The CoC's commercial judgment on a resolution plan is final — courts and the NCLT cannot substitute their view for the collective wisdom of creditors.

The Legal Question Before the Court

The Essar Steel insolvency was one of the largest and most complex resolutions under the IBC. The Committee of Creditors approved a resolution plan submitted by ArcelorMittal. Operational creditors and the resolution applicant both challenged aspects of the plan — the operational creditors contended that the plan treated them inequitably compared to financial creditors, and that the NCLT/NCLAT had erred in approving the plan without ensuring operational creditors received adequate treatment. The fundamental question was: what is the scope of judicial review over a resolution plan approved by the CoC?

The Court's Decision

The three-judge bench held that the commercial wisdom of the Committee of Creditors in approving a resolution plan is largely non-justiciable. The NCLT's role under Section 31 — when examining whether to approve a resolution plan voted for by the CoC — is limited to checking compliance with the requirements of the IBC and the regulations. The NCLT does not conduct a merits review of the commercial terms of the plan.

The court also clarified the minimum entitlement of operational creditors: they must receive at least the liquidation value to which they would be entitled if the corporate debtor were wound up. They are not entitled to equal treatment with financial creditors; the CoC may legitimately differentiate. However, the plan must not provide them with zero or only a token amount if the corporate debtor has distributable value.

The court simultaneously struck down NCLAT's power to modify or "re-write" approved resolution plans — once the CoC approves, the adjudicating authority approves the plan as a whole or not at all.

The Court's Reasoning

The bench grounded its decision in the legislative architecture of the IBC. The Code places commercial decision-making in the hands of creditors — specifically the CoC — because lenders have both the financial expertise and the economic incentive to maximise the value of the distressed corporate debtor. Judicial intervention in the commercial terms of a resolution plan — second-guessing the discount accepted, the treatment of specific creditors, or the viability of the proposed restructuring — would paralyse the resolution process and defeat the Code's objective of time-bound resolution.

The court invoked the principle of economic deference: courts are not equipped, and the IBC does not intend them, to be commercial evaluators of restructuring plans. The insolvency regime reserves that function for informed market participants — the financial creditors — with appropriate protections for the minimum entitlements of other stakeholders.

Practical Implications — What This Means Today

Essar Steel is the most important IBC precedent after Innoventive Industries and Swiss Ribbons. It definitively closed the door to judicial rewriting of resolution plans and established the CoC's primacy as the commercial decision-maker in insolvency proceedings. For businesses involved in large-scale insolvency — whether as resolution applicants, financial creditors, or operational creditors — this ruling defines the playing field precisely.

For operational creditors — particularly vendors and contractors of large corporate debtors — the practical takeaway is sobering: once a company enters CIRP, operational creditors must engage early in the process, file their claims promptly, monitor the plan as it is developed, and take steps to ensure their liquidation value is properly computed and reflected in the plan. The window for effective intervention is during CIRP, not after the CoC has voted.

Relevant Statutory Provisions

  • Section 30, Insolvency and Bankruptcy Code, 2016 — Submission of resolution plan — requirements
  • Section 31, Insolvency and Bankruptcy Code, 2016 — Approval of resolution plan by adjudicating authority
  • Section 21, Insolvency and Bankruptcy Code, 2016 — Committee of Creditors — composition and powers
  • Section 53, Insolvency and Bankruptcy Code, 2016 — Distribution of assets in liquidation — waterfall

Analysis by Vinode V. Luka, Advocate | Published: May 2026 | Last reviewed: May 2026