The government may amend the insolvency law to stipulate that a resolution plan will require the Competition Commission of India’s (CCI’s) approval only after it’s endorsed by the committee of creditors (CoC) and not before that, a senior official indicated.
Currently, as per Section 31 (4) of the Insolvency and Bankruptcy Code (IBC), the antitrust regulator’s clearance is required before resolution plans are approved by the CoC that comprises financial creditors alone.
This rule, however, applies when the resolution plan contains a merger or acquisition above a certain threshold, thereby raising competition issues.
The latest proposal by the corporate affairs ministry comes after the Supreme Court in January rejected the winning bid of AGI Greenpac for Hindustan National Glass and Industries, citing its failure to get the competition regulator’s clearance before the CoC approval.
To be sure, the apex court, earlier this month, admitted a plea by the CCI to review this decision.
Hindustan National Glass is the country’s largest glass packaging firm with a 60% market share, while AGI Greenpac is the second-biggest player.
With the latest proposal, the ministry aims to ease the burden of the CCI while ensuring enough scrutiny of the winning bid.
The ministry may introduce a raft of amendments to the IBC in the next Parliament session, the official said. The amendments could also include a creditor-led framework that would reduce the resolution timelines.
Anoop Rawat, partner at Shardul Amarchand Mangaldas & Co, said the prior CCI nod requirement was intended to bring more certainty to the resolution process. But several investors have cited this as an onerous requirement before any decision on the resolution plan by the CoC. So the latest move seems a “prudent” one, he said.
“The amendment would also ease the pressure on the CCI in clearing the resolution plan within a very tight time-line,” Rawat added.
The proposal can significantly reduce delays and help prevent erosion of stressed asset value, said Yogendra Aldak, partner at Lakshmikumaran & Sridharan Attorneys.
“It reflects a shift toward a self-declaratory regime, enabling resolution applicants to proceed based on bona fide declarations rather than await regulatory clearance,” he said.
While the move aligns with the broader objective of streamlining the IBC framework to boost resolution, its “success will hinge on how post-facto violations of the Competition Act are treated”, Aldak added.
