Supreme Court’s Sanjay Dave Judgment on Letter of Intent in Insolvency – Implications for ‘Additional Terms’

Overview The Supreme Court recently decided Sanjay Dave v. Andhra Bank Ltd. (2026 INSC 580). The case dealt with a dispute over the Letter of Intent (LoI) in an insolvency proceeding. The applicant argued that certain clauses in the LoI were "additional terms" that altered the approved resolution plan. The Court rejected the argument, emphasizing the applicant’s knowledge, participation and acquiescence during the corporate insolvency process. Key Developments The Court held that a successful resolution applicant cannot later escape obligations by claiming the LoI is "conditional" when the applicant had already taken part in the deliberations. The judgment highlighted the existence of a proviso in Clause 1.9.4 of the Insolvency and Bankruptcy Code (IBC) that protects an applicant who refuses to accept "additional terms" beyond the resolution plan. However, the Court did not define what constitutes "additional terms"; it left that question open for future cases. Important Facts The dispute arose after the Committee of Creditors (CoC) approved a resolution plan. The applicant later challenged several stipulations in the LoI, claiming they were inconsistent with the plan. The lower forums – the Adjudicating Authority, the National Company Law Appellate Tribunal (NCLAT) and finally the Supreme Court – all dismissed the challenge. The Court’s reasoning rested on three pillars: Knowledge: The applicant attended the CoC meeting on 24 Jan 2020 where key issues were discussed. Participation: He continued to engage in subsequent CoC meetings and sought issuance of the LoI. Acquiescence: He had already accepted certain conditions (e.g., employee claims, performance guarantee) during the CIRP. Because of these, the Court said the applicant could not “approbate and reprobate” – i.e., accept the plan and later reject its implementation. UPSC Relevance Understanding this judgment is vital for UPSC aspirants because: It clarifies the procedural hierarchy in corporate insolvency – from the Resolution Professional (RP) to the CoC, the NCLAT and finally the Supreme Court. The case illustrates how statutory provisions (like the proviso in Clause 1.9.4) can remain dormant until a factual dispute forces judicial interpretation – a common theme in constitutional and administrative law. The concept of "additional terms" touches upon contract‑law principles of amendment versus implementation, relevant for GS 2 (Polity) and GS 3 (Economy) questions on corporate governance. Way Forward Future litigations are likely to test the meaning of "additional terms". Courts may adopt a test based on the source of the obligation: If the term is expressly in the approved resolution plan, it is not "additional". If it was discussed and accepted during CoC deliberations, it is also part of the original bargain. If it merely facilitates implementation (e.g., document execution), it remains procedural. Only obligations that arise solely from the LoI, without any trace in the plan or CoC records, may be deemed "additional" and thus protected by the proviso. Practitioners should therefore ensure that any new condition is recorded contemporaneously in CoC minutes. Applicants must raise objections promptly and in writing to preserve their rights under the proviso. Until a higher court finally interprets the proviso, the Sanjay Dave judgment remains a benchmark for assessing knowledge, participation and acquiescence in insolvency disputes.