Content:
For years, one principle has guided insolvency jurisprudence under the Insolvency and Bankruptcy Code: courts do not interfere with the commercial wisdom of creditors. But recent rulings suggest an important refinement.
Commercial wisdom is being respected, not treated as immunity. A pattern is emerging in decisions of the National Company Law Tribunal and appellate forums: while business decisions remain within the Committee of Creditors’ domain, process integrity is becoming non-negotiable.
Where the boundary is shifting
● Process over outcome – Even commercially sound resolutions face scrutiny if timelines, disclosures, or voting procedures are compromised.
● Transparency expectations rising – Information asymmetry between bidders or creditors is increasingly viewed as a procedural defect, not a minor lapse.
● Fair participation standards – Resolution applicants are challenging processes where evaluation criteria evolve mid-way or lack documented rationale.
● Documentation now equals defensibility – Minutes, evaluation matrices, and decision trails are becoming as critical as financial recovery outcomes.
The judiciary is not questioning what creditors decide, it is examining how they arrive there. Commercial wisdom governs economic choice. But procedural fairness governs legitimacy. And legitimacy determines whether a resolution survives judicial review.
IBC processes are moving from negotiation-driven exercises to governance-driven frameworks. The risk today is no longer just a bad commercial decision. It is a defensible decision reached through an indefensible process.
In insolvency, value maximisation still matters. But process credibility now decides whether that value stands.
