GSTAT’s Real Challenge Is Not Backlog – It Is Transition!
C A Dhanashree Prabhu, Surya Prakash B S, Jatin Christopher & Vivek Jalan
July 29, 2026
I. Abstract
The National Company Law Tribunal (NCLT) was created by Parliament as the adjudicating authority (AA) for India’s corporate insolvency framework. It has extensive authority, extensive legal power and the power to approve or reject resolution plans that determine the fate of companies worth thousands of crores. It cannot even inquire whether a resolution plan’s haircut is appropriate, give preference to one resolution applicant over another, order the Committee of Creditors (CoC) to accept a better offer, reconsider the CoC’s selection criteria, and review the commercial merits of any decision the CoC claims to have made based on its own judgment. “Neither the NCLT, nor the NCLAT, nor this Court is authorized to make its own assessment in lieu of the commercial decision taken by the CoC by the required majority.” This is not a criticism of the Supreme Court’s position but it reflects a correct legislative design philosophy. However, this suggests that the NCLT’s role in India’s insolvency architecture is not as clear cut as its inception suggests. The NCLT is not the final decision maker in corporate insolvency proceedings; the Committee of Creditors is. The NCLT approves the decisions of the CoC. It examines the process, not the outcome. It validates the commercial decisions of a private body that is not accountable to anyone outside its legal jurisdiction.
This blog asks a question that remains largely unadressed in the discourse on India’s insolvency reform which is: if the CoC’s decisions are wrong, what is the NCLT for?
II. Introduction
The principle that the CoC’s decisions on resolution plans are not subject to judicial review on their merits is one of the most entrenched principles in Indian insolvency law today. Under this, neither the NCLT nor any appellate court can substitute its commercial decision for the CoC’s, as long as the CoC has acted within the procedural framework of the law. However, importantly, this principle has not been clearly stated in the Code. The Insolvency and Bankruptcy Code, 2016, enacted by Parliament, granted adjudicatory authority to the NCLT but remained silent on the question of how far this authority extends to examining the commercial arguments of creditors. Though it created the architecture, it did not set this specific limit.
That clarity was provided by the Supreme Court through a series of thoughtful and progressive decisions. The Court first enunciated this principle in K. Shashidhar vs Indian Overseas Bank (2019)1. In that decision the Supreme Court arrived at a clear line: once a resolution plan is approved with the statutorily required threshold, neither the NCLT nor the NCLAT can “substitute its judgment for the commercial wisdom of the CoC.”
A year later, in the Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2019)2, the apex court further reiterated this distinction and emphasized that judicial review is limited to a narrow procedural inquiry – whether the plan complies with the Code, treats creditors fairly, and respects priority rules and leaves the economic benefits of the plan to lenders. This is understandable as economic creditors are the biggest risk-takers and therefore best determine the value of viability and recovery which most recently, explicitly, reaffirmed in the matter of Torrent Power Ltd v. Ashish Arjunkumar Rathi & Ors. (2026)3 stating –
“The principle of commercial wisdom embodies both institutional discipline and legislative intent: insolvency resolution must be efficient, market-responsive and guided by those best placed to assess commercial risk4.”
The Supreme Court emphasized the legislative intent behind the IBC. The Court observed: “The IBC is a deliberate legislative choice to prioritize speed, certainty, and creditor-driven decision making over a thorough judicial investigation. Experience shows that unsuccessful bidders will always attempt to circumvent the CoC’s commercial judgment in the process so that they can get a second chance through litigation by filing an application or making representations5.”
This underscores that judicial intervention is intentionally limited to preserve the efficiency and finality of the resolution process.
The reason for this is strong. Financial creditors bear the economic risk of insolvency. They have the most direct benefit from maximizing recovery. The CIRP process gives them access to the corporate debtor’s financial information. In fact, they are in the best position to determine which resolution plan offers the most realistic returns. Subjecting their commercial decisions to judicial re-examination by a tribunal with no commercial expertise, no equity stake and no information advantage will slow down every resolution and encourage every unsuccessful bidder to litigate.
