances in which concurrent findings of the NCLT and NCLAT may be disturbed. Interference is ordinarily unwarranted unless the findings disregard mandatory statutory provisions, rely on extraneous considerations or are demonstrably arbitrary or illegal.
