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MCA may amend IBC to scrap prior CCI approval for insolvency bids
The Ministry of Corporate Affairs (MCA) is likely to amend the Insolvency and Bankruptcy Code (IBC) to clarify that prior permission of the Competition Commission of India (CCI) is not required for submitting bids under the corporate insolvency resolution process, government sources indicated.
This comes in the backdrop of the Supreme Court (SC) rejecting the winning bid of AGI Greenpac for Hindustan National Glass in January due to its failure to get CCI approval before the nod of the plan by the Committee of Creditors (Coc).
'We want to reduce the burden on CCI. We will try to address this issue in the IBC through an amendment,' the official source said.
The provision in question is Section 31A (4) of the IBC which states, '...where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.'
The SC in its January order had said, 'AGI Greenpac's resolution plan is unsustainable as it failed to secure prior approval from the CCI, as mandated under the provision to Section 31(4) of the Insolvency and Bankruptcy Code. Consequently, the approval granted by the Committee of Creditors to the resolution plan dated October 28, 2022, without the requisite CCI approval, cannot be sustained and is hereby set aside and quashed.'
The SC's decision would impact future mergers that happen through IBC.
Experts feel a clarity by the government on this matter would bring relief to bidders who were concerned about approaching CCI before the CoC approval.
'Post the first submission of the plan, it could be significantly amended at the time of final submission for CoC approval. If the bidder approaches the CCI before final submission of the plan, there is no certainty that the plan being reviewed by the CCI would be the same that would be approved by the CoC,' said Anshul Jain, Partner & Leader - Regulatory, PwC India.
The top court on May 8 agreed to look into a request made by the CCI to reconsider its earlier judgment from January.
AGI Greenpac and Independent Sugar Corp (INSCO), were vying for HNG which went into insolvency in October 2021.
INSCO secured CCI clearance in 2022, but AGI Greenpac emerged as the successful bidder chosen by the CoC, despite not having received approval from the CCI at the time. INSCO challenged this in the National Company Law Tribunal (NCLT).
The crux of the dispute was whether CCI approval was mandatory before the CoC approved a resolution plan or if it could be granted afterward.
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