Commercial Wisdom And Economic Justice Under The Ibc: A Comparative Analysis Of Indian And International Insolvency Frameworks
- IJLLR Journal
- 2 hours ago
- 2 min read
Siddhant Pant, Law College Dehradun, Uttaranchal University
Introduction
The Insolvency and Bankruptcy Code has been the bedrock of insolvency laws in the nation since its enactment in the 2016. The code was conceived to provide a dynamic framework to regulate insolvency and bankruptcy proceedings which awards genuine efforts to revive stressed assets and maximize the recovery within the prescribed timelines. The Committee of Creditors serves as the central and most crucial component within the broader framework of the Corporate Insolvency Resolution Process (CIRP). The Committee consists of the Financial Creditors, Operational Creditors and other stakeholders, but works in a creditor-in-control model, where the financial creditor plays dominant role in the approval of the Resolution Plan. The process of such approval is guided by the commercial wisdom which refers to the economic judgment exercised by the creditors acting through the Committee of Creditors (CoC) in evaluating the viability and feasibility of a resolution plan.
The doctrine of commercial wisdom has been the cornerstone of the resolution process which mirrors the legislative intent of IBC, that is to minimize judicial interference in a purely business decision. Commercial wisdom of the CoC has been recognised in various judgments of the Supreme Court representing a decisive shift form the pre-IBC era. The Supreme Court has time and again upheld that the decisions made by the CoC cannot be challenged or revised by Tribunals and Courts thus limiting the power of judicial review. This article aims to assert that while the doctrine of commercial wisdom promotes efficiency and creditor confidence, the near-absolute primacy given to the CoC raises serious concerns about the economic justice. A balanced approach is much required where judicial review remains limited and meaningful and is necessary to ensure that the insolvency process remains both economically efficient and legally sound.
