India: Prior Competition Clearance In Insolvency Resolution Process Now Mandatory – Step Towards "Ease Of Doing Business"

Last Updated: 31 May 2019

Article by MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India

The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) has been often cited as one of the key economic reform of the present government. Undoubtedly the new enactment resulted in large corporate entities queuing up to acquire distressed companies and their assets, put on block following initiation of IBC proceedings, thereby infusing efficiencies in the economy due to likely revivals of such companies . Acquisition of a corporate debtor under the IBC begins with the submission of a resolution plan to the Resolution Professional (RP) by the resolution applicant (acquirer/bidder), followed by the approval of such resolution plan by the Committee of Creditors (CoC) and finally by the National Company Law Tribunal (NCLT).

But whether the competition regulator, the Competition Commission of India (CCI) should have a role in such corporate insolvency resolution process (CIRP) , which is primarily justified under the "failing firm" defence and whether it has created another regulatory hurdle for the foreign investors who may be interested in purchasing the assets or otherwise robust Indian companies in crucial sectors with a well established marketing network with goodwill and well - known brand of products or services ? Let us examine .

Depending upon the turnover or assets of the resolution applicant (bidder) and the corporate debtor (target), as prescribed under the Competition Act, 2002 ('the Act") and the Combination Regulations framed thereunder, such resolution plans (bids) require mandatory approval from the Competition Commission of India (CCI) in terms of section 6 of the Act , which empowers the CCI to examine ex ante , all acquisitions , mergers or amalgamations , where the parties collectively meet the prescribed thresholds ( referred as "combinations') . The CCI, till date, has been notified 13 large transactions involving the acquisition of a corporate debtor under the IBC , which amounted to "combination" under the Act and CCI has granted approval to all of them in shortest possible time. The recent acquisition of a sick co., Ruchi Soya Industries Ltd. by a consortium led by home grown Patanjali Ayurved Ltd. pursuant to its resolution application for reviving Ruch Soya , a leading company in edible oils and soya products , which was approved by CCI in a record time of 13 working days , is a case in point which justifies the CCI as a contributor to the proverbial "ease of doing business" , a key parameter for India's economic growth highlighted by the government of Narendra Modi in his first tenure (2014-19) and not as a hurdle.

The elusive 'binding' document and "trigger" event for notifying CCI under IBC

Under the Act, an acquirer's obligation to the notify the CCI is triggered upon execution of a binding document conveying an agreement or even a decision taken by the acquirer to acquire control, shares, voting rights or assets.

In this context, one of the earliest uncertainties surrounded as to what would constitute a binding document for a prospective buyer to notify the CCI i.e. whether the submission of the resolution plan or the approval of such resolution plan by the COC?

The CCI's decisions so far appear to have indicated some clarity on what constitutes a binding document for obtaining CCI approvals in IBC proceedings. For instance, out of the five transactions initially notified to the CCI, only one (acquisition of Electrosteel Steel Limited by Vedanta Ltd.) was filed pursuant to the approval of the resolution plan by the CoC.

In the face of multiple resolution plans (acquirers) gunning for the same corporate debtor, the question arose whether notifying the CCI, prior to the approval of a resolution plan by the COC would constitute a 'pre-mature' filing since, ultimately only one resolution plan would succeed?

From the CCI's decisional practice , it was known till then that the CCI considers a resolution plan filed by a resolution applicant as a 'binding document' for the purposes of filing notice. Had the CCI not considered the resolution plan as a binding document, instead of approving Dalmia's and Ultratech's notices (in their proposed acquisition of Binani Cements Ltd.), the CCI would have held the notices as pre-mature and thus invalid. Thus, there was an ambiguity prevailing at the time as to the time when a resolution applicant should approach CCI . This resulted in unnecessary delays.

Amendments in IBC

To remove the above ambiguity in CIRP, the Indian Parliament passed the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (The Amendment Act). The Amendment Act, passed on 17 August 2018, inter alia, introduced a new sub section (4) in Section 31with a proviso. By way of this proviso to the new sub section (4) of Section 31 , it has been provided that where a resolution plan or any part thereof constitutes a 'combination" under section 5 of the Competition Act,2002 (the Act) , that is, in case where the combined values of the assets or turnovers of the resolution applicant and the corporate debtor proposed to be acquired cross the thresholds prescribed under section 5 of the Act, it will be mandatory for the resolution applicant to obtain prior approval of the proposed acquisition from the Competition Commission of India ('CCI') and in such cases the CoC shall have to wait for the CCI approval before approving the resolution plan .

The said proviso to sub section (4) of Section 31 of the Amendment Act reads as follows:

"Provided that 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".

This, in effect, means that the prospective buyers of the distressed assets or Insolvent companies, while making their bids/resolution applications for such companies should file the Notice before CCI simultaneously with the filing of the resolution plan to avoid delay in obtaining CCI approval. The above proviso brings the much-needed clarity in the CIRP and reduces unnecessary litigation and delays and is a step towards 'ease of doing business".

Specific Questions relating to this article should be addressed directly to the author.

© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions