Ethics · 29 Aug 2026

Committee of Creditors commercial wisdom doctrine

Consider the following statements regarding the Committee of Creditors (CoC) under India's Insolvency and Bankruptcy Code (IBC):

  1. Courts have generally deferred to the CoC's "commercial wisdom" in approving resolution plans, limiting judicial second-guessing
  2. The "commercial wisdom" doctrine was specifically designed to detect and screen out related-party capture of the voting majority
  3. A resolution plan requires the approval of at least 80.81% of the CoC's voting share to be considered "majority approved" under all circumstances
AOnly one
BOnly two
CAll three
DNone
This question is based on: ₹22,006 Crore Owed. ₹6.5 Crore Paid. A Majority Vote Made It Legal.
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About this question

Why in news

An 80.81% Committee of Creditors vote approved a ₹6.5 crore payout against ₹22,006.57 crore owed - a 99.97% haircut - with dissenting banks alleging that entities holding 61.78% of that approving vote are related parties of the debtor.

Why for UPSC

UPSC's ethics paper frequently tests whether a legally sound majoritarian mechanism can still be ethically compromised when the majority's independence itself is contested - a distinction this case makes vivid.

Prelims summary

The IBC's commercial wisdom doctrine limits judicial review of CoC resolution-plan votes, but was designed for arm's-length creditor decisions, not to screen out related-party capture of the voting majority. The general CoC approval threshold under the IBC is 66%, not case-specific figures like 80.81%.

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