India Resurgence Arc Private … vs M/S. Amit Metaliks Limited on 13 May, 2021


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Supreme Court of India

India Resurgence Arc Private … vs M/S. Amit Metaliks Limited on 13 May, 2021

Author: Vineet Saran

Bench: Vineet Saran, Dinesh Maheshwari

                                                                                              REPORTABLE


                                         IN THE SUPREME COURT OF INDIA
                                          CIVIL APPELLATE JURISDICTION


                                           CIVIL APPEAL NO. 1700 OF 2021


                 INDIA RESURGENCE ARC PRIVATE LIMITED                                       … APPELLANT(S)

                                                             VERSUS

                 M/S. AMIT METALIKS LIMITED & ANR.                                      …RESPONDENT(S)



                                                      JUDGEMENT

1. By way of this appeal under Section 62 of the Insolvency and

Bankruptcy Code, 20161, the appellant India Resurgence ARC Private

Limited seeks to question the order dated 02.03.2021 passed by the

National Company Law Appellate Tribunal, New Delhi 2 in CA(AT)

(Insolvency) No. 1061 of 2020, whereby the Appellate Authority rejected

its challenge to the order dated 20.10.2020 passed by the National

Company Law Tribunal, Kolkata Bench, Kolkata 3in approval of the

resolution plan in the corporate insolvency resolution process4concerning
Signature Not Verified

Digitally signed by
DEEPAK SINGH
Date: 2021.06.02
14:10:06 IST
Reason:

1Hereinafter also referred to as ‘the Code’ or ‘IBC’.
2Hereinafter also referred to as ‘the Appellate Authority’ or ‘NCLAT’.
3Hereinafter also referred to as ‘the Adjudicating Authority’ or ‘NCLT’.
4‘CIRP’ for short.

1

the corporate debtor VSP Udyog Private Limited (respondent No. 2

herein), as submitted by the resolution applicant Amit Metaliks Limited

(respondent No. 1 herein).

2. The appellant company is said to be the assignee of the rights,

title and interest carried by Religare Finvest Limited as secured financial

creditor of the corporate debtor, having 3.94% of voting share in the

Committee of Creditors5.

3. When the resolution plan submitted by the respondent No. 1 was

taken up for consideration by the CoC, the appellant expressed

reservations on the share being proposed, particularly with reference to

the value of the security interest held by it; and chose to remain a

dissentient financial creditor. The dissention on the part of the appellant

and response thereto by the resolution professional as also by other

members of CoC was noted in the 14th meeting of CoC dated 31.07.2020

in the following words: –

“Representative from Religare Finvest/India Resurgence ARC, Mr
Shakti inquired about the lower share they are getting as per
Resolution Plan whereas the security interest held by them is far
more. He also raised question about the fair market value and
liquidation value of the CD. On this the RP informed him that the
valuation exercise has been done by registered valuers of IBBI
who were appointed by the erstwhile IRP and he do not find any
inconsistency in the same. Other members also agreed on the
same. Mr Shakti then raised the point that in the present scenario
it will be better for them if the company goes into Liquidation and
they will realize their security interest by exercising option u/s
52(1)(b). The RP then replied that Liquidation option may be
beneficial to one creditor but is definitely detrimental to other

5‘CoC’ for short.

2

secured lenders who are having majority stake of around 96%.

Further the RP also said that the objective of IBC is resolution and
revival of a distressed company and is not a recovery procedure.”
3.1. However, a substantial majority of other financial creditors voted in

favour of the resolution plan and, therefore, the resolution plan got the

approval of 95.35% of voting share of the financial creditors.

4. The said resolution plan, as approved by the vast majority of

voting share in the CoC, was submitted for approval by the resolution

professional to the Adjudicating Authority. The Adjudicating Authority

examined, inter alia, the salient features of resolution plan, particularly

those concerning financial proposals; and found the plan to be feasible

and viable with judicious distribution of financial bids by CoC to the

stakeholders according to their entitlements as also being compliant of all

the mandatory requirements. The Adjudicating Authority stated its

complete satisfaction and proceeded to approve the resolution plan while

observing in its order dated 20.10.2020 (as amended on 21.10.2020) as

under: –

“13. Having heard the Ld. Senior Counsel and on perusal of
the Plan, it is understood that the assets of the Corporate Debtor
are going to rest in a safer hand. The RP, Mr. Raj Singhania,
deserves special appreciation for finding out a Resolution
Applicant, whose Plan has been approved by the Committee of
Creditors by 95.35% voting share, even in these difficult times of
pandemic, due to COVID-19. All the provisions of mandatory
requirements are seen complied with by the Resolution Applicant,
as per Form H, submitted by the RP. It makes provision for the
payment of the Insolvency Resolution Process, payment of the
debts of Operational Creditors, Management of the affairs of the
Corporate Debtor, and also provision for implementation and
supervision of the Resolution Plan. It also provides terms of the
3
Plan and its implementation schedule. So it is a feasible and viable
Plan. A judicious distribution of the financial bids by the COC to the
stakeholders according to their entitlements can be inferred from
the Plan under consideration. No waiver of extinguishments in
contravention of the provisions of the Code or in violation of
existing laws is seen not brought out and therefore, there is
nothing in the Plan, so as to disapprove it. This CP was admitted
on 7th August, 2019. However, upon expiry of 180 days, the period
of CIRP was extended, excluding the days last during the period of
lockdown imposed by the Central Government in the wake of
COVID-19 outbreak, not to be counted for the purposes of the
time-line for any activity that could not be completed due to such
lockdown, in relation to a Corporate Insolvency Resolution
Process and thereby, approval of the Plan by the COC within the
period of 270 days. The COC has very well deliberated with the
Plans received by it and decided the viability, feasibility and
financial matrix of each Plan and approved one with 95.35% vote
shares of the members of the Committee of Creditors.”

5. It does not appear if any objection to the resolution plan was placed

before the Adjudicating Authority for consideration. Be that as it may,

against the order so passed by the Adjudicating Authority, the appellant

preferred an appeal under Section 61(1) read with Section 61(3) of the

Code. It was contended on behalf of the appellant, in its capacity as a

dissenting financial creditor, that the approved resolution plan failed the

test of being ‘feasible and viable’ inasmuch as the value of the secured

asset, on which security interest was created by the corporate debtor in its

favour, was not taken into consideration. It was contended by the appellant

that after the amendment to sub-section (4) of Section 30 of IBC, which

came into effect from 16.08.2019, the CoC was to ensure that the manner

of distribution takes into account the order of priority among the creditors

as also the priority and value of the security interest of a secured

4
creditor; and the resolution applicant and the CoC having failed to consider

the existing security interest in its favour, approval of the Adjudicating

Authority was not in accordance with law.

6. The Appellate Authority took note of the submissions made on

behalf of the appellant and referred to the decision of this Court in

Committee of Creditors of Essar Steel India Limited v. Satish Kumar

Gupta and Ors.: (2020) 8 SCC 5316to stress upon the principles

governing various classes of creditors in the insolvency resolution

process. The Appellate Authority particularly referred to the passages in

Essar Steel explaining the meaning and contours of the concept of

equitable treatment of creditors, including the observations that equitable

treatment of creditors meant equitable treatment only within the same

class; and that protection of creditors in general was important but it was

also imperative that the creditors be protected from each other; and

further that the Code should not be read so as to imbue the creditors with

greater rights in a bankruptcy proceeding than they would enjoy under the

general law, unless it is to serve some bankruptcy purpose.

6.1. Having taken note of the principles expounded in Essar Steel

(supra), the Appellate Authority proceeded to reject the contentions urged

on behalf of the appellant with the following observations and findings: –

“6. Section 30(4) of the I&B Code provides that the Committee of
Creditors may approve a Resolution Plan by a vote which shall not

6 Hereinafter referred to as the case of ‘Essar Steel’.
5
be less than 66% of voting share of Financial Creditors. Such
approval is to be done after considering the feasibility and viability
of the Resolution Plan, the manner of distribution proposed therein
having regard to the order of priority amongst the creditors in
terms of the waterfall mechanism laid down in Section 53 of the
I&B Code including the priority and value of security interest of
Secured Creditor besides other requirements specified by IBBI.
On a plain reading of this provision it is manifestly clear that the
considerations regarding feasibility and viability of the Resolution
Plan, distribution proposed with reference to the order of priority
amongst creditors as per statutory distribution mechanism
including priority and value of security interest of Secured Creditor
are matters which fall within the exclusive domain of Committee of
Creditors for consideration. These considerations must be present
to the mind of the Committee of Creditors while taking a decision
in regard to approval of a Resolution Plan with vote share of
requisite majority. As regards amendment introduced in Section
30(4)
, be it seen that the amendment that it, introduced vide
Section 6 (b) of Amending Act of 2019 vests discretion in the
Committee of Creditors to take into account the value of security
interest of a Secured Creditor in approving of a Resolution Plan.
It’s a guideline and not imperative in terms, which may be taken
into account by the Committee of Creditors in arriving at a decision
as regards approval or rejection of a Resolution Plan, such
decision being essentially a business decision based on
commercial wisdom of the Committee of Creditors. In this regard
the observations of Hon’ble Apex Court in ‘Committee of
Creditors of Essar Steel India LimitedVs. Satish Kumar Gupta
and Others’ (Supra) are significant. The Hon’ble Apex Court
observed as under:-

“131. The challenge to sub-clause (b) of Section 6 of the
Amending Act of 2019, again goes to the flexibility that the
Code gives to the Committee of Creditors to approve or
not to
approve a resolution plan and which may take into
account different classes of creditors as is mentioned in
Section 53, and different priorities and values of security
interests of a secured creditor. This flexibility is referred to
in the BLRC Report, 2015(see para 56 of this judgment).
Also, the discretion given to the Committee of Creditors by
the word “may” again makes it clear that this is only a
guideline which is set out by this sub-section which may
be applied by the Committee of Creditors in arriving at a
business decision as to acceptance or rejection of are
solution plan. For all these reasons, therefore, it is difficult
to hold that any of these provisions is constitutionally
infirm.”
6

7. It abundantly clear that the considerations including priority in
scheme of distribution and the value of security are matters falling
within the realm of Committee of Creditors. Such considerations,
being relevant only for purposes for arriving at a business decision
in exercise of commercial wisdom of the Committee of Creditors,
cannot be the subject of judicial review in appeal within the
parameters of Section 61(3) of I&B Code. While it is true that prior
to amendment of Section 30(4) the Committee of Creditors was
not required to consider the value of security interest obtaining in
favour of a Secured Creditor while arriving at a decision in regard
to feasibility and viability of a Resolution Plan, legislature brought
in the amendment to amplify the scope of considerations which
may be taken into consideration by the Committee of Creditors
while exercising their commercial wisdom in taking the business
decision to approve or reject the Resolution Plan. Such
consideration is only aimed at arming the Committee of Creditors
with more teeth so as to take an informed decision in regard to
viability and feasibility of a Resolution Plan, fairness of distribution
amongst similarly situated creditors being the bottomline.
However, such business decision taken in exercise of commercial
wisdom of Committee of creditors would not warrant judicial
intervention unless creditors belonging to a class being similarly
situated are not given a fair and equitable treatment.

8. We find no merit in this appeal, it is accordingly dismissed.”

7. Seeking to question the decision of the Appellate Authority, the

main plank of submissions of learned counsel for the appellant before us

again revolves around Section 30(4) of Code. It is contended that the

CoC could not have approved the resolution plan which failed to consider

the priority and value of security interest of the creditors while deciding

the manner of distribution to each creditor even though the legislature in

its wisdom has amended Section 30(4) of the Code, requiring the CoC to

take into account the order of priority amongst creditors as laid down in

Section 53(1) of the Code, including the priority and value of the security

interest of a secured creditor. Learned counsel would submit that the
7
primary reason for appellant’s dissent to the resolution plan was that, as

against total admitted claim of over INR 13.38 crores, the resolution

applicant had offered the appellant a meagre amount of about INR 2.026

crores without even considering the valuation of the security held by the

appellant, which admittedly had the valuation of more than INR 12 crores.

Learned counsel has referred to the decision in Essar Steel (supra) as

also the recent decision of this Court in the case of Jaypee Kensington

Boulevard Apartments Welfare Association and Ors. v. NBCC (India)

Ltd. and Ors., rendered on 24.03.20217. Learned counsel would submit

that the consideration of NCLAT that the amendment to Section 30(4) of

the Code was merely a guideline fails to take into account the fact that

CoC does not have an unfettered and arbitrary right to exercise its

commercial wisdom and to approve the plan which does not stand in

conformity with the provisions of the Code.

8. Having heard the learned counsel and having perused the

material placed on record, we are clearly of the view that this appeal

remains totally bereft of substance and does not merit admission.

9. The requirements of law, particularly in regard to the contentions

sought to be urged on behalf of the appellant, are referable to the

provisions contained in Section 30 of the Code dealing with the processes

relating to submission of a resolution plan, its mandatory contents, its

7 Hereinafter referred to as the case of ‘Jaypee Kensington’.
8
consideration and approval by the Committee of Creditors, and its

submission to the Adjudicating Authority for approval. Sub-sections (2)

and (4) of Section 30 of the Code, being relevant for the present purpose,

could be usefully reproduced, while omitting the other parts, as under:-


Section30. Submission of resolution plan.-(1) xxx xxx xxx
(2) The resolution professional shall examine each resolution
plan received by him to confirm that each resolution plan-

(a) provides for the payment of insolvency resolution process
costs in a manner specified by the Board in priority to the
8
[payment] of other debts of the corporate debtor;

9

[(b) provides for the payment of debts of operational creditors in
such manner as may be specified by the Board which shall not be
less than-

(i) the amount to be paid to such creditors in the event of a
liquidation of the corporate debtor under section 53; or

(ii) the amount that would have been paid to such creditors, if
the amount to be distributed under the resolution plan had
been distributed in accordance with the order of priority in
sub-section (1)of section 53,
whichever is higher, and provides for the payment of debts of
financial creditors, who do not vote in favour of the resolution plan,
in such manner as may be specified by the Board, which shall not
be less than the amount to be paid to such creditors in accordance
with sub-section (1) of section 53 in the event of a liquidation of the
corporate debtor.

8Substituted by Act 26 of 2018, sec. 23 (ii)(A), for “repayment” (w.r.e.f. 06.06.2018).

9Substituted by Act 26 of 2019, sec. 6(a), for clause (b) (w.e.f. 16.08.2019). Earlier clause (b)
was amended by Act 26 of 2018, sec. 23(ii)(A) (w.r.e.f. 06.06.2018). Clause (b), before
substitution, stood as under:

“(b) provides for the payment of the debts of operational creditors in such
manner as may be specified by the Board which shall not be less than the
amount to be paid to the operational creditors in the event of a liquidation of the
corporate debtor under section 53;”

9
Explanation 1.—For the removal of doubts, it is hereby clarified
that a distribution in accordance with the provisions of this clause
shall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is hereby
declared that on and from the date of commencement of the
Insolvency and Bankruptcy Code (Amendment) Act, 2019, the
provisions of this clause shall also apply to the corporate
insolvency resolution process of a corporate debtor-

(i) where a resolution plan has not been approved or rejected
by the Adjudicating Authority;

(ii) where an appeal has been preferred under section 61 or
section 62 or such an appeal is not time barred under any
provision of law for the time being in force; or

(iii) where a legal proceeding has been initiated in any court
against the decision of the Adjudicating Authority in respect of
a resolution plan;]

(c) provides for the management of the affairs of the Corporate
debtor after approval of the resolution plan;

(d) the implementation and supervision of the resolution plan;

(e) does not contravene any of the provisions of the law for the
time being in force;

(f) conforms to such other requirements as may be specified by
the Board.

10

[Explanation.—For the purposes of clause (e), if any approval
of shareholders is required under the Companies Act, 2013 (18 of
2013) or any other law for the time being in force for the
implementation of actions under the resolution plan, such approval
shall be deemed to have been given and it shall not be a
contravention of that Act or law.]
(3) xxx xxx xxx
11
[(4) The committee of creditors may approve a resolution plan
by a vote of not less than 12[sixty-six]per cent. of voting share of the
financial creditors, after considering its feasibility and viability, 13[the

10Inserted by Act 26 of 2018, sec. 23(ii)(B) (w.r.e.f. 06.06.2018).
11Substituted by Act 8 of 2018, sec. 6, for sub-section (4) (w.r.e.f. 23.11.2017). Sub-section (4),
before substitution, stood as under:

“(4) The committee of creditors may approve a resolution plan by a vote of
not less than seventy five per cent of voting share of the financial creditors.”.
12Substituted by Act 26 of 2018, sec. 23(iii)(a) for “seventy-five” (w.r.e.f. 06.06.2018).
13Inserted by Act 26 of 2019, sec. 6(b) (w.e.f. 16.08.2019).
10
manner of distribution proposed, which may take into account the
order of priority amongst creditors as laid down in sub-section (1) of
section 53, including the priority and value of the security interest of
a secured creditor]and such other requirements as may be
specified by the Board:

Provided that the committee of creditors shall not approve a
resolution plan, submitted before the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017
(Ord. 7 of 2017), where the resolution applicant is ineligible under
section 29A and may require the resolution professional to invite a
fresh resolution plan where no other resolution plan is available
with it:

Provided further that where the resolution applicant referred to in
the first proviso is ineligible under clause (c) of section 29A, the
resolution applicant shall be allowed by the committee of creditors
such period, not exceeding thirty days, to make payment of
overdue amounts in accordance with the proviso to clause (c) of
section 29A:

Provided also that nothing in the second proviso shall be
construed as extension of period for the purposes of the proviso to
sub-section (3) of section 12, and the corporate insolvency
resolution process shall be completed within the period specified in
that sub-section.]
14
[Provided also that the eligibility criteria in section 29A as
amended by the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution
applicant who has not submitted resolution plan as on the date of
commencement of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018 (Ord. 6 of 2018).]
(5) xxx xxx xxx
(6) xxx xxx xxx”

10. As regards the process of consideration and approval of resolution

plan, it is now beyond a shadow of doubt that the matter is essentially that

of the commercial wisdom of Committee of Creditors and the scope of

judicial review remains limited within the four-corners of Section 30(2) of

the Code for the Adjudicating Authority; and Section 30(2) read with
14Inserted by Act 26 of 2018, sec. 23(iii)(b) (w.r.e.f. 06.06.2018).
11
Section 61(3) for the Appellate Authority. In the case of Jaypee

Kensington (supra), this Court, after taking note of the previous

decisions in Essar Steel(supra) as also in K. Sashidhar v. Indian

Overseas Bank and Ors.: (2019) 12 SCC 150 and Maharashtra

Seamless Limited v. Padmanabhan Venkatesh and Ors.: (2020) 11

SCC 467, summarised the principles as follows:-

“77. In the scheme of IBC, where approval of resolution plan
is exclusively in the domain of the commercial wisdom of CoC, the
scope of judicial review is correspondingly circumscribed by the
provisions contained in Section 31 as regards approval of the
Adjudicating Authority and in Section 32 read with Section 61 as
regards the scope of appeal against the order of approval.
77.1. Such limitations on judicial review have been duly
underscored by this Court in the decisions above-referred, where it
has been laid down in explicit terms that the powers of the
Adjudicating Authority dealing with the resolution plan do not
extend to examine the correctness or otherwise of the commercial
wisdom exercised by the CoC. The limited judicial review available
to Adjudicating Authority lies within the four corners of Section
30(2) of the Code, which would essentially be to examine that the
resolution plan does not contravene any of the provisions of law
for the time being in force, it conforms to such other requirements
as may be specified by the Board, and it provides for: (a) payment
of insolvency resolution process costs in priority; (b) payment of
debts of operational creditors; (c) payment of debts of dissenting
financial creditors; (d) for management of affairs of corporate
debtor after approval of the resolution plan; and (e)
implementation and supervision of the resolution plan.
77.2. The limitations on the scope of judicial review are
reinforced by the limited ground provided for an appeal against an
order approving a resolution plan, namely, if the plan is in
contravention of the provisions of any law for the time being in
force; or there has been material irregularity in exercise of the
powers by the resolution professional during the corporate
insolvency resolution period; or the debts owed to the operational
creditors have not been provided for; or the insolvency resolution
process costs have not been provided for repayment in priority; or
the resolution plan does not comply with any other criteria
specified by the Board.

12

77.3. The material propositions laid down in Essar Steel
(supra) on the extent of judicial review are that the Adjudicating
Authority would see if CoC has taken into account the fact that the
corporate debtor needs to keep going as a going concern during
the insolvency resolution process; that it needs to maximise the
value of its assets; and that the interests of all stakeholders
including operational creditors have been taken care of. And, if the
Adjudicating Authority would find on a given set of facts that the
requisite parameters have not been kept in view, it may send the
resolution plan back to the Committee of Creditors for re-
submission after satisfying the parameters. Then, as observed in
Maharashtra Seamless Ltd. (supra), there is no scope for the
Adjudicating Authority or the Appellate Authority to proceed on any
equitable perception or to assess the resolution plan on the basis
of quantitative analysis. Thus, the treatment of any debt or asset is
essentially required to be left to the collective commercial wisdom
of the financial creditors.”

11. It needs hardly any elaboration that financial proposal in the

resolution plan forms the core of the business decision of Committee of

Creditors. Once it is found that all the mandatory requirements have been

duly complied with and taken care of, the process of judicial review

cannot be stretched to carry out quantitative analysis qua a particular

creditor or any stakeholder, who may carry his own dissatisfaction. In

other words, in the scheme of IBC, every dissatisfaction does not partake

the character of a legal grievance and cannot be taken up as a ground of

appeal.15

12. The provisions of amended sub-section (4) of Section 30 of the

Code, on which excessive reliance is placed on behalf of the appellant, in
15For the purpose of illustration, reference may be made to the decision in Jaypee
Kensington(supra) wherein, as regards the grounds sought to be urged by minority
shareholders against the resolution plan, this Court held that their grievances could not be
recognised as legal grievances (videparagraph 154). Similarly, when this Court noticed that the
homebuyers as a class assented to the plan, it was held that any individual homebuyer or
association was not entitled to maintain achallenge to the resolution plan and could not be
treated as carrying any legal grievance(vide paragraph 170).
13
our view, do not make out any case for interference with the resolution

plan at the instance of the appellant. The purport and effect of the

amendment to sub-section (4) of Section 30 of the Code, by way of sub-

clause (b) of Section 6 of the Amending Act of 2019, was also explained

by this Court in Essar Steel(supra), as duly taken note of by the Appellate

Authority (vide the extraction hereinbefore).The NCLAT was, therefore,

right in observing that such amendment to sub-section (4) of Section 30

only amplified the considerations for the Committee of Creditors while

exercising its commercial wisdom so as to take an informed decision in

regard to the viability and feasibility of resolution plan, with fairness of

distribution amongst similarly situated creditors; and the business

decision taken in exercise of the commercial wisdom of CoC does not

call for interference unless creditors belonging to a class being similarly

situated are denied fair and equitable treatment.

12.1. In regard to the question of fair and equitable treatment, though

the Adjudicating Authority as also the Appellate Authority have returned

concurrent findings in favour of the resolution plan yet, to satisfy

ourselves, we have gone through the financial proposal in the resolution

plan. What we find is that the proposal for payment to all the secured

financial creditors (all of them ought to be carrying security interest with

them) is equitable and the proposal for payment to the appellant is at par

with the percentage of payment proposed for other secured financial
14
creditors. No case of denial of fair and equitable treatment or disregard of

priority is made out.

13. The repeated submissions on behalf of the appellant with

reference to the value of its security interest neither carry any meaning

nor any substance. What the dissenting financial creditor is entitled to is

specified in the later part of sub-section (2)(b) of Section 30 of the Code

and the same has been explained by this Court in Essar Steel as under:-

“128. When it comes to the validity of the substitution of
Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is
clear that the substituted Section 30(2)(b) gives operational
creditors something more than was given earlier as it is the higher
of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b)
that is now to be paid as a minimum amount to operational
creditors. The same goes for the latter part of sub-clause (b) which
refers to dissentient financial creditors. Ms Madhavi Divan is
correct in her argument that Section 30(2)(b) is in fact a beneficial
provision in favour of operational creditors and dissentient financial
creditors as they are now to be paid a certain minimum amount,
the minimum in the case of operational creditors being the higher
of the two figures calculated under sub-clauses (i) and (ii) of clause

(b), and the minimum in the case of dissentient financial creditor
being a minimum amount that was not earlier payable. As a matter
of fact, pre-amendment, secured financial creditors may cramdown
unsecured financial creditors who are dissentient, the majority vote
of 66% voting to give them nothing or next to nothing for their
dues. In the earlier regime it may have been possible to have done
this but after the amendment such financial creditors are now to be
paid the minimum amount mentioned in sub-section (2). Ms
Madhavi Divan is also correct in stating that the order of priority of
payment of creditors mentioned in Section 53 is not engrafted in
sub-section (2)(b) as amended. Section 53 is only referred to in
order that a certain minimum figure be paid to different classes of
operational and financial creditors. It is only for this purpose that
Section 53(1) is to be looked at as it is clear that it is the
commercial wisdom of the Committee of Creditors that is free to
determine what amounts be paid to different classes and sub-

classes of creditors in accordance with the provisions of the Code
and the Regulations made thereunder.”
(underlining supplied for emphasis)
15
13.1. Thus, what amount is to be paid to different classes or sub-

classes of creditors in accordance with provisions of the Code and the

related Regulations, is essentially the commercial wisdom of the

Committee of Creditors; and a dissenting secured creditor like the

appellant cannot suggest a higher amount to be paid to it with reference

to the value of the security interest.

14. In the case of Jaypee Kensington (supra), the proposal in the

resolution plan was to the effect that if the dissenting financial creditors

would be entitled to some amount in the nature of liquidation value in

terms of Sections 30 and 53 of IBC read with Regulation 38 of the CIRP

Regulations, they would be provided such liquidation value in the form of

proportionate share in the equity of a special purpose vehicle proposed to

be set up and with transfer of certain land parcels belonging to corporate

debtor. Such method of meeting with the liability towards dissenting

financial creditors in the resolution plan was disapproved by the

Adjudicating Authority; and this part of the order of the Adjudicating

Authority was upheld by this Court with the finding that the proposal in the

resolution plan was not in accord with the requirement of ‘payment’ as

envisaged by clause (b) of Section 30(2) of the Code 16. In that context,
16In Jaypee Kensington, after disapproving the proposition of the resolution plan regarding
dissenting financial creditor, the Adjudicating Authority itself modified the offending terms of the
plan and provided for monetary payment to the dissenting financial creditor. This latter part of
the order of the Adjudicating Authority was not approved by this Court while holding that after
disapproval of such term related with financial model proposed in the resolution plan, the
Adjudicating Authority itself could not have modified the same and ought to have sent the matter
back to CoC for reconsideration. However, that part of the decision in Jaypee Kensingtonis not
relevant for the present purpose.

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this Court held that such action of ‘payment’ could only be by handing

over the quantum of money or allowing the recovery of such money by

enforcement of security interest, as per the entitlement of a dissenting

financial creditor. This Court further made it clear that in case a valid

security interest is held by a dissenting financial creditor, the entitlement

of such dissenting financial creditor to receive the amount could be

satisfied by allowing him to enforce the security interest, to the extent of

the value receivable by him and in the order of priority available to him.

This Court clarified that by enforcing such a security interest, a dissenting

financial creditor would receive payment to the extent of his entitlement

and that would satisfy the requirement of Section 30(2)(b) of the Code.

This Court, interalia, observed and held as under: –

“121.1. Therefore, when, for the purpose of discharge of
obligation mentioned in the second part of clause (b) of Section
30(2) of the Code, the dissenting financial creditors are to be
“paid” an “amount” quantified in terms of the “proceeds” of assets
receivable under Section 53 of the Code; and the “amount
payable” is to be “paid” in priority over their assenting
counterparts, the statute is referring only to the sum of money and
not anything else. In the frame and purport of the provision and
also the scheme of the Code, the expression “payment” is clearly
descriptive of the action of discharge of obligation and at the same
time, is also prescriptive of the mode of undertaking such an
action. And, that action could only be of handing over the quantum
of money, or allowing the recovery of such money by enforcement
of security interest, as per the entitlement of the dissenting
financial creditor.

121.2. We would hasten to observe that in case a dissenting
financial creditor is a secured creditor and a valid security interest
is created in his favour and is existing, the entitlement of such a
dissenting financial creditor to receive the “amount payable” could
also be satisfied by allowing him to enforce the security interest, to
the extent of the value receivable by him and in the order of
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priority available to him. Obviously, by enforcing such a security
interest, a dissenting financial creditor would receive “payment” to
the extent of his entitlement and that would satisfy the requirement
of Section 30(2)(b) of the Code….”
(underlining supplied for emphasis)

14.1. In Jaypee Kensington(supra), this Court repeatedly made it clear

that a dissenting financial creditor would be receiving the payment of the

amount as per his entitlement; and that entitlement could also be satisfied

by allowing him to enforce the security interest, to the extent of the value

receivable by him. It has never been laid down that if a dissenting

financial creditor is having a security available with him, he would be

entitled to enforce the entire of security interest or to receive the entire

value of the security available with him. It is but obvious that his dealing

with the security interest, if occasion so arise, would be conditioned by

the extent of value receivable by him.

14.2. The extent of value receivable by the appellant is distinctly given

out in the resolution plan i.e., a sum of INR 2.026 crores which is in the

same proportion and percentage as provided to the other secured

financial creditors with reference to their respective admitted claims.

Repeated reference on behalf of the appellant to the value of security at

about INR 12 crores is wholly inapt and is rather ill-conceived.

15. The limitation on the extent of the amount receivable by a

dissenting financial creditor is innate in Section 30(2)(b) of the Code and

has been further exposited in the decisions aforesaid. It has not been the
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intent of the legislature that a security interest available to a dissenting

financial creditor over the assets of the corporate debtor gives him some

right over and above other financial creditors so as to enforce the entire of

the security interest and thereby bring about an inequitable scenario, by

receiving excess amount, beyond the receivable liquidation value

proposed for the same class of creditors.

16. It needs hardly any emphasis that if the propositions suggested on

behalf of the appellant were to be accepted, the result would be that

rather than insolvency resolution and maximisation of the value of assets

of the corporate debtor, the processes would lead to more liquidations,

with every secured financial creditor opting to stand on dissent. Such a

result would be defeating the very purpose envisaged by the Code; and

cannot be countenanced. We may profitably refer to the relevant

observations in this regard by this Court in Essar Steel as follows:-

“85. Indeed, if an “equality for all” approach recognising the
rights of different classes of creditors as part of an insolvency
resolution process is adopted, secured financial creditors will, in
many cases, be incentivised to vote for liquidation rather than
resolution, as they would have better rights if the corporate debtor
was to be liquidated rather than a resolution plan being approved.
This would defeat the entire objective of the Code which is to first
ensure that resolution of distressed assets takes place and only if
the same is not possible should liquidation follow.”

17. Viewed from any angle, the submissions made on behalf of the

appellant do not merit acceptance and are required to be rejected.

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18. For what has been discussed hereinabove, this appeal fails and

stands dismissed.

..……….………………….J.

(VINEET SARAN)1

……….…………………….J.

(DINESH MAHESHWARI)

New Delhi
13th May, 2021

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