New Delhi: The Supreme Court on Friday pulled up unsuccessful bidding companies in insolvency cases for challenging commercial decisions taken by lenders, warning that such attempts undermine the design of India’s bankruptcy framework.
A bench led by Justice B.V. Nagarathna made the observations while upholding the resolution plan of Sarda Energy & Minerals Ltd for SKS Power Generation (Chhattisgarh) Ltd.
The court dismissed appeals filed by Torrent Power Ltd, Jindal Power Ltd and Singapore-based Vantage Point Asset Management, which had challenged the approval of the plan.
The court said losing bidders cannot seek a second chance by portraying commercial decisions of the committee of creditors (CoC) as procedural flaws. Such litigation, it cautioned, delays resolution and weakens the time-bound structure of the Insolvency and Bankruptcy Code (IBC).
“Unsuccessful resolution applicants seek to reopen almost every commercial position under the guise of procedural impropriety. This converts the corporate resolution process into a protracted adversarial contest and erodes the value of the corporate debtor,” the court observed.
It further noted that such an approach incentivises delay, rent-seeking and strategic obstruction, and is fundamentally inconsistent with the economic logic and statutory design of the IBC.
The court upheld the CoC’s decision approving Sarda Energy’s plan, as well as the earlier rulings of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
It clarified that there was no scope for the Supreme Court to interfere with a resolution plan that had already been duly approved and implemented in accordance with the law.
“There is an unmistakable signal that insolvency proceedings cannot become platforms for competitive afterthought litigation," said Alay Razvi, managing partner, Accord Juris. "Once a plan has been lawfully approved and implemented, interference will be rare and exceptional. This reflects institutional resolve to preserve the credibility, speed, and certainty of the insolvency framework.”
The top court's observations come amid a growing trend of unsuccessful bidders—and in some cases former promoters—challenging resolution outcomes from the NCLT stage up to the Supreme Court, often delaying successful bidders from taking operational control of stressed companies.
According to the judgment, IBC is designed to ensure speed, certainty and creditor-driven decision-making, with only limited judicial review. Unsuccessful bidders cannot reopen commercial decisions of the Committee of Creditors (CoC) by labelling them procedural faults. Excessive court interference delays resolution, increases costs, erodes the value of the stressed company and discourages serious bidders.
“For the longest time under Indian law, the freedom of exit remained under-institutionalised. The enactment of the IBC was a decisive correction of this imbalance by introducing a predictable and time-bound mechanism for insolvency resolution. While predictability allows market participants to form stable expectations about enforcement outcomes, finality curtails strategic delay and rent-seeking, ensuring timely deployment of capital and labour into more productive use,” the court said in its order.
The dispute dates back to 1 October 2024, when the NCLAT upheld the approval of Sarda Energy’s ₹1,950-crore bid to acquire SKS Power and rejected objections raised by Torrent Power, NTPC, Jindal Power and Vantage Point.
In April 2022, the Mumbai bench of the NCLT admitted a plea filed by Bank of Baroda to initiate insolvency proceedings against SKS Power after admitted claims of about ₹2,560 crore. Lenders, including State Bank of India and Bank of Baroda, had moved the tribunal over defaults. On 13 August 2024, the NCLT approved Sarda Energy’s resolution plan, which covered nearly the entire amount of financial creditors' dues.
SKS Power operates a 4x300 MW coal-based thermal power plant at Binjkote and Durramuda in Raigarh district of Chhattisgarh.
Founded in 1973 and headquartered in Chhattisgarh, Sarda Energy & Minerals is the flagship company of the Sarda Group. The company is among India’s lowest-cost steel producers and one of the country’s largest manufacturers and exporters of ferroalloys.
"…The SKS Power resolution represents a positive outcome under the IBC — creating a win-win outcome for lenders, employees, the local community and all other stakeholders while ensuring continued operation of an important power asset,” said Nilay Joshi, executive director at Sarda Energy, in response to Mint’s query. “The judgment reaffirms confidence in India’s insolvency framework and further strengthens our company’s position as an integrated mining-to-energy player,” Joshi said.
Jindal Power Ltd, Vantage Point Asset Management, and Torrent Power Ltd did not respond to queries until press time.
“The Resolution Plan was already implemented in August 2024. This judgment upholds the decision of the CoC and reiterates that the process was run in a fair and transparent manner by the RP,” said Ashish Rathi, resolution professional of SKS Power Generation (Chhattisgarh) Ltd, in response to Mint’s query.
Rathi said the plant was shut when he took over in 2022, but was restarted during the CIRP with interim finance from lenders, generating over ₹600 crore in cash. The turnaround enabled 100% recovery for financial creditors ( ₹1,876 crore) and operational creditors ( ₹576 crore). The asset was operational and profitable when handed over to Sarda Energy & Minerals Ltd in August 2024.
“This turnaround was a major contributor to the 100% recovery for both financial creditors (INR 1876 Cr) and operational creditors (INR 576 Cr), making it probably the only case of this size to result in 100% recoveries to operational creditors as well, owing largely to the turnaround effected during CIRP,” the RP said
Lawyers say the Supreme Court’s ruling makes it clear that losing bidders cannot use courts to reopen commercial decisions under the IBC. Going forward, the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are likely to dismiss such challenges at an early stage unless there is a clear statutory violation, reinforcing finality and creditor primacy in insolvency cases.
Courts have increasingly adopted a strict commercial approach in insolvency matters, giving primacy to the wisdom of the CoC and discouraging unnecessary challenges that could further erode asset value, said Soayib Qureshi, partner at PSL Advocates & Solicitors.