CoC Commercial Wisdom is Non-Justiciable: Supreme Court Reaffirms in Torrent Power Case

The Supreme Court of India has once again reaffirmed the foundational principle of the Insolvency and Bankruptcy Code, 2016: the commercial wisdom of the Committee of Creditors in evaluating and approving a resolution plan is paramount and non-justiciable. In Torrent Power Ltd. v. Ashish Arjunkumar Rathi, decided in February 2026, the Court dismissed a challenge to a resolution plan that had been approved by the CoC, holding that adjudicating authorities and appellate courts cannot substitute their commercial judgment for that of the CoC in assessing the viability and feasibility of a resolution plan.

The Principle of CoC Commercial Wisdom Under IBC

The Supreme Court first articulated the primacy of CoC commercial wisdom in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019), holding that the IBC deliberately vests commercial decision-making with the CoC, which consists of financial creditors best placed to assess the viability of a going concern and the comparative merits of competing resolution plans. Subsequent decisions in Swiss Ribbons, Maharashtra Seamless, and Vidarbha Industries reinforced this framework. The Torrent Power ruling is significant because it applies this principle in the context of a creditor challenging a resolution plan on the ground that the plan discriminated between similarly placed creditors.

What the Court Held in Torrent Power

The Court held that the CoC's decision to approve a resolution plan that differentiated between classes of operational creditors was within its commercial discretion and did not violate the IBC's waterfall provisions or the principle of equality under Article 14. The Court reiterated that the CoC can take into account a wide range of commercial factors including the operational requirements of the corporate debtor post-resolution, the likelihood of the resolution applicant achieving the projected financial outcomes, and the overall health of the sector in which the corporate debtor operates. These are commercial judgments that courts are not equipped to second-guess.

Limits on CoC Discretion That Remain

While reaffirming CoC primacy, the Court also noted the limits that the IBC itself imposes on CoC discretion. These limits remain judicially enforceable: the resolution plan must pay workmen's dues and operational creditor dues at least at the liquidation value, the CoC cannot approve a resolution plan that violates mandatory provisions of law, the process must comply with procedural requirements including proper conduct of the CoC meeting and valid voting, and the resolution applicant must not be a person ineligible under Section 29A. These are matters of legal compliance, not commercial judgment, and courts retain jurisdiction to review them.

Implications for IBC Litigation

The Torrent Power ruling is a continued signal that challenges to approved resolution plans based on disagreements with the CoC's commercial assessment are unlikely to succeed before the NCLAT or the Supreme Court. For resolution applicants, CoC approval provides significant legal protection against post-approval challenges. For dissenting creditors, the ruling narrows the viable grounds of challenge to procedural irregularities, ineligibility of the resolution applicant, violation of waterfall priorities below the minimum statutory threshold, or clear breach of mandatory law. Legal strategy in CIRP-related litigation must be calibrated against these narrowing grounds of judicial review.