* Author
[2024] 1 S.C.R. 114 : 2024 INSC 14
Case Details
DBS Bank Limited Singapore
v.
Ruchi Soya Industries Limited and Another
(Civil Appeal No. 9133 of 2019)
03 January 2024
[Sanjiv Khanna* and S.V.N. Bhatti, JJ.]
Issue for Consideration
Whether s.30(2)(b)(ii) of the Insolvency and Bankruptcy Code,
2016, as amended in 2019, entitles the dissenting financial creditor
to be paid the minimum value of its security interest; whether the
amendments made in the substantive portion of s.30(2), in terms
of Explanation 2 will be applicable when the first appeal was heard
by NCLAT.
Headnotes
Insolvency and Bankruptcy Code, 2016 – s.30(2)(b)(ii) –
Interpretation:
Held: s.30(2)(b)(ii) forfends the dissenting financial creditor from
settling for a lower amount payable under the resolution plan – A
financial creditor can dissent if the resolution plan is discriminatory
or against a provision of law– However, a dissenting financial
creditor cannot take advantage of s.30(2)(b)(ii) – A secured creditor
cannot claim preference over another secured creditor at the stage
of distribution on the ground of a dissent or assent, otherwise
the distribution would be arbitrary and discriminative – Purpose
of the amendment was only to ensure that a dissenting financial
creditor does not get anything less than the liquidation value, but
not for getting the maximum of the secured assets – There is a
contradiction in the reasoning given in the judgment of this Court
in India Resurgence ARC Private Limited v. Amit Metaliks Limited
& Another [2021] 6 SCR 611, which is in discord with the ratio
decidendi of the decisions of the three Judge Bench in Committee
of Creditors of Essar Steel India Limited v. Satish Kumar Gupta
& Ors [2019] 16 SCR 275 and Jaypee Kensington Boulevard
Apartments Welfare Association & Others. v. NBCC (India) Limited
& Others [2021] 12 SCR 603 – Provisions of s.30(2)(b)(ii) by
[2024] 1 S.C.R. 115
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
law provides assurance to the dissenting creditors that they will
receive as money the amount they would have received in the
liquidation proceedings – This rule also applies to the operational
creditors – This ensures that dissenting creditors receive the
payment of the value of their security interest – Paragraph 17
in India Resurgence is correct in its observations when it refers
to the provisions of s.30(4) and that the voting is essentially a
matter which relates to commercial wisdom of the CoC – The
observation that a dissenting secured creditor cannot suggest
that a higher amount be paid to it is also correct – However, this
does not affect the right of a dissenting secured creditor to get
payment equal to the value of the security interest in terms of
s.30(2)(b)(ii) – Further, Paragraph 21 is partially correct – It is
incorrect to state that the dissenting financial creditor would not
be entitled to receive the liquidation value, the amount payable to
him in terms of s.53(1) – Reasoning given in the earlier portion of
paragraph 22 in conflict with the ratio in Committee of Creditors
of Essar Steel India Limited as it does not take into account
the legal effect of s.30(2)(b)(ii) – Present view taken different
from India Resurgence ARC Private Limited on interpretation of
s.30(2)(b)(ii) – Matter referred to larger Bench. [Paras 26, 27,
31, 33, 36 and 49]
Insolvency and Bankruptcy Code, 2016 – s.30(2), Explanation 2
– IBC (Amendment) Act, 2019 – Appellant had preferred the first
appeal before the NCLAT on 31.07.2019 – The Amendment Act
was notified and came into effect on 16.08.2019 – Applicability
of the Amendment Act:
Held: Explanation 2(ii) clearly states that an appeal preferred
u/s.61 or 62, when it is not barred by time under any provision of
law, shall be heard and decided after considering the amended
s.30(2)(b) under the Amendment Act – Clauses (i), (ii) and (iii) of
Explanation 2 reflect the wide expanse and width of the legislative
intent viz. the application of the Amendment Act, whether
proceedings are pending before the adjudicating authority, the
appellate authority, or before any court in a proceeding against
an order of the adjudicating authority in respect of a resolution
plan – Only when the resolution plan, as approved, has attained
finality as no proceedings are pending, that the amendments will
not apply to re-write the settled matter. [Para 22]
116 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
List of Citations and Other References
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta & Ors [2019] 16 SCR 275: (2020)
8 SCC 531; Jaypee Kensington Boulevard Apartments
Welfare Association & Others. v. NBCC (India) Limited
& Others [2021] 12 SCR 603:(2022) 1 SCC 401 –
relied on.
Swiss Ribbons Private Limited and Another v. Union
of India and Others [2019] 3 SCR 535: (2019) 4 SCC
17; Vallal RCK v. Siva Industries and Holdings Limited
and Other (2022) 9 SCC 803; India Resurgence ARC
Private Limited v. Amit Metaliks Limited & Another [2021]
6 SCR 611:2021 SCC Online SC 409; Vistra ITCL
(India) Limited & Ors. v. Dinkar Venkatasubramanian
& Anr. (2023) 7 SCC 324 – referred to.
List of Acts
Insolvency and Bankruptcy Code, 2016; IBC (Amendment) Act,
2019.
List of Keywords
Dissenting financial creditor; Minimum value of security interest.
Other Case Details Including Impugned Order and
Appearances
CIVIL APPELLATE JURISDICTION : Civil Appeal No.9133 of 2019.
From the Judgment and Order dated 18.11.2019 of the National
Company Law Appellate Tribunal, New Delhi in Comp. App. (AT)
(Ins.) No.788 of 2019.
With
Civil Appeal No.787 Of 2020.
Appearances:
Krishnendu Datta, Sr. Adv., Ms. Anindita Roychowdhury, Raghav
Chadda, Bharat Makkar, Ms. Anannya Ghosh, Brian Henry Moses,
Advs. for the Appellant.
[2024] 1 S.C.R. 117
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
Krishnan Venugopal, Sr. Adv., Nakul Sachdeva, Aakarshan Sahay,
Sagar Arora, Abhinandan Sharma, Krishnan Agarwal, Faisal
Sherwani, M/s. Cyril Amarchand Mangaldas, N.P.S. Chawla, Sujoy
Datta, Surekh Kant Baxy, Ms. Kinjal Goyal, Gaurav Varma, Advs.
for the Respondents.
Judgment / Order of The Supreme Court
Judgment
Sanjiv Khanna, J.
The issue that arises for consideration in the present appeals is:
Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code,
20161
, as amended in 2019, entitles the dissenting financial creditor
to be paid the minimum value of its security interest?
2. Appellant - DBS Bank Limited Singapore had extended financial
debt of around USD 50,000,000 (fifty million dollars only) or Rs.
243,00,00,000 (rupees two hundred forty three crore only) to M/s.
Ruchi Soya Industries Limited2
, the corporate debtor.
3. The financial debt was secured by: (i) a sole and exclusive first
charge over certain immovable and fixed assets of the Corporate
Debtor in Kandla, Gujarat; and (ii) sole and exclusive first charge
over assets of the Corporate Debtor in Baran, Rajasthan; Guna,
Madhya Pradesh; Dalauda, Madhya Pradesh; Gadarwara, Madhya
Pradesh; and a commercial office space at Nariman Point, Mumbai.
4. On 15.12.2017, Corporate Insolvency Resolution Process3 was
initiated against the Corporate Debtor under the provisions of the
Code. The company petition seeking to initiate CIRP was admitted
and a Resolution Professional4
was appointed.
5. The appellant had submitted its claim, which was admitted by the
RP at Rs. 242,96,00,000 (rupees two hundred forty two crore ninety
six lakh only).
1 For short, “IBC” or “the Code”, as the case may be.
2 For short, “Corporate Debtor”.
3 For short, “CIRP”.
4 For short, “RP”.
118 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
6. On 20.03.2019, Patanjali Ayurvedic Limited submitted a resolution
plan for Rs. 4134,00,00,000 (rupees four thousand one hundred
thirty four crore only) against the aggregate claims of around Rs.
8398,00,00,000 (rupees eight thousand three hundred ninety eight
crore only), representing approximately 49.22% of the total admitted
claims of the financial creditors.
7. On 12.04.2019, by a communication, the appellant informed the
Committee of Creditors5 that the sole and exclusive nature of
security held by the appellant by way of mortgage/hypothecation over
immovable and fixed assets of the Corporate Debtor was of greater
value compared to collaterals held by other creditors. Emphasising
the specific treatment of the exclusive and superior security, the
appellant requested the CoC to take into account the liquidation value
of such security while considering the distribution of proceeds and
to make such distribution in a “fair and equitable” manner.
8. In the 21st and 22nd CoC meetings held on 15.04.2019 and 23.04.2019
respectively, the appellant’s concern regarding treatment/proposed
pay-out was noted. However, in the meeting held on 23.04.2019, the
CoC approved pari passu distribution of the resolution plan proceeds.
9. On 30.04.2019, the resolution plan was approved by 96.95% of the
CoC. The appellant had voted against the resolution plan, thereby
becoming a dissenting financial creditor.
10. The resolution plan was filed for approval before the National Company
Law Tribunal6
, Mumbai. Separately, the appellant challenged the
distribution mechanism of the resolution plan proceeds by way of
an application before the NCLT, Mumbai.
11. On 24.07.2019, the NCLT granted provisional/conditional approval to
the resolution plan. By the same order dated 24.07.2019, the NCLT
dismissed the appellant’s application challenging the distribution
mechanism of the resolution plan proceeds.
12. On 31.07.2019, the appellant challenged the dismissal of its
application before the National Company Law Appellate Tribunal7
.
5 For short, “CoC”.
6 For short, “NCLT”.
7 For short, “NCLAT”.
[2024] 1 S.C.R. 119
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
13. During pendency of the appeal, Section 6 of the Insolvency and
Bankruptcy Code (Amendment) Act, 20198
, was notified by way of
a gazette notification dated 16.08.2019. It amended Section 30(2)(b)
of the Code. Amended Section 30(2)(b)(ii) of the Code provides that
operational and dissenting financial creditors shall not be paid an
amount lesser than the amount to be paid to creditors in the event of
liquidation of the Corporate Debtor under Section 53(1) of the Code.
Explanation 2 added thereby makes the amended Section 30(2)(b)
applicable to pending proceedings. Section 30(4) was also amended
to state the CoC shall take into account “the order of priority” amongst
creditors as laid down in Section 53(1) of the Code.
14. On 30.08.2019, at the 26th CoC meeting, the appellant requested the
CoC to reconsider the distribution of the resolution proceeds in light
of the amendments to the Code. The appellant had submitted that
if the amendments were considered, it would be entitled to receive
Rs. 217,86,00,000 (rupees two hundred seventeen crore eighty six
lakh only) which is the liquidation value of the security interest. The
CoC, however, did not accept the prayer, observing inter alia that
the appellant had already filed an appeal before the NCLAT, which
was pending. The CoC was of the view that there was a fair amount
of ambiguity in the amendments, and no view should be expressed
by them.
15. The NCLT vide order dated 04.09.2019 finally approved the resolution
plan, which was already provisionally approved vide order dated
24.07.2019.
16. On 11.10.2019, the appellant challenged the final approval order dated
04.09.2019 by way of an appeal before the NCLAT. The first NCLAT
appeal preferred by the appellant on 31.07.2019 was still pending.
17. The two appeals preferred by the appellant against the orders/
judgments of the NCLT dated 24.07.2019 and dated 04.09.2019
were taken up for hearing by the NCLAT. By order dated 18.11.2019,
the first appeal preferred by the appellant was dismissed. By the
subsequent order dated 09.12.2019, the NCLAT dismissed the second
appeal filed by the appellant.
8 For short, “Amendment Act”.
120 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
18. The orders dated 18.11.2019 and 09.12.2019 passed by the NCLAT
are in challenge before us. This Court, vide order dated 06.12.2019,
was pleased to issue notice in the appeal preferred against the
order dated 18.11.2019 and by way of an interim order, has directed
that Rs. 99,74,00,000 (rupees ninety nine crore seventy four lakh
only), being the difference between the amount which the appellant
would have received in terms of the amendments noticed above
and the amount received by the appellant on pro rata distribution of
proceeds, should be deposited in an escrow account. Accordingly,
Rs. 99,74,00,000 (rupees ninety nine crore seventy four lakh only)
had been set aside and kept in an escrow account.
19. The appellant, it should be stated, has made no claims against
Patanjali Ayurvedic Limited.
20. As per the appellant, the pro rata distribution of proceeds does not
give regard to the sole, exclusive and higher value of their security
interest. The appellant will receive approximately Rs. 119,00,00,000
(rupees one hundred nineteen crore only) as against the liquidation
value of the security interest of Rs. 217,86,00,000 (rupees two
hundred seventeen crore eighty six lakh only). The admitted claim
of the appellant is Rs. 242,96,00,000 (rupees two hundred forty two
crore ninety six lakh only). Thus, the appellant, notwithstanding the
amendments to Section 30 of the Code, has been deprived of its
due share given its superior security assets. Equating the appellant
with financial creditors having inferior security interest has resulted
in unjust enrichment and windfall benefits to the dissimilarly placed
creditors to the detriment of the appellant.
21. To appreciate the legal question, which requires an answer, we would
like to reproduce Section 30(2) and Section 30(4) of the Code, with
the amendments made vide the IBC (Amendment) Act, 2019, which
for clarity have been highlighted in italics and bold. Relevant portions
of the two sections read:
“30. Submission of resolution plan.—
xx xx xx
(2) The resolution professional shall examine each
resolution plan received by him to confirm that each
resolution plan—
[2024] 1 S.C.R. 121
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
(a) provides for the payment of insolvency resolution
process costs in a manner specified by the Board in
priority to the payment of other debts of the corporate
debtor;
(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 subsection (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.
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;
122 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
(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.
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.
xx xx xx
(4) The committee of creditors may approve a resolution
plan by a vote of not less than sixty-six per cent of
voting share of the financial creditors, after considering
its feasibility and viability the 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:
xx xx xx
22. The first issue that arises for consideration in these appeals is
whether the amendments made in the substantive portion of Section
[2024] 1 S.C.R. 123
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
30(2), in terms of Explanation 2 will be applicable when the first
appeal was heard by the NCLAT. The Amendment Act was notified
and came into effect on 16.08.2019. The appellant had preferred
the first appeal before the NCLAT on 31.07.2019, which appeal was
directed against the provisional approval order passed by the NCLT
on 24.07.2019. In our opinion, Explanation 2(ii) clearly states that
an appeal preferred under Section 61 or 62, when it is not barred
by time under any provision of law, shall be heard and decided after
considering the amended Section 30(2)(b) under the Amendment
Act. In fact, Explanation 2(i) states that the amended clause shall
“also” apply to the CIRP of the corporate debtor where a resolution
plan has not been approved or rejected by the adjudicating authority.
Explanation 2(iii) states that the amended Section 30(2)(b) shall
“also” apply where legal proceedings have been initiated in any
court against the decision of the adjudicating authority. Clauses
(i), (ii) and (iii) of Explanation 2 reflect the wide expanse and width
of the legislative intent viz. the application of the Amendment Act,
whether proceedings are pending before the adjudicating authority,
the appellate authority, or before any court in a proceeding against
an order of the adjudicating authority in respect of a resolution plan.
Only when the resolution plan, as approved, has attained finality as
no proceedings are pending, that the amendments will not apply to
re-write the settled matter.
23. A three Judge Bench of this Court in Committee of Creditors
of Essar Steel India Limited v. Satish Kumar Gupta & Ors.
9
,
in paragraph 130, has observed that Explanation 2 applies to the
substituted Section 30(2)(b) to pending proceedings either at the
level of the adjudicating authority, appellate authority or in a writ
or civil court. Referring to several decisions, it is observed that
no vested right inheres in any resolution applicant who has plans
approved under the Code. Further, an appellate proceeding is a
continuation of the original proceeding. A change in law can always
be applied to original or appellate proceedings. Thus, Explanation 2
is constitutionally valid and despite having retrospective operation,
it does not impair vested rights.
9 (2020) 8 SCC 531.
124 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
24. We must also take note of the second submission of the appellant in
this regard relying upon Explanation 2(i), inter alia, on the ground that
the final approval to the resolution plan by the NCLT was vide order
dated 04.09.2019, which is after the notification of the Amendment Act
on 16.08.2019. The first order provisionally/ conditionally approving
the resolution plan was dated 24.07.2019 and hence, the effect of
the Amendment Act could not have been considered and applied
by the NCLT. There is merit in the contention of the appellant, but
we need not firmly decide this issue, for we are of the opinion that
the Amendment Act was certainly applicable when the appeals were
heard and decided by the NCLAT on 18.11.2019 and 09.12.2019,
which was post the enforcement of the Amendment Act.
25. The second question relates to the interpretation of Section 30(2)
(b)(ii) of the Code. As we read Section 30(2)(b)(ii), the dissenting
financial creditor is entitled to payment, which should not be less
than the amount payable under Section 53(1), in the event of the
liquidation of the corporate debtor. The provision recognises that all
financial creditors need not be similarly situated. Secured financial
creditors may have distinct sets of securities. There are a number
of decisions of this Court, viz. Committee of Creditors of Essar
Steel India Limited (supra), Swiss Ribbons Private Limited and
Another v. Union of India and Others10, and Vallal RCK v. Siva
Industries and Holdings Limited and Others11, which have held that
the commercial wisdom of the CoC must be respected. Therefore,
the resolution plan accepted by the requisite creditors/members of
the CoC upon voting, is enforceable and binding on all creditors. The
CoC can decide the manner of distribution of resolution proceeds
amongst creditors and others, but Section 30(2)(b) protects the
dissenting financial creditor and operational creditors by ensuring
that they are paid a minimum amount that is not lesser than their
entitlement upon the liquidation of the corporate debtor.
26. The Code had been enacted to balance the interests of various
stakeholders, inter alia, by facilitating the resolution of insolvency,
promoting investment, maximising the value of assets, and increasing
the availability of credit. Secured credit is important for commerce
10 (2019) 4 SCC 17.
11 (2022) 9 SCC 803.
[2024] 1 S.C.R. 125
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
as it reduces credit risk and carries lower interest due to lower loss
value in the event of failure. On the resolution plan being approved,
an unwilling secured creditor does and must forgo the security, albeit
such an unwilling secured creditor is entitled to the value of the
security as payable on the liquidation of the corporate debtor. The
provision is enacted to protect the minority autonomy of creditors. It
should not be read down to nullify the minimum entitlement. Section
30(2)(b)(ii) forfends the dissenting financial creditor from settling for
a lower amount payable under the resolution plan.
27. The order passed by the NCLAT dated 18.11.2019 noticing
the amendments states that Section 30(4) had not been given
retrospective effect but is prospective in nature. While it was
open to the CoC to follow the amended Section 30(4), it was not
mandatory to follow the same. A financial creditor can dissent if
the resolution plan is discriminatory or against a provision of law.
However, a dissenting financial creditor cannot take advantage of
Section 30(2)(b)(ii). A secured creditor cannot claim preference over
another secured creditor at the stage of distribution on the ground
of a dissent or assent, otherwise the distribution would be arbitrary
and discriminative. The purpose of the amendment was only to
ensure that a dissenting financial creditor does not get anything
less than the liquidation value, but not for getting the maximum of
the secured assets.
28. In India Resurgence ARC Private Limited v. Amit Metaliks Limited
& Another.12, a two Judge Bench of this Court has referred to a
judgment by a three Judge Bench of this Court in Jaypee Kensington
Boulevard Apartments Welfare Association & Others. v. NBCC
(India) Limited & Others.13, to observe and hold:
“18. 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
12 2021 SCC Online SC 409.
13 (2022) 1 SCC 401.
126 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
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. In that context,
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,
inter alia, 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
[2024] 1 S.C.R. 127
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
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 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….”
29. Thereafter, this Court in India Resurgence ARC Private Limited
(supra) has observed:
“19. 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.
20. 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.
128 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
21. 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 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.”
30. Our attention is also drawn to paragraph 17 and 22 of India
Resurgence ARC Private Limited (supra), wherein after elucidating
on the ratio in Jaypee Kensington (supra), the Bench has observed:
“17. Thus, what amount is to be paid to different classes
or subclasses 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.
xx xx xx
22. 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
[2024] 1 S.C.R. 129
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
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.””
31. We believe that there is a contradiction in the reasoning given in the
judgment of this Court in India Resurgence ARC Private Limited
(supra), which is in discord with the ratio decidendi of the decisions
of the three Judge Bench in Committee of Creditors of Essar Steel
India Limited (supra) and Jaypee Kensington (supra).
32. In Committee of Creditors of Essar Steel India Limited (supra),
this Court had referred to the UNCITRAL Legislative Guide on the
treatment of dissenting creditors to observe that it is essential to
provide a way of imposing a plan agreed upon by a majority of a
class upon the dissenting minority to increase the chances of success
of the reorganisation. However, it is also necessary depending upon
the mechanism that is chosen for voting on the plan and whether the
creditors vote in class, to consider whether the plan can be made
binding upon dissenting classes of creditors and other affected parties.
To the extent that the plan can be approved and enforced upon the
dissenting parties, there is a need to ensure that the plan provides
appropriate protection for the dissenting parties and, in particular,
the rights may not be unfairly affected. Thereupon, the UNCITRAL
Legislative Guide states:
“…The law might provide, for example, that dissenting
creditors cannot be bound unless assured of certain
treatment. As a general principle, that treatment might
be that the creditors will receive at least as much under
the plan as they would have received in liquidation
proceedings. If the creditors are secured, the treatment
required may be that the creditor receives payment of the
value of its security interest, while in the case of unsecured
creditors it may be that any junior interests, including equity
holders, receive nothing…”
33. In our opinion, the provisions of Section 30(2)(b)(ii) by law provides
assurance to the dissenting creditors that they will receive as money
the amount they would have received in the liquidation proceedings.
130 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
This rule also applies to the operational creditors. This ensures
that dissenting creditors receive the payment of the value of their
security interest.
34. In paragraph 128 in the case of Committee of Creditors of Essar
Steel India Limited (supra), it has been clearly held:
“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 cram down 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.”
[2024] 1 S.C.R. 131
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
35. The reasoning and the ratio in Jaypee Kensington (supra) is also
the same:
“164.2. 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 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.”
36. We have reservation on portions of the view expressed in paragraphs
17, 21 and 22 in the judgment of India Resurgence ARC Private
Limited (supra). Paragraph 17 is respectfully correct in its observations
when it refers to the provisions of Section 30(4) and that the voting is
essentially a matter which relates to commercial wisdom of the CoC.
The observation that a dissenting secured creditor cannot suggest
that a higher amount be paid to it is also correct. However, this does
not affect the right of a dissenting secured creditor to get payment
equal to the value of the security interest in terms of Section 30(2)
(b)(ii) of the Code. Paragraph 21 in India Resurgence ARC Private
Limited (supra) again in our respectful view is partially correct. It
is correct to the extent that the legislature has not stipulated that
the dissenting financial creditor shall be entitled to enforce the
security interest. However, it is incorrect to state that the dissenting
financial creditor would not be entitled to receive the liquidation
value, the amount payable to him in terms of Section 53(1) of the
Code. Paragraph 22 refers to the Committee of Creditors of Essar
Steel (supra), which we have already quoted and is apposite to the
view expressed by us. The reasoning given in the earlier portion of
paragraph 22 in our respectful opinion is in conflict with the ratio
in Committee of Creditors of Essar Steel India Limited (supra)
as it does not take into account the legal effect of Section 30(2)(b)
(ii) of the Code. While it is important to maximise the value of the
assets of the corporate debtor and prevent liquidation, the rights of
operational creditors or dissenting financial creditors also have to
be protected as stipulated in law.
132 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
37. In Jaypee Kensington (supra), it has been held that the dissenting
financial creditor, if the occasion arises, is entitled to receive the
extent of value in money equal to the security interest held by him.
It would not be proper to read Jaypee Kensington (supra), as laying
down that the dissenting financial creditor would be entitled to the
extent of amounts receivable by him in the resolution plan. This
would undo the very object and purpose of the amendment. It would
make the portion of Section 30(2)(b)(ii) specifying the amount to be
paid to such creditor in accordance with Section 53(1), redundant
and meaningless.
38. Our reasoning finds resonance in the reasoning given in Jaypee
Kensington (supra), which states that for the purpose of discharge
of obligation mentioned in the second part of Section 30(2)(b) 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. This amount payable is to be paid on priority over
the dissenting counterparts. However, Section 30(2) refers only to
the sum of money and nothing else, that is, it does not permit the
dissenting financial creditor to enforce the security and sell the same.
This would be counterproductive and may nullify the resolution plan.
What the dissenting financial creditor is entitled to is the payment,
which should not be less than the amount/value of the security interest
held by them. The security interest gets converted from the asset
to the value of the asset, which is to be paid in the form of money.
This is clear from the relevant portions of paragraphs 164.1, 164.2,
166.4, and 167 in Jaypee Kensington (supra), which read as under:
“164.1. 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
[2024] 1 S.C.R. 133
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
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.
164.2. 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 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 [
Though it is obvious, but is clarified to avoid any ambiguity,
that the “security interest” referred herein for the purpose
of money recovery by dissenting financial creditor would
only be such security interest which is relatable to the
“financial debt” and not to any other debt or claim.] . In
any case, that is, whether by direct payment in cash or by
allowing recovery of amount via the mode of enforcement of
security interest, the dissenting financial creditor is entitled
to receive the “amount payable” in monetary terms and
not in any other term.
xx xx xx
166.4. The suggestion about prejudice being caused to
the assenting financial creditors by making payment to the
dissenting one has several shortcomings. As noticeable, in
the scheme of IBC, a resolution plan is taken as approved,
only when voted in favour by a majority of not less than
66% of the voting share of CoC. Obviously, the dissenting
sect stands at 34% or less of the voting share of CoC.
Even when the financial creditors having a say of not less
than 2/3rd in the Committee of Creditors choose to sail
with the resolution plan, the law provides a right to the
remainder (who would be having not more than 34% of
134 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
voting share) not to take this voyage but to disembark,
while seeking payment of their outstanding dues. Even
this disembarkment does not guarantee them the time
value for money of the entire investment in the corporate
debtor; what they get is only the liquidation value in terms
of Section 53 of the Code. Of course, in the scheme of
CIRP under the Code, the dissenting financial creditors
get, whatever is available to them, in priority over their
assenting counterparts. In the given scheme of the statutory
provisions, there is no scope for comparing the treatment
to be assigned to these two divergent sects of financial
creditors. The submissions made on behalf of assenting
financial creditors cannot be accepted.
xx xx xx
167. To sum up, in our view, for a proper and meaningful
implementation of the approved resolution plan, the
payment as envisaged by the second part of clause (b)
of sub-section (2) of Section 30 could only be payment in
terms of money and the financial creditor who chooses to
quit the corporate debtor by not putting his voting share in
favour of the approval of the proposed plan of resolution (i.e.
by dissenting), cannot be forced to yet remain attached to
the corporate debtor by way of provisions in the nature of
equities or securities. In the true operation of the provision
contained in the second part of sub-clause (ii) of clause
(b) of sub-section (2) of Section 30 (read with Section
53), in our view, the expression “payment” only refers to
the payment of money and not anything of its equivalent
in the nature of barter; and a provision in that regard is
required to be made in the resolution plan whether in
terms of direct money or in terms of money recovery with
enforcement of security interest, of course, in accordance
with the other provisions concerning the order of priority as
also fair and equitable distribution. We are not commenting
on the scenario if the dissenting financial creditor himself
chooses to accept any other method of discharge of its
payment obligation but as per the requirements of law, the
resolution plan ought to carry the provision as aforesaid.”
[2024] 1 S.C.R. 135
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
39. Similar view has been taken by a two Judge Bench of this Court in
Vistra ITCL (India) Limited & Ors. v. Dinkar Venkatasubramanian
& Anr.14, wherein it was observed in paragraphs 34, 41.2 and 42
as under:
“34. The amendment introduced by Act 26 of 2019 ensures
that the operational creditors under the resolution plan
should be paid the amount equivalent to the amount which
they would have been entitled to, in the event of liquidation
of the corporate debtor under Section 53 of the Code. In
other words, the amount payable under the resolution plan
to the operational creditors should not be less than the
amount payable to them under Section 53 of the Code,
in the event of liquidation of the corporate debtor. The
amended provision also provides that the financial creditors
who have not voted in favour of the resolution plan shall
be paid not less than the amount which would be paid
to them in accordance with sub-section (1) to Section 53
of the Code, in the event of liquidation of the corporate
debtor. Explanation (1) to clause (b) of Section 30(2) of
the Code, for the removal of doubts, states and clarifies
that the distribution in accordance with this clause shall
be fair and equitable to such creditors.
xx xx xx
41.2. The second option is to treat Appellant 1-Vistra as a
secured creditor in terms of Section 52 read with Section
53 of the Code. In other words, we give the option to the
successful resolution applicant — DVI (Deccan Value
Investors) to treat Appellant 1-Vistra as a secured creditor,
who will be entitled to retain the security interest in the
pledged shares, and in terms thereof, would be entitled
to retain the security proceeds on the sale of the said
pledged shares under Section 52 of the Code read with
Rule 21-A of the Liquidation Process Regulations. The
second recourse available, would be almost equivalent
in monetary terms for Appellant 1-Vistra, who is treated
14 (2023) 7 SCC 324.
136 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
as a secured creditor and is held entitled to all rights
and obligations as applicable to a secured creditor under
Sections 52 and 53 of the Code. This to our mind would
be a fair and just solution to the legal conundrum and
issue highlighted before us.
42. We wish to clarify that the directions given by us would
not be a ground for the successful resolution applicant —
DVI to withdraw the resolution plan which has already been
approved by Nclat and by us. The reason is simple. Any
resolution plan must meet with the requirements/provisions
of the Code and any provisions of law for the time being
in force. What we have directed and the option given by
us ensures that the resolution plan meets the mandate
of the Code and does not violate the rights given to the
secured creditor, who cannot be treated as worse off/
inferior in its claim and rights viz an operational creditor
or a dissenting financial creditor.”
40. One of the contentions raised by the respondent no. 2 - the CoC is
that Section 30(2)(b)(ii) refers only to Section 53 of the Code and
not to Section 52. We find it difficult to accept the said submission
to read down Section 30(2)(b)(ii) of the Code. Reference to Section
53 of the Code in Section 30(2)(b)(ii) is made with a specific purpose
and objective and accordingly, we have to understand and give a
cogent and effective meaning to the words to effectuate the intent.
Section 53 of the Code refers to Section 52 thereof. We would not
isolate Section 53, when we refer to Section 30(2)(b)(ii) and make
it meaningless and undo the legislative intent behind the amended
provision, which is clear and apparent. Whenever required, in a
reference made to Section 53 of the Code, we would have to refer
to Section 52 to give meaning to Section 30(2)(b)(ii) of the Code. A
dissenting financial creditor is entitled to not partake the proceeds
in the resolution plan, unless a higher amount in congruence with its
security interest is approved in the resolution plan. The “amount” to
be paid to the dissenting financial creditor should be in accordance
with Section 53(1) in the event of liquidation of the corporate debtor.
In other words, in our opinion, the dissenting financial creditor is
entitled to a minimum value in monetary terms equivalent to the
value of the security interest.
[2024] 1 S.C.R. 137
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
41. The submission that the secured creditor’s entitlement to distribution
under Section 53(1)(b)(ii) is applicable where the secured creditor
relinquishes its security interest under Section 52 of the Code, and,
therefore, is not applicable to dissenting financial creditors like the
appellant is erroneous and unacceptable.
42. Apart from the reasons stated above, a dissenting financial creditor,
as held in Jaypee Kensington (supra) is only entitled to the monetary
value of the assets. The dissenting financial creditor loses the security
interest, that is, it relinquishes the security interest. Dissenting financial
creditor, therefore, cannot enforce the security interest. It is necessary
to clearly state this position, as in case a dissenting financial creditor
enforces the security interest, the resolution plan itself may fail and
become unworkable. The dissenting financial creditor has to statutorily
forgo and relinquish his security interest on the resolution plan being
accepted, and his position is same and no different from that of a
secured creditor who has voluntarily relinquished security and is to
be paid under Section 53(1)(b)(ii) of the Code.
43. The reasoning also takes care of the argument that the Explanation
to Section 53 incorporates the principle of pari passu distribution
into Section 53(1) with each class of creditors mentioned therein.
We wish to clarify that Section 53(1) is referred to in Section 30(2)
(b)(ii) with the purpose and objective that the dissenting financial
creditor is not denied the amount which is payable to it being equal
to the amount of value of the security interest. The entire Section
53 is not made applicable.
44. We would, for the above reasons, reject the submission on behalf
of the respondents that Section 30(2)(b)(ii) is unworkable because it
involves deeming fiction relating to liquidation, which is inapplicable
during the CIRP period. This would be contrary to the legislative
intent and is unacceptable.
45. Respondent no. 2 – CoC has submitted that the appellant has
dissented because it did not approve the manner of distribution of the
proceeds under the resolution plan. The appellant did not dispute the
resolution plan itself. Accordingly, Section 30(2)(b)(ii) is not applicable.
The argument is fallacious and must be rejected. Section 30(2)(b)(ii)
relates to the proportion of the proceeds mentioned in the resolution
plan or the amount which the dissenting financial creditor would be
entitled to in terms of the waterfall mechanism provided in Section
138 [2024] 1 S.C.R.
DIGITAL SUPREME COURT REPORTS
53(1), if the corporate debtor goes into liquidation. The dissenting
financial creditor does not have any say when the resolution plan is
approved by a two-third majority of the CoC. The resolution plan will
be accepted when approved by the specified majority in the CoC.
The dissenting financial creditor cannot object to the resolution plan,
but can object to the distribution of the proceeds under the resolution
plan, when the proceeds are less than what the dissenting financial
creditor would be entitled to in terms of Section 53(1) if the corporate
debtor had gone into liquidation. This is the statutory option or choice
given by law to the dissenting financial creditor. The option/choice
should be respected.
46. Respondent no. 2 – CoC had referred to the objections referred to in
the CoC meetings dated 15.04.2019 and 23.04.2019. We are of the
view that the objections raised by the appellant relate to the distribution
of the proceeds in terms of the liquidation plan. According to them,
they were entitled to money of value not less than the amount that
they would have received under Section 53(1) of the Code.
47. It is also argued that the NCLAT had rejected the first appeal on the
ground that the appellant had only challenged the distribution of the
pay-out under the plan inter se the financial creditors of the corporate
debtor and not the resolution plan. Accordingly, the amendment to
Section 30(2)(b) vide the Amendment Act of 2019 was not applicable.
We have already rejected this argument, for the reasons set out
above. In our opinion, the contention that the appellant is not the
dissenting financial creditor is to be rejected.
48. The contention on behalf of the respondent that there is conflict
between sub-section (4), as amended in 2019, and the amended
clause (b) to sub-section (2) to Section 30 of the Code does not
merit a different ratio and conclusion. Section 30(4) states that the
CoC may approve the resolution plan by a vote not less than 66%
of the voting share of the financial creditor. It states that the CoC
shall consider the feasibility and viability, the manner of distribution
proposed, which may take into account the order of priority amongst
creditors under sub-section (1) to Section 53, including the priority
and value of the security interest of the secured creditors, and other
requirements as may be specified by the Board. These are the
aspects that the CoC has to consider. It is not necessary for the CoC
to provide each assenting party with liquidation value. However, a
[2024] 1 S.C.R. 139
DBS BANK LIMITED SINGAPORE v. RUCHI SOYA INDUSTRIES
LIMITED AND ANOTHER
secured creditor not satisfied with the proposed pay-out can vote
against the resolution plan or the distribution of proceeds, in which
case it is entitled to full liquidation value of the security payable in
terms of Section 53(1) on liquidation of the corporate debtor. The
conflict with sub-clause (ii) to clause (b) to sub-section (2) to Section
30 does not arise as it relates to the minimum payment which is to
be made to an operational creditor or a dissenting financial creditor.
A dissenting financial creditor does not vote in favour of the scheme.
Operational creditors do not have the right to vote.
49. In view of the aforesaid discussion, and as we are taking a different
view and ratio from India Resurgence ARC Private Limited (supra)
on interpretation of Section 30(2)(b)(ii) of the IBC, we feel that it would
be appropriate and proper if the question framed at the beginning of
this judgment is referred to a larger Bench. The matter be, accordingly
placed before the Hon’ble the Chief Justice for appropriate orders.
Headnotes prepared by: Divya Pandey Result of the case: Matter referred
to larger Bench.
