AN ALTERNATIVE TO THE PROBLEM OF LINEARITY IN COMPETITION APPROVAL AND INSOLVENCY RESOLUTION

This post is authored by Abhirami J. Subhash, third-year B.A. LL.B (Hons.) student at National Law School of India University, Bangalore.

INTRODUCTION

S.19(d) of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 proposes an amendment to the proviso to S.31(4) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), such that resolution applicants, in cases involving combinations, are required to obtain approval from the Competition Commission of India (“CCI”) only before submission of the resolution plan to the Adjudicating Authority. This marks a departure from the existing legal position, which required such approval prior to the approval of the Committee of Creditors (“CoC”).

The proposed amendment aligns with the dissenting opinion of Justice S.V.N. Bhatti in Independent Sugar Corporation Ltd. v. Girish Sriram Juneja (2025), which held that the requirement of prior CCI approval was merely directory. However, this paper argues that the amendment does not offer a satisfactory solution, as it fails to address several of the substantive concerns underlying the majority opinion authored by J. Hrishikesh Roy. The debate framed as “mandatory versus directory” compliance is therefore a false dichotomy. Any workable solution cannot be located within a purely linear understanding of approval timelines. Instead, the problem requires a framework that allows competition scrutiny and commercial decision-making to interact. This paper critiques the amendment on these grounds and proposes an alternative coordination mechanism that preserves Corporate Insolvency Resolution Process (“CIRP”)  timelines while ensuring that competition risks are not excluded from the CoC’s deliberative process.

ANALYSIS OF THE AMENDMENT PROVISION

Mandating CCI approval prior to submission of the resolution plan to the Adjudicating Authority is desirable for certain reasons. First, it avoids a situation where the CCI is required to review a transaction that has already attained binding force upon approval by a similarly placed body, namely the NCLT. Second, had CCI approval been mandated only after approval by the Adjudicating Authority, the risk of liquidation would significantly increase. This concern is particularly acute given the CCI’s remedial powers under s.31(3) of the Competition Act, 2002 (“the Competition Act”) and reg.25(1A) of the Combination Regulations (2011), which may require substantial structural or behavioural modifications. Such modifications cannot be meaningfully implemented once a resolution plan has acquired statutory binding force upon approval under s.31 of the IBC. Alternatively, the CCI may declare the combination void ab initio under s.6(6) of the Competition Act, again rendering the resolution process nugatory. The amendment also reflects certain market realities in a post-COVID context, insofar as it seeks to reduce procedural bottlenecks and encourage greater participation in insolvency bidding. However, these advantages are limited.

The amendment fails to account for several reasons advanced by the majority in Independent Sugar for requiring CCI approval prior to CoC approval. Most importantly, an anomalous situation will arise when modifications directed by the CCI fall outside the scrutiny of the CoC, and the CoC is now required to exercise its commercial wisdom without any competition analysis, as Roy J. warned. The CoC’s assessment of feasibility and viability, as understood in Essar Steel, is confined to financial and operational considerations and does not extend to an independent evaluation of competition law compliance. As a result, a resolution plan that is anti-competitive may be treated as commercially viable by the CoC, despite being legally unsustainable. This renders the statutory assessment of feasibility and viability under s.30(4) of the IBC partial and incomplete. Moreover, any competition-related modifications suggested by the CCI are now effectively excluded from the scrutiny of the CoC, as post-approval alterations to a resolution plan run contrary to the IBC framework. Even if such modifications were permitted, they would possibly extend the CIRP beyond the model timeline prescribed under reg.40A of the CIRP Regulations (2016). If the CCI were to deny approval altogether, fresh resolution plans would have to be invited, further undermining value maximisation and the objective of strict timelines. The amendment, therefore, relocates the problem rather than resolves it.

AN ALTERNATIVE: THE SYNCHRONISED APPROVAL MECHANISM (SAM)

An alternative approach lies in procedural coordination. This paper proposes a Synchronised Approval Mechanism (“SAM”), which allows competition risks to be identified early without triggering the formal merger control process. SAM is not intended to replace Phase I or Phase II scrutiny under s.29 of the Competition Act. Rather, it serves as a preliminary screening mechanism, providing the CoC with information relevant to its commercial assessment. Competition law thus operates as a pre-selection signal rather than a post-selection shock.

Step 1 of SAM operates within the CIRP timeline. It may be triggered once the final list of compliant resolution applicants is prepared under regs. 36A and 36B IBC (between T+100 days and T+135 days). At this stage, the Resolution Professional forwards all compliant resolution plans to the CCI. Although a resolution plan is not binding under the CIRP framework at this point, as it has not yet been approved by the Adjudicating Authority under art.31(3) of the IBC, it qualifies as a relevant document under s.6(2) of the Competition Act because they indicate the intention to create a combination and may therefore be examined by the CCI. The CCI conducts a desk-based, non-binding screening and issues a preliminary report classifying plans into three categories: (i) plans with no prima facie Apreciable Adverse Effect on Competition (“AAEC”) concerns (GREEN), (ii) plans with potential AAEC concerns along with indicative remedies (YELLOW), and (iii) plans involving serious AAEC concerns (RED). It is important to note that “prima facie” in this context does not denote Phase I scrutiny under s.29. The review is significantly narrower and does not trigger statutory timelines as it does not constitute a formal notice of combination under Section 6(2). The statutory merger control framework, including the timelines under Section 29, is triggered only upon the filing of a valid notice by the parties to the combination. In contrast, the screening contemplated under SAM is a non-binding, pre-notification exercise undertaken at the instance of the Resolution Professional, intended solely to provide indicative guidance to the CoC. 

Step 2 of SAM runs parallel to the CoC’s evaluation under s.30(4) of the IBC and does not involve the CCI. The CoC evaluates resolution plans with competition risk priced into its commercial assessment. This may include renegotiation with applicants whose plans fall within the YELLOW category, while plans involving serious competition concerns may be rationally discounted.

Step 3 involves the formal merger control process under s.29 of the Competition Act, triggered only after the CoC has selected a resolution plan. At this stage, the CCI conducts its statutory review within the prescribed timeline. Since competition risks and potential remedies have already been identified, the review is more predictable, Phase I clearance is more likely, and the scope of any Phase II investigation is significantly narrowed.

HOW DOES SAM RESPOND TO INDEPENDENT SUGAR?

The First Insolvency Law Committee’s reasoning for treating CCI approval differently from other regulatory approvals remains instructive. Competition scrutiny goes to the structural core of a resolution plan, unlike peripheral compliances required in s.31(4), such as SEBI approvals. This is precisely why competition assessment must inform the CoC’s evaluation, rather than follow it. The concern underlying J. Roy’s majority opinion is that the CoC may be compelled to exercise its commercial wisdom without complete information. Viability and feasibility necessarily include competition concerns; a plan that fails competition scrutiny is not viable.

The principal objection raised by the minority relates to delay, specifically that mandatory CCI approval prior to CoC approval would extend the CIRP beyond the 330-day limit under s.12 of the IBC, thereby undermining value maximisation and the preservation of the corporate debtor as a going concern. As J. Roy notes, the CCI typically disposes of combination filings within short periods, around 21 days, now further reduced to 16 days, and the 2023 amendment has reduced the overall timeline from 210 to 150 days. This demonstrates institutional capacity for swift preliminary assessment. Even in rare cases where some extension occurs, such a delay would be permissible where not attributable to the litigant’s conduct. By contrast, strict adherence to post-CoC approval scrutiny risks greater value destruction, as competition objections at that stage leave no scope to modify an approved plan, pushing firms toward liquidation.

Finally, while the statute does not seek to impose undue hardship on resolution applicants, SAM ensures that the filing is undertaken by the Resolution Professional and that the preliminary review does not impose significant procedural or financial burdens on bidders. While concerns about bidder participation are valid, the mere presence of multiple bidders is of limited value if their plans are fundamentally anti-competitive. A marginal reduction in bidder numbers, where it filters out structurally unviable plans, does not undermine the objectives of the IBC.

ADDRESSING POTENTIAL CONCERNS REGARDING SAM

A primary objection to SAM is that it may overburden the CCI by requiring it to examine multiple resolution plans, even though only one plan will ultimately succeed. This concern is overstated. SAM shifts the CCI’s effort from late-stage, intensive scrutiny of a single competition-risky plan to early-stage, light screening of multiple plans. Since the screening is desk-based and non-binding, it consumes far fewer institutional resources and may, in fact, reduce the incidence of resource-intensive Phase II investigations. SAM finds a middle ground between the resource requirements of the majority and minority prescriptions.

A second concern relates to the costs incurred by resolution applicants whose plans are not selected by the CoC. Resolution applicants in CIRP are required to undertake detailed financial and operational due diligence based on the information memorandum and other disclosures made during the resolution process under Reg. 36 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In this context, the additional burden imposed by a preliminary, non-binding screening under SAM is likely to be marginal when compared to the transaction costs already incurred in preparing and submitting a resolution plan. Moreover, increased bidder participation is not an end in itself as argued above.

CONCLUSION

The proposed amendment to section 31(4) of the IBC does not resolve the institutional conflict between insolvency resolution and competition regulation. By continuing to conceptualise competition approval in linear terms, it fails to ensure that commercial decision-making is informed by competition concerns at the appropriate stage. The Synchronised Approval Mechanism (SAM) demonstrates that a feedback approach rather than linearity is both feasible and normatively preferable. The amendment’s failure to adopt such an approach renders it an incomplete response to the problem it seeks to address.