In most legal systems, power rarely exists without responsibility. The Insolvency and Bankruptcy Code (IBC), however, offers a slightly uncommon concept. The Committee of Creditors (CoC), which sits at the heart of the resolution process, carries significant decisive authority, yet operates with relatively limited answerability. What started as a practical response to inefficiencies has gradually evolved into a powerful doctrine: the near-absolute supremacy of “commercial wisdom”. 

The IBC has been designed to fix delays and value erosion. By shifting control to financial creditors, those with the most at stake, the law aimed to ensure quicker and more commercially sound outcomes. The approach backed by Supreme Court, precedents that courts should not interfere with business decisions taken by creditors. The rationale has been simple, judicial intervention would only slow things down and defeat the objective of value maximisation and timely resolution. 

With this approach resolution timelines have improved, even if not perfectly, and creditors are recovering more than they used to under the earlier restructuring framework. Perhaps more importantly, the balance of power has shifted away from defaulting promoters to institutional lenders. But this success also raises the question: has the system focussed too much on speed and efficiency, while neglecting answerability? 

The doctrine of commercial wisdom rests on the assumption that financial creditors, acting together, will make rational decisions aimed at maximising value. In reality, however, collective decision-making does not always guarantee transparency. CoC meetings are confidential, voting rationales are rarely shared, and key decisions, i.e. whether they are accepting steep haircuts or rejecting competing bids often come without any recorded explanation. In practical parlance the outcome of the CoC decision is binding, but the reasoning behind it is largely masked. 

Take the example of large haircuts, sometimes in the range of 80-90%. These may well be justified by market conditions or the distressed nature of the asset. But when such decisions are not explained, they invite suspicion. Whether these decisions are purely commercial, or do other factors like institutional caution or internal preferences play a significant role? The absence of clarity makes it difficult to classify. 

Recent judicial trends suggest that courts are beginning to recognise this gap, even if cautiously or in passing, by remarks in their judgments. The Supreme Court has continued to uphold the principle that CoC’s commercial wisdom is paramount and should not be interfered with. NCLAT has echoed this position, consistently holding that once a resolution plan is approved, the Adjudicating Authority’s role is limited to checking compliance with Section 30(2). The merits of the decision of CoC itself remain outside the scope of review and judicial intervention. 

In certain cases, particularly those involving real estate insolvencies, the Supreme Court has stressed the need for CoCs to record reasons for their decisions ensuring clarity. This does not dilute the principle of non-interference, but it does introduce a layer of responsibility. The intent of the Courts may not be to question what decision was taken, but they are progressively willing to examine how it was arrived at. It signals a move from blanket acceptance to a more balanced approach. 

That said, the jurisprudence is not entirely consistent. In some cases, tribunals have taken a strict view and refused to engage even with procedural concerns. In others, they have stepped in where the interests of certain stakeholders appear to have been overlooked. The lack of a clear, uniform standard makes outcomes unpredictable and opens a grey area concerning the CoC commercial wisdom anonymity. 

This becomes particularly evident in cases involving competing resolution plans. The CoC is, of course, entitled to consider factors beyond the highest bid, such as the credibility of the applicant or the feasibility of implementation. But when a higher-value offer is rejected without explanation, it becomes difficult to distinguish between a thoughtful commercial decision and an arbitrary one, leading to litigation and delay in resolution process. 

This is where the idea of “structured commercial wisdom” starts to make sense. The goal is not to take away the CoC’s decision-making authority, but to ensure that it is exercised in a more transparent and responsible manner. Even a simple requirement to record reasons for key decisions such as why a plan was accepted or rejected, why a particular haircut was considered acceptable, or why evaluation criteria were departed from can go a long way in building trust amongst the stakeholders. 

Improving disclosure norms under the Code w.r.t. CoC decisions does not mean revealing sensitive commercial strategies or negotiation details. Rather, ensuring that the record reflects that the CoC has considered essential factors like viability, implementation capability, and stakeholder impact in a structured way. 

It is important to acknowledge that, in most cases, CoCs do act responsibly. Decisions are typically taken after detailed evaluation and are aligned with the objective of value maximisation. The concern is not about isolated instances, but about the structure of the system itself. Any framework that grants wide discretion without corresponding safeguards runs the risk of losing credibility over time. The Code is still evolving, and so is its jurisprudence. 

Positively, there are signs of a shift. The increasing emphasis on reasoned decision-making suggests that both courts and policymakers recognise the need for balance. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 is a step in this direction. By requiring the CoC to record reasons while approving resolution plans and selecting resolution applicants, introduces a layer of discipline into the process. It reinforces the idea that commercial decisions should not only be binding but also reasonable to ensure the right balance. 

(The author is Partner (Designate), S&A Law Offices. Views are personal.)