By Dhanendra Kumar, Chairman, Competition Advisory Services India LLP
India’s insolvency framework rests on a simple but powerful idea: commercial decisions should be taken by those who bear the financial risk, and the decisions must be implemented swiftly. A recent Supreme Court judgment in Torrent Power Limited v. Ashish Arjunkumar Rathi reinforces this foundational principle under the Insolvency and Bankruptcy Code (IBC), consolidating lines between judicial oversight and commercial decision-making.
“Predictability and finality are thus essential to maintaining a robust insolvency regime,” the court said, emphasising that the IBC deliberately confines judicial review to strict statutory compliance under Sections 30(2) and 61(3), and so respecting these limits will preserve the IBC’s economic sense and ensure insolvency remains a predictable, time-bound, and market-driven process.
At one level, the ruling dismisses challenges to an approved resolution plan. At another, it addresses a deeper and growing concern: the increasing tendency of unsuccessful bidders and other stakeholders to use litigation as a strategy to reopen concluded insolvency processes. By doing so, the court has restored balance to a system where delays and uncertainty had begun to undermine outcomes.
The facts are straightforward. SKS Power Generation (Chhattisgarh) Limited (SKS Power) entered the corporate insolvency resolution process (CIRP), attracted multiple bidders, and ultimately saw its resolution plan approved unanimously by the Committee of Creditors (CoC). The plan was implemented, creditors were paid, and control shifted. Sarda Energy and Minerals Ltd had completed the acquisition of SKS Power in August 2024 under the CIRP of the IBC. Yet, litigation continued, with challenges reaching the Supreme Court. The court decisively rejected these attempts, reiterating that the “commercial wisdom” of the CoC is paramount and cannot be second-guessed unless there is a clear legal infirmity. The court took note of the fact that the CoC approved Sarda Energy and Minerals Ltd’s resolution plan on the basis of its commercial wisdom. It was later approved by the National Company Law Tribunal and upheld by the Appellate Tribunal. The court noted that the resolution plan was already “approved and has since been implemented, leaving absolutely no scope for intervention”.
This is not a new principle, but its reaffirmation comes at a critical moment. Over the past few years, India’s insolvency ecosystem has matured significantly. But it has also witnessed a parallel trend—litigation becoming a tool of negotiation rather than a mechanism of justice. Losing bidders, operational creditors, and even erstwhile promoters have increasingly invoked procedural objections to stall implementation.
The economic consequences of such delays are substantial. Insolvency is, by design, a time-sensitive process. A distressed asset derives its value from continuity of operations, contracts, employees, and market confidence. Every month of uncertainty erodes that value.
There is also a less visible but more damaging effect. If bidders anticipate prolonged legal battles even after winning a resolution plan, they will either discount their bids or avoid participation altogether. This weakens competition in the bidding process, reduces recovery for creditors, and ultimately defeats the purpose of the IBC. The court’s judgment implicitly recognises it, by reinforcing finality it strengthens multiple layers of the financial ecosystem.
For banks and financial institutions, predictability in resolution outcomes improves recovery expectations. When lenders are confident that approved plans won’t be endlessly litigated, they can resolve stress faster. For investors, especially those specialising in distressed assets, the judgment reduces execution risk. The IBC was designed to create a transparent, competitive marketplace for stressed assets. That marketplace can function well only when outcomes are credible and enforceable.
For resolution applicants, the ruling provides assurance that winning a bid marks the start of business revival, not of a prolonged legal battle. This is critical for operational turnaround.
Perhaps most importantly, the judgment sends a strong signal to global investors. Cross-border capital is highly sensitive to legal uncertainty. Countries with efficient insolvency regimes attract higher levels of restructuring and turnaround investment. By upholding the design of the IBC, India strengthens its position as a credible destination for such capital.
At a broader level, the ruling reflects judicial maturity in dealing with complex economic law. The IBC marked a structural shift in our approach to insolvency—from a debtor-in-possession model to a creditor-driven framework. For such a system to work, institutional roles must remain clearly defined. Courts are guardians of legality, not arbiters of business decisions. The court judgment respects this distinction.
That said, the judgment doesn’t curtail judicial oversight altogether. It rightly preserves the court’s role in addressing procedural irregularities, fraud, or violations of law. What it rejects is substituting judicial preference for commercial judgment—a distinction that’s essential for maintaining both fairness and efficiency. Nearly a decade after its enactment, the IBC is at an inflection point. Its early successes established it as one of India’s most significant economic reforms. The next phase requires deepening trust in the system—among creditors, investors, and courts alike.
The Supreme Court ruling contributes meaningfully to that objective. By discouraging frivolous challenges and reaffirming the primacy of creditor decisions, it protects the integrity of the insolvency process. In the long run, the credibility of India’s insolvency regime will not be judged by individual recoveries, but by the confidence it inspires. Judgments like this reinforces that such confidence.