Restructuring Competition in Resolution: Redefining the Mandatory CCI Approval under CIRP
- CCL NLUO
- Aug 3
- 6 min read
Updated: 3 days ago
Author: Pratyush Mailapur
Fourth year law student at Gujarat National Law University, Gandhinagar
I. Background
In today’s fast-changing insolvency landscape, the overlap between competition law and corporate resolution is more than just a technical detail. It has become a crucial turning point—one that can determine whether ambitious resolution plans succeed or collapse.
This convergence is no longer confined to legal fine print. It has real, practical consequences for companies undergoing Corporate Insolvency Resolution Processes ("CIRPs"). Regulatory clearances, especially from competition authorities like the Competition Commission of India ("CCI"), are emerging as decisive factors. As resolution applicants push for faster timelines and commercial certainty, delays in approvals can derail plans even after they have been approved by the Committee of Creditors ("CoC"). The Supreme Court's ruling in the AGI Greenpac-Hindustan National Glass case has highlighted a fine but structurally important aspect of the Insolvency and Bankruptcy Code ("IBC"), Section 31(4).
This provision requires that resolution plans that involve a "Combination" (as Section 5 of the Competition Act, 2002 defines it) first obtain the prior approval of the CCI before they are considered or approved by the Committee of Creditors.
With the Supreme Court affirming the mandatory aspect of this provision, the Ministry of Corporate Affairs ("MCA") is reported to be on the verge of amending the Code to eliminate this requirement. This is a change with far-reaching legal, economic, and institutional consequences. Additionally, this event warrants a more crucial analytical question: what does this battle between insolvency schedules and competition oversight tell us about India's regulation of the intersection between market structure and financial distress?
At its core, the problem is a conflict of two equally valid public policy goals—speedy resolution of insolvency on one side, and keeping market structures competitive on the other. The IBC, in its very conception, values speed and certainty. The 330-day outer limit, the focus on value maximization, and the CoC-governed process design all exhibit a "market-linked, time-bound" template that resists loss of asset value on account of procedural drag.
But competition law, by definition, works at a different pace. The Competition Commission must determine whether a transaction would have significant adverse effect on competition.
This requires in-depth sectoral analysis, economic modeling, and time-consuming consultations. It is procedurally ineffective and economically self-defeating that a bidder in a resolution process must wait first for a CCI decision before being considered by the CoC. The very goal of preserving the going concern value of the debtor entity is thwarted when bidders are disqualified or deterred by procedural choke points.
II. Analysis
The Supreme Court in AGI Greenpac's case held that the CCI pre-approval was mandatory. This meant that non-adherence before acceptance of the plan by the CoC rendered the whole process void. While the Court's decision follows a literal reading of Section 31(4), it ignores commercial realities and regulatory resistance. The judgment’s wider message is that the judiciary is unwilling to dilute statutory clarity. As a result, any reconciliation of conflicting legislation must be achieved by way of legislative amendment.
This conflict is the foundation of the MCA-proposed amendment. If adopted, the legislation would make it clear that bidders do not need CCI clearances before CoC approval; that these clearances may be obtained either following CoC approval but before NCLT approval; or even after as a condition precedent to implementation. This change would bring the Code into line with commercial sense without weakening existing protections against M&A activity. This change restores the correct the risk-return profile for bidders under insolvency resolution.
From an economic perspective, eliminating the pre-CoC CCI approval process would be a great step towards increasing bidder participation. Uncertainty and delay with today’s front-loaded competition clearance deters even well-meaning applicants. Especially in concentrated sectors—cement, steel, telecom, banking—where any acquisition will inevitably be subject to CCI scrutiny, potential resolution applicants may opt to avoid the CIRP process altogether. This results in reduced competition, sub-optimal valuations, and even liquidation of viable businesses. However, if CCI clearance becomes a post-CoC, pre-implementation process, the process would be similar to global best practices observed in the U.S. under Chapter 11 - Bankruptcy, where antitrust review runs in tandem with bankruptcy proceedings without impairing them.
The argument also rests on a broader principle—that the law must not only be technically correct but also aligned with practical business needs and responsive to regulatory roadblocks. By making competition authorities review insolvency bids too early places the burden on them instead of letting the insolvency process work first, which isnt’t how the system should be designed. The CoC, which is largely made up of sophisticated financial creditors, is already responsible for evaluating the commercial practicability of competing resolution plans. To make their decision contingent on a regulatory authority's pre-view on market concentration dilutes the autonomy of the CoC. It confuses the role of a financial creditor with that of a market regulator. In effect, the proposed amendment would restate the first principles of the IBC—that the CoC is the commercial mind of the insolvency process, whereas competition implementation issues can be addressed through conditions, not preconditions.
But it does not mean competition issues should be overlooked. Rather, they should be woven into the process. For example, notification to the CCI can follow CoC approval, with a closely defined time limit (say 30-45 days) to render its judgment before the plan is placed before NCLT. Alternatively, resolution plans can include an express provision that they are subject to regulatory approval, including that of the CCI, and a material adverse finding permits a revised proposal. This hybrid solution respects CoC autonomy, maintains market competition, and ensures speedy resolution. Above all, it treats resolution as a dynamic process, and not a yes or no event.
There is also a more basic institutional lesson to be gleaned here. India's regulatory apparatus needs to build inter-regulatory coordination. The IBC-Competition Act conflict is not an isolated instance. There are similar tensions between insolvency law and tax law (e.g., Section 238 of the IBC pre-empting other law); between SEBI rules and CIRP procedures; and between environmental rules and liquidation timetables. These tensions mirror a lack of a harmonious regulatory architecture. Instead of leaving these to be resolved judicially on an ad hoc basis, the government needs to think of creating a statutory platform—perhaps as part of the Financial Sector Legislative Reforms Commission (FSLRC) agenda—where regulators can issue joint guidelines or protocols for cross-jurisdiction cases. The proposed MCA, if drafted well, can be a step in that direction.
The market consequences of the amendment are also significant. In this period of economic recovery from the pandemic, asset quality stresses still exist. It is crucial for India to build a stronger insolvency ecosystem to enable investor attraction. The proposed amendments, aimed at eliminating procedural bottlenecks and diminishing regulatory risk, are likely to attract more strategic and financial investors to engage in bidding for distressed assets.
This will contribute to market expansion, enhance recovery channels for creditors, and promote a culture that prioritizes early resolution over litigative results. Critics can argue that granting post-facto approval by the Competition Commission of India can lead to a sanctioned resolution plan that is later undermined by antitrust concerns. This is a legitimate concern, but one that can be managed. First, the CCI has a pre-determined review timeline (30 days for Phase I and 90 days for Phase II), showcasing its ability to accelerate evaluation with regard to bankruptcy-related mergers. Second, the penalty of delayed CCI approval is less severe than the upfront rejection of a bidder. Third, the CCI can impose structural or behavioural remedies to mitigate anti-competitive impacts without invalidating the deal as a whole. Flexibility in terms of timing does not constitute abdication of supervision but optimizes the strategic location of supervision within procedural design.
III. Conclusion
Overall, the proposed change is more than legislation. It is a substantial regulatory change. It reorients the insolvency regime to pursue practical realism without compromising regulatory integrity. The law does not have to make commercial convenience and competition regulation choices that it cannot. Instead, it should create a process in which both objectives are met sequentially, not in opposition. As India continues to mature as a jurisdiction in which insolvency is not a stigma but a restructuring tool, these reforms will be vital. They will determine not only how companies exit distress, but how law, markets, and institutions work together to build a more efficient economy.
Note: This article has been reviewed by Mr. Steve Levitsky (Merger Clearance and Antitrust Counseling, Manhattan, New York, United States), at the Tier II Stage.
