Vedanta vs Adani: Jaiprakash case may test limits of ‘commercial wisdom’

Subscribe to enjoy similar stories.If Vedanta’s challenge to lenders’ approval of Adani Enterprises’ ₹15,000-crore resolution plan for Jaiprakash Associates Ltd (JAL) succeeds, it could redefine lenders’ wide powers under the “commercial wisdom” doctrine in the country’s bankruptcy regulation, lawyers said.Lawyers say the Anil Agarwal-led Vedanta's challenge is serious and, if successful, could force lenders to better explain their decisions, especially when choosing a lower-value plan based on factors like upfront cash and faster payments.“If Vedanta succeeds, the case would represent a reconsideration of the commercial wisdom doctrine,” said V. Aneesh, partner at CMS IndusLaw.Vedanta is challenging the committee of creditors' (CoC) approval for Adani’s plan before the National Company Law Appellate Tribunal (NCLAT), saying its higher bid was unfairly rejected."Commercial wisdom” is a court-developed legal principle, not expressly defined in the Insolvency and Bankruptcy Code (IBC).

It means lenders have the primary authority to choose the best resolution plan based on viability, feasibility, recovery and timelines, with limited court interference. It has evolved through rulings of insolvency tribunals and the Supreme Court.However, under the IBC, Section 30(4) gives powers to the CoC to assess resolution plans—often through an evaluation matrix—and approve one with at least 66% vote share."A Vedanta win would be one of the most significant developments in the IBC law since Essar Steel,” said Mayur Shetty, partner at Kochhar & Co.If Vedanta can show with documents that the evaluation matrix was changed after bids were submitted, or that key parameters were not disclosed equally to all bidders, the issue would go beyond