Commercial Wisdom and Appellate Finality Under the IBC: “Clarifications” Sought by the CoC via the RP Are Not Plan Modifications; RP Acting on CoC Instructions Is Not “Material Irregularity” (Sections 61–62)

Case: TORRENT POWER LIMITED v. ASHISH ARJUNKUMAR RATHI & OTHERS
Citation: 2026 INSC 206 (Supreme Court of India, 27-02-2026)
Coram: B.V. Nagarathna, J.; R. Mahadevan, J.

1. Introduction

The appeals arose from a Corporate Insolvency Resolution Process (“CIRP”) of SKS Power Generation (Chhattisgarh) Limited (“Corporate Debtor”). The Resolution Professional (“RP”), Mr. Ashish Arjunkumar Rathi, invited Expressions of Interest, issued the Request for Resolution Plan (“RFRP”), and the Committee of Creditors (“CoC”) conducted negotiations and an inter-se bidding process governed by a Process Note. Ultimately, the CoC approved (100% voting share) the Resolution Plan of Sarda Energy and Minerals Limited (“SEML”).

The appellants—Torrent Power Limited (“Torrent”), Vantage Point Asset Management Pte. Ltd. (“Vantage”), and Jindal Power Limited (“Jindal”)—were unsuccessful resolution applicants. Their core grievance was that SEML allegedly modified its commercial bid after the negotiation process had “frozen” offers, under the guise of post-bid “clarifications”.

2. Summary of the Judgment

The Supreme Court dismissed all appeals and affirmed the NCLAT order. It held:

• No “material irregularity” under Section 61(3)(ii): The RP acted strictly on CoC instructions when seeking clarifications from all resolution applicants. This conduct cannot be treated as “material irregularity”.
• No plan modification by SEML: The clarifications on BG-related margin money and the Rs.240 crore “upfront vs deferred” structure did not change SEML’s commercial offer; they only explained existing terms and NPV mechanics.
• Commercial wisdom is non-justiciable: What remained, in substance, was a challenge to CoC’s commercial decision—barred by the scheme of the IBC and settled precedent.
• Section 62 threshold not met: An appeal to the Supreme Court lies only on a “question of law”; the appellants’ case did not fit within the narrow grounds of Section 61(3), hence no viable question of law arose.
• Concurrent findings + implementation: NCLT and NCLAT had concurrent findings; additionally, the plan stood implemented, reinforcing finality and limiting judicial intervention.

The Court also issued a broader institutional caution against strategic litigation by unsuccessful bidders that seeks to recharacterize commercial decisions as procedural improprieties, undermining speed and certainty—core objectives of the IBC.

3. Analysis

3.1 Precedents Cited (and Their Influence)

(a) Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, (2020) 8 SCC 531 ("Essar Steel India Limited")

The Court relied on the Essar Steel framework on the limited judicial review available at plan approval: the Adjudicating Authority may only verify whether the CoC considered statutory essentials (going concern, value maximisation, stakeholder interests) and whether the plan complies with Section 30(2). Once satisfied, the plan “must then pass”, “other things being equal”. This precedent anchored the Court’s rejection of attempts to invite a “quantitative” re-evaluation of bids by judicial bodies.

(b) K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150

This case was treated as the doctrinal foundation for commercial wisdom and the statutorily circumscribed jurisdiction of NCLT/NCLAT: neither authority can review the merits of CoC’s business decision; appellate scrutiny is limited to the grounds enumerated in Section 61(3). The present judgment extends that logic by emphasizing that allowing “material irregularity” to be argued where RP merely conveys CoC queries would indirectly open CoC decisions to review—contrary to Sashidhar’s statutory design.

(c) Kalyani Transco v. Bhushan Power & Steel Ltd., 2025 SCC OnLine SC 2093 ("Kalyani Transco")

Kalyani Transco was used in two ways:

• Concurrent findings restraint: The Supreme Court reiterated it will not interfere with concurrent NCLT/NCLAT findings unless ignorance of mandatory provisions, extraneous considerations, or ex facie arbitrariness/illegality is shown.
• Non-justiciability of CoC decision-making: The judgment quoted Kalyani Transco to reaffirm that the legislature “purposefully did not include a means to challenge” commercial wisdom and that courts must not “rewrite the law”.

(d) Pratap Technocrats Private Ltd. v. Monitoring Committee of Reliance Infratel Limited, (2021) 10 SCC 623

Pratap Technocrats reinforced the proposition that NCLT/NCLAT have no “residual equity” jurisdiction to re-balance outcomes if the plan otherwise conforms to the IBC and regulations. This was significant in rejecting the appellants’ value-maximisation rhetoric as a backdoor attempt to obtain merits review of CoC’s decision.

(e) Swiss Ribbons Private Ltd. v. Union of India, (2019) 4 SCC 17

Swiss Ribbons was invoked for the IBC’s economic objectives: time-bound resolution, preservation of going-concern value, and reduction of value destruction from delay. The Court used this to justify institutional vigilance against expanding review, emphasizing both ex post costs (erosion of value) and ex ante distortions (bidders discounting offers due to litigation uncertainty).

(f) Kalparaj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401

Cited by the CoC to argue that even if the RP’s procedural steps are questioned, where actions have the “seal of approval” of the CoC, interference is generally unwarranted. In the present case, this supported the Court’s characterization that RP’s clarification-seeking was CoC-directed and thus not a “material irregularity” attributable to the RP.

3.2 Legal Reasoning

(i) The statutory gatekeeping under Sections 61 and 62

The Court’s first principle was jurisdictional discipline:

• Section 61(3) permits appeal to NCLAT against plan approval only on five narrowly defined grounds (contravention of law; material irregularity by RP; specified deficiencies regarding operational creditors; IRP costs; non-compliance with Board criteria).
• Section 62 permits appeal to the Supreme Court only on a “question of law arising out of” the NCLAT order.

The appellants attempted to fit their case into “material irregularity” (Section 61(3)(ii)), but the Court held that where the RP acts on CoC instructions (seeking clarifications from all applicants), it cannot be labeled “material irregularity”. Accepting such an argument would collapse the RP/CoC distinction and indirectly enable merits review of CoC decisions—contrary to the IBC’s structure and precedent.

(ii) “Clarification” vs “modification”: the BG (margin money) dispute

The appellants argued SEML increased its BG-related infusion from Rs.103.39 crores to ~Rs.180 crores. The Court rejected this on document logic:

• SEML’s plan (Clause 6.3.14) always contemplated return of margin money of Rs.180.05 crores to the Corporate Debtor on the Transfer Date to be used for payment as the CoC decides.
• Clause 6.3.15 referred only to infusion of Rs.103.39 crores as “Margin Money Replacement Amount” for BGs the plan proposed to continue (Items 1–5).
• BGs at Items 6–7 (Rs.76.61 crores) were proposed to be not continued because underlying liabilities would be extinguished; the “clarification” explained timing and mechanics—ensuring issuing banks remained 100% secured pending cancellation/expiry—without changing what the CoC ultimately receives.

The Court’s key conceptual distinction: Rs.103.39 crores was not the “extent of offer” to the CoC, but the incremental replacement funding needed for BGs that would remain live; the margin money release of the whole Rs.180.05 crores was already baked into the plan.

(iii) The deferred vs upfront Rs.240 crores dispute and the NPV lens

On the second allegation—that SEML converted a deferred Rs.240 crores into upfront Rs.240 crores—the Court accepted the NCLAT’s reading:

• SEML proposed NCDs of Rs.240 crores with coupon; over time, this totalled Rs.301.64 crores.
• It also offered the CoC an option to take Rs.240 crores upfront as the discounted/present value (NPV) of that deferred stream.
• The RP’s query asked whether “discounted amount of INR 240 Cr” meant a further discount below Rs.240 crores; SEML clarified “No”.

Thus, the “clarification” was not an enhancement or a post-freeze commercial change; it was a confirmation that Rs.240 crores already represented discounted value and would not be discounted again if taken upfront.

(iv) Commercial wisdom: why “highest bid” arguments fail in law

Torrent, Vantage, and Jindal all advanced variations of a “value maximisation” thesis (they were higher or more upfront). The Court treated these as, in substance, invitations to reassess feasibility/viability and CoC preference—precisely what the IBC and precedent forbid. The Court also noted the RFRP’s express caution that the CoC is under no obligation to approve the highest-scoring plan and will decide solely by commercial wisdom.

(v) Finality, implementation, and systemic caution against bidder litigation

Beyond case disposition, the judgment contains a policy-forward warning: insolvency is designed to be time-bound; expansive review raises transaction costs, prolongs timelines, and destroys going-concern value. The Court describes a pattern of “strategic use” of litigation by unsuccessful applicants seeking “a second shot”, and instructs courts to resist expanding review beyond statutory confines.

3.3 Impact

• Reinforcement of Sections 61–62 as hard filters: The judgment fortifies the idea that many bidder grievances do not even reach the merits stage if they do not map precisely onto Section 61(3) grounds and yield a genuine Section 62 “question of law”.
• Clarifications jurisprudence: It provides a practical test for distinguishing a “clarification” from a “modification”: whether the clarification changes the economic substance/NPV/payment obligation, or merely explains implementation mechanics already implicit in the plan.
• “Material irregularity” narrowed where RP follows CoC directions: The ruling makes it harder to characterize CoC-driven steps as RP irregularities, limiting a common litigation strategy.
• Greater protection for implemented plans: By emphasizing implementation and finality, the judgment adds deterrence against late-stage challenges that would unravel concluded transactions.
• Institutional message: The Court explicitly frames excessive judicial review as economically harmful (ex post value destruction; ex ante bidder participation distortion), strengthening the pro-certainty, pro-speed narrative of the IBC.

4. Complex Concepts Simplified

• Commercial wisdom of the CoC: The CoC (financial creditors) decides which plan is feasible/viable; courts do not replace that business assessment with their own.
• Material irregularity (Section 61(3)(ii)): A serious procedural lapse by the RP in exercising CIRP powers. The Court held: when the RP merely carries out CoC instructions (like seeking clarifications from all applicants), it is not a “material irregularity”.
• RFRP / Process Note: The “rulebook” of the bidding process issued by the RP/CoC. Here, it allowed seeking clarifications, and the Court treated clarifications (sent to all applicants) as consistent with process fairness.
• Bank Guarantees (BGs) and margin money: BGs are bank-backed assurances; “margin money” is cash collateral kept with the bank to secure the BG. SEML’s plan contemplated that this collateral (Rs.180.05 crores) would be released and used for creditor payments; additional “replacement margin” was needed only if certain BGs were to continue.
• NPV (Net Present Value): Future payments are worth less than immediate payments; NPV converts future cash flows into today’s value. SEML’s “upfront Rs.240 crores” was treated as the NPV of the larger deferred stream (Rs.301.64 crores), not an enhancement.
• Concurrent findings: When NCLT and NCLAT agree on facts, the Supreme Court generally will not interfere unless the view is illegal, perverse, or ignores mandatory law.

5. Conclusion

The decision in TORRENT POWER LIMITED v. ASHISH ARJUNKUMAR RATHI consolidates a stringent, process-and-jurisdiction-focused approach to IBC appeals: (i) unsuccessful bidders cannot recast CoC’s commercial preference as a legal wrong, (ii) clarifications that do not alter economic substance are not “plan modifications”, (iii) an RP acting on CoC directions is unlikely to satisfy “material irregularity” under Section 61(3)(ii), and (iv) Section 62 requires a real question of law—mere disagreement with CoC outcomes does not qualify. The judgment’s broader institutional warning is equally significant: expanding judicial review invites delay, value destruction, and strategic litigation—outcomes the IBC was designed to prevent.