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adequately participate in the processes which might discussed the relevancy of the commercial wisdom of the
otherwise allow them to do so. Committee of Creditors (CoC) and stressed upon that the
NCLT and NCLAT must work within the framework of IBC and
Commercial Wisdom and Decision- not to interfere with a commercial decision made by the
majority of the CoC.
Making:
One of the key principles guiding the CoC is the exercise of Ashish Saraf - Vs Bhuvan Madan (2021):
"commercial wisdom." This term refers to the latitude given
In this case NCLAT stated that the "Committee of creditor's
to the CoC to evaluate and choose the most viable resolution holds the responsibility of making business decision"
plan based on financial prudence and commercial
regarding the approval or rejection of a resolution plan. This
considerations. The IBC does not mandate the CoC to choose
decision involves assessing the feasibility of the resolution
the plan with the highest financial offer but encourages the
plan is considered non-justiciable. Therefore, the commercial
selection of a plan that ensures the long-term sustainability
wisdom of the committee of creditors cannot be
of the business.
challenged, even if they reject a settlement proposal that
is supported by the majority of appellant's and instead
Challenges and Controversies: approve a resolution plan proposed by another party. The
While the commercial wisdom principles grant flexibility, it appellants do not have the authority to challenge the
also raises challenges and controversies. The subjective committee's decision in such matters.
nature of commercial wisdom may lead to disagreements
among operational creditors and other stakeholders, Kalpraj Dharamshi Case (2021):
potentially resulting in legal disputes. Striking a balance In the case of Ricoh India Ltd, after the formation of the
between financial considerations and qualitative factors CoC, different Resolution Plans were proposed by several
requires a nuanced approach and thorough deliberation. parties such as Mr. Kalpraj Dharamshi & Mr. Rekha

Jhunjunwalas group, Kotak Investment Advisors Ltd (KIAL),
Judicial Interpretation and Pronounce- Karvy Data management systems Ltd and WeP Solution Ltd.
ments on the Commercial Wisdom of However, Kalpraj's Resolution plan was submitted after
the designated deadline, prompting objections from
Committee of Creditors KIAL. As a result, the CoC instructed all parties to
K.Sashidhar-Vs-Indian Overseas bank (2019) resubmit their revised plans.
In this case, it is declared that the decision of the CoC On this KIAL appealed to the NCLAT, which overturned
commercial wisdom is non-justiciable and that neither the the NCLT's ruling and instructed the CoC to reconsider
NCLT nor the NCLAT has the authority to reverse it. The its decision solely based on Resolution Plans that were
amendment to section 30(4) of the IBC, simply restated the submitted within the designated time frame.
factors that the CoC must consider while evaluating a
resolution plan and does not grant the tribunals a jurisdiction
over the commercial wisdom of the CoC. Under the IBC and
the regulations framed thereunder, there was no
requirement for financial creditors who disapproves or reject
a resolution plan to provide a justification or explanation for
their decision.

Essar Steel India Ltd- Vs- Satish Kumar Gupta
(2019)
The Supreme Court, in its significant decision in the case of
Committee of Creditors of Essar Steel India Ltd., thoroughly

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