K. Sashidhar v. Indian Overseas Bank: the foundational articulation of the CoC's commercial wisdom

K. Sashidhar v. Indian Overseas Bank is the foundational articulation of the commercial-wisdom doctrine in Indian insolvency law. The judgment was delivered on 5 February 2019, eleven days after Swiss Ribbons Pvt Ltd v. Union of India had upheld the constitutional validity of the Insolvency and Bankruptcy Code 2016. The two-judge bench of A.M. Khanwilkar, J. and Ajay Rastogi, J. — authored by Khanwilkar, J. — took up two appeals from the National Company Law Appellate Tribunal that posed the same question in mirror-image form: where the Committee of Creditors of a corporate debtor has rejected the resolution plans placed before it by failing to vote the requisite majority in their favour, can the Adjudicating Authority second-guess that rejection and direct that the plans be reconsidered or approved?

The answer the Bench returned has organised the post-2019 IBC jurisprudence. The CoC's commercial wisdom — its vote on whether to approve or reject a resolution plan — is non-justiciable. The NCLT's residual jurisdiction under Section 31 is to satisfy itself of Section 30(2) compliance — the plan's adherence to the statutory requirements on viability, on the Section 30(2)(b) minimum-liquidation-value floor, on the management of affairs of the corporate debtor post-approval, on the implementation supervision regime. Beyond that compliance check, the NCLT cannot reach into the CoC's commercial assessment. And where the CoC has rejected all plans by failing to vote the requisite majority — at the time, the pre-2019 text required 75% — the Adjudicating Authority's residual obligation under Section 33(1) is to direct liquidation.

The judgment is reported at (2019) 12 SCC 150 and 2019 SCC OnLine SC 257.

The statutory architecture

The CIRP architecture under Chapter II of Part II of the Code is built around the Committee of Creditors. The CoC is constituted under Section 21; it is composed of financial creditors of the corporate debtor. The resolution professional invites and processes resolution plans under Sections 25 and 29; the plans are placed before the CoC for vote under Section 30(4). The voting threshold — at the time of K. Sashidhar, 75% by value (since amended by the IBC (Amendment) Act 2019 to 66%) — operates as the bar to approval.

The resolution professional's role at the CoC stage is procedural and compliance-oriented. The professional certifies that each plan complies with the requirements of Section 30(2) — which set out the statutory floor and the non-negotiables of a resolution plan: provision for payment of insolvency-resolution-process costs in priority; provision for payment to operational creditors of not less than the minimum-liquidation-value amount; provision for management of the corporate debtor's affairs post-approval; provision for implementation and supervision; conformity with such other requirements as the Board may specify.

The CoC, having received the compliance-certified plans, votes. If a plan crosses the requisite voting threshold, the resolution professional submits it to the Adjudicating Authority under Section 30(6). The Adjudicating Authority, on its own examination under Section 31, either approves the plan (rendering it binding on the corporate debtor and all stakeholders) or — if it finds the plan non-compliant with Section 30(2) — refuses approval. The Code does not, on its face, confer on the Adjudicating Authority the power to direct the CoC to vote differently, to compel approval of a rejected plan, or to substitute its own view of the plan's commercial merits.

If the CoC rejects all plans placed before it by failing to vote the requisite majority — or if the resolution professional informs the Authority that no plan has been received within the Section 12 timeline — the consequence is mandated by Section 33(1): the Authority shall pass an order requiring the corporate debtor to be liquidated. The architecture is deliberately binary at this stage: either the CoC approves a plan and the plan goes for Section 31 scrutiny, or the CoC's rejection triggers liquidation.

Regulation 39(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 supplements the statutory architecture: it requires the CoC's voting on a plan to record the reasons for approval or rejection, and supplies the framework for what becomes the audit trail of commercial wisdom.

The factual matrix

The two appeals before the Bench arose out of distinct CIRPs but raised the same legal question.

In the lead matter, the CIRP of Kamineni Steel and Power India Pvt Ltd had been initiated on the application of Indian Overseas Bank. Resolution plans had been received, scrutinised by the resolution professional for Section 30(2) compliance, and placed before the CoC. The CoC had voted on the plans; the requisite 75% majority had not been mustered for any of them. The CoC's decision was, in effect, a rejection of all plans.

The resolution professional reported the position to the National Company Law Tribunal, Hyderabad bench, under the expectation that Section 33(1) liquidation would follow. The Tribunal, instead, ventured into a substantive review of the CoC's voting record. It examined the reasons recorded by the dissenting financial creditors, took the view that the dissent was not adequately reasoned, and remitted the matter to the CoC for reconsideration with directions on how the voting was to be conducted.

In the companion CIRP heard with the principal appeal — a different proceeding raising the same legal question on a different fact-set — the Tribunal had taken a similar interventionist position, setting aside the CoC's plan rejection on grounds that engaged the commercial reasoning of the dissenting financial creditors.

The NCLAT, on appeal, had taken inconsistent positions across the two matters. The Supreme Court took up both appeals together to settle the law.

The Court's reasoning

The Code's architecture is creditor-driven

Khanwilkar, J. opened with the structural argument. The Code, in its 2016 enactment, departed from the prior debtor-in-possession architecture of the Sick Industrial Companies regime. The Committee of Creditors — composed of financial creditors — was placed at the centre of the resolution process. The legislative judgment was that financial creditors, by their training and by their stake in the corporate debtor's viability, were best placed to assess the resolution options and to vote on them.

That structural choice has a doctrinal consequence. The CoC's vote is not a procedural step in a court-led adjudication; it is the substantive resolution mechanism. The court's role under Section 31 is confined to ensuring that what the CoC has approved meets the statutory floor — it is not the body that decides which plan to approve, on what terms, with which trade-offs between competing creditor interests. To allow judicial review of the CoC's voting record on the merits would be to invert the statutory architecture.

The Section 30(2) compliance audit is the boundary

The Bench then defined the boundary of the Section 31 judicial-review jurisdiction. The Adjudicating Authority's enquiry at the Section 31 stage is whether the resolution plan placed before it, having been approved by the CoC, complies with the Section 30(2) requirements. The compliance audit is itself non-trivial — the plan must provide for insolvency-resolution-process-cost payment, for the operational-creditor minimum-liquidation-value floor, for the post-approval management architecture, for implementation supervision, and for conformity with such other requirements as the Board has prescribed.

But the audit ends there. The Authority is not to assess whether the plan is the best plan that could have been crafted, whether the CoC ought to have negotiated a better deal, whether the dissenting financial creditors had cogent reasons for their dissent, whether the commercial outcome is sub-optimal. Those are matters for the CoC's commercial judgment, and the Code has placed them beyond the Authority's reach.

Non-justiciability of the CoC's voting

The third and central pillar of the reasoning is the non-justiciability of the CoC's vote. The Bench held that financial creditors voting on a resolution plan are exercising their commercial judgment on matters within their statutory remit. The reasons recorded by dissenting creditors are required by Regulation 39(3) for the audit trail; they are not, however, themselves justiciable. A court cannot, on a review of the recorded reasons, declare that the dissent was inadequately reasoned and require the CoC to vote afresh.

The reasoning is anchored in the structural argument: if the CoC's vote were justiciable, the resolution process would migrate from the CoC to the Tribunal, and the legislative architecture would be inverted. The Bench observed that the Code's design contemplates the CoC as the resolution body, not the Tribunal; the Tribunal's residual jurisdiction is the Section 30(2) compliance check, not the commercial-merits review.

The Section 33(1) consequence

The fourth and operational consequence is the Section 33(1) obligation. Where the CoC has rejected all plans by failing to vote the requisite majority, the Section 33(1) trigger is automatic. The Adjudicating Authority is not at liberty to direct the CoC to vote again, to defer the Section 33(1) order, or to seek further plans. The CoC's rejection moves the corporate debtor's affairs to the liquidation track.

The Bench noted that this consequence — that a CoC rejection leads directly to liquidation rather than to a renewed resolution attempt — has been calibrated by the legislature as the cost of preserving CoC supremacy. The discipline is intentional: it concentrates the CoC's attention on the plans before it, because the CoC is conscious that rejection is consequential.

The doctrinal contribution

K. Sashidhar did three pieces of foundational work for the post-2019 IBC jurisprudence.

It supplied the non-justiciability of the CoC's commercial wisdom as a settled doctrine. The vote is the resolution mechanism; the recorded reasons are an audit trail, not a basis for judicial second-guessing; the Tribunal cannot reach into the commercial assessment.

It supplied the Section 30(2) compliance enquiry as the boundary of the Section 31 judicial-review jurisdiction. The architecture is now well-settled: the Tribunal at the plan-approval stage checks the statutory floor; it does not review the merits.

It supplied the Section 33(1) discipline: a CoC rejection of all plans triggers the liquidation track, and the Tribunal cannot defer that consequence to coax the CoC into a different vote.

What the judgment did not decide

A few matters were left open and were addressed in subsequent decisions.

The Bench did not work through the CoC's commercial wisdom on the distribution of plan proceeds — the question of how the recoverable amount under a resolution plan is divided between financial creditors and operational creditors, and between secured and unsecured financial creditors. That question was decided by the three-judge bench in Committee of Creditors of Essar Steel India Ltd v. Satish Kumar Gupta, (2020) 8 SCC 531, in November 2019.

The Bench did not address the extension of the commercial-wisdom doctrine to Section 12A withdrawal. Vallal RCK v. Siva Industries and Holdings Ltd, (2022) 9 SCC 803, extended the Sashidhar reasoning to CoC voting on a Section 12A application for withdrawal of the CIRP — the CoC's commercial wisdom on whether to permit withdrawal is similarly non-justiciable.

The Bench did not address the related-party-financial-creditor exclusion under the first proviso to Section 21(2). The contours of that exclusion were worked out in Phoenix ARC (P) Ltd v. Spade Financial Services Ltd, (2021) 3 SCC 475.

The Bench did not address the reverse-CIRP architecture — the situation where the CoC, having approved a plan, seeks to withdraw the approval after the Section 31 order. That question was decided in Ebix Singapore Pvt Ltd v. Committee of Creditors of Educomp Solutions Ltd (2021), which held that the approved plan cannot be withdrawn or renegotiated post-Section 31.

The Bench did not address the practitioner-bidder relationship and the bidding process. The question of whether a bid once submitted can be revised — and on what terms — was addressed in Maharashtra Seamless Ltd v. Padmanabhan Venkatesh, (2020) 11 SCC 467, and in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd, (2021) 10 SCC 401.

The doctrinal arc

The commercial-wisdom doctrine, articulated in K. Sashidhar, has been built out across the IBC jurisprudence of the past seven years.

Essar Steel (2019) reaffirmed Sashidhar on the CoC's commercial wisdom and extended it to the distribution of plan proceeds. The CoC's vote on the FC-versus-OC split — and on any unequal treatment within the financial-creditor class — is non-justiciable, subject to the Section 30(2)(b) minimum-liquidation-value floor and to Section 53 waterfall consciousness.

Maharashtra Seamless (2020) reaffirmed Sashidhar on the CoC's commercial wisdom in selecting between competing plans and in approving plan terms that may appear sub-optimal on review.

Kalpraj Dharamshi (2021) reaffirmed Sashidhar on the CoC's commercial wisdom in evaluating revised bids and in conducting the bidding process. The Tribunal cannot substitute its view on whether the bidding process produced the optimal outcome.

Vallal RCK v. Siva Industries (2022) extended Sashidhar to Section 12A CoC voting on withdrawal of the CIRP.

Ngaitlang Dhar (2021) and Ebix Singapore (2021) applied Sashidhar in the context of CoC-approved plans and the limits on Tribunal-level review thereof.

The arc traces a steady consolidation. The post-Sashidhar line has not produced material doctrinal disturbance; the commercial-wisdom doctrine is, in 2026, the most stable proposition in Indian insolvency jurisprudence.

What practitioners take

For the resolution professional. The discipline at the CoC stage is procedural. The professional's role is to certify Section 30(2) compliance, to place the plans before the CoC with the supporting commercial documentation, to ensure the Regulation 39(3) voting record is properly maintained, and to report the outcome to the Adjudicating Authority. The professional should not be drawn into substantive commercial assessment; the role is facilitative.

For the dissenting financial creditor. The reasons for dissent recorded under Regulation 39(3) are the audit trail. Subsequent litigation on the CoC's vote is unlikely to succeed under Sashidhar — the dissent is the dissent, and it produces the Section 33(1) consequence if it carries (because, mathematically, dissent that pushes the plan below the voting threshold is rejection). A dissenting financial creditor cannot, post-vote, seek to revisit the CoC's decision through the Tribunal.

For the corporate debtor. Sashidhar closes the avenue of seeking Tribunal-level second-guessing of CoC rejection. If the CoC has rejected all plans, the path is to liquidation under Section 33(1). The corporate debtor's strategic engagement is therefore at the pre-vote stage — at the CoC discussions, at the plan negotiations, at the resolution-professional engagement.

For the bidder. The bidder's engagement with the CoC is commercial. The bid is evaluated by the CoC on its commercial terms; the Tribunal will not, post-Sashidhar and Maharashtra Seamless, second-guess the CoC's evaluation. A bidder should engage actively with the CoC's commercial concerns at the negotiation stage rather than relying on Tribunal review post-rejection.

For the operational creditor. Sashidhar leaves the Section 30(2)(b) minimum-liquidation-value floor as the operative protection at the plan-approval stage. The Tribunal will scrutinise whether the plan provides for at least the liquidation value; it will not, however, examine whether the CoC ought to have negotiated a higher allocation. Operational-creditor strategy should focus on the Section 30(2)(b) compliance check.

Related editorial pieces

• Committee of Creditors of Essar Steel v. Satish Kumar Gupta: the commercial wisdom hub
• Phoenix ARC v. Spade Financial Services: related-party exclusion under Section 21(2)
• Innoventive Industries v. ICICI Bank: the paradigm shift and the narrow Section 7 gate
• Section 12A withdrawal: NCLAT on post-liquidation reach