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.

* 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.

Code of Criminal Procedure, 1973 – Issuance of summons, duty of Magistrate – Penal Code, 1860 – ss.406, 504 and 506 – Commercial dispute given criminal colour – Dispute between the parties related to the rate at which the assigned work was to be done – Respondent no.2 filed complaint case – Summons issued by Magistrate for trial u/ss.406, 504 and 506, IPC – Application filed by the appellant for quashing the summons and the complaint case, dismissed by High Court – Propriety:

* Author

[2024] 1 S.C.R. 1134 : 2024 INSC 72

Sachin Garg

v.

State of U.P & Anr.

(Criminal Appeal No. 497 of 2024)

30 January 2024

[Aniruddha Bose* and Sanjay Kumar, JJ.]

Issue for Consideration

In a case wherein the dispute was commercial in nature having

no element of criminality, whether the Magistrate was justified in

issuing summons for trial u/ss.406, 504 and 506, Penal Code,

1860 and the High Court in dismissing the application filed by the

appellant for quashing said summons and the complaint case.

Headnotes

Code of Criminal Procedure, 1973 – Issuance of summons,

duty of Magistrate – Penal Code, 1860 – ss.406, 504 and 506 –

Commercial dispute given criminal colour – Dispute between

the parties related to the rate at which the assigned work was

to be done – Respondent no.2 filed complaint case – Summons

issued by Magistrate for trial u/ss.406, 504 and 506, IPC –

Application filed by the appellant for quashing the summons

and the complaint case, dismissed by High Court – Propriety:

Held: Past commercial relationship between the appellant’s

employer and the respondent no.2 was admitted – Dispute between

the parties centred around the rate at which the assigned work

was to be done – Neither in the complaint petition nor in the initial

deposition of the two witnesses (including the complainant), the

ingredients of the offence u/s.405, IPC surfaced – Such commercial

disputes over variation of rate cannot per se give rise to an offence

u/s.405, IPC without presence of any aggravating factor leading

to the substantiation of its ingredients – No material to come to a

prima facie finding that there was dishonest misappropriation or

conversion of any material for the personal use of the appellant in

relation to gas supplying work done by the respondent no.2 – The

said work was done in course of regular commercial transactions –

There was no misappropriation or conversion of the subject property, 

[2024] 1 S.C.R. 1135

Sachin Garg v. State of U.P. and Anr.

being Dissolved Acetylene Gas which was supplied to the factory

for the purpose of battery manufacturing at EIL – No evidence

for commission of offence u/s.405/406, IPC – Further, as regards

criminal intimidation also there was a mere bald allegation, short

of any particulars as regards to the manner in which threat was

conveyed – While it is true that at the stage of issuing summons

a magistrate only needs to be satisfied with a prima facie case for

taking cognizance, the duty of the magistrate is also to be satisfied

whether there is sufficient ground for proceeding – Magistrate’s

order issuing summons reflects his satisfaction in a cryptic manner

– At the stage of issue of summons, though detailed reasoning as

to why a Magistrate is issuing summons is not necessary but in

the present case, the allegations made by the complainant do not

give rise to the offences for which the appellant was summoned for

trial – A commercial dispute, which ought to have been resolved

through the forum of Civil Court was given criminal colour by lifting

certain words or phrases from the penal code and implanting

them in a criminal complaint – Magistrate failed to apply his mind

in issuing summons and the High Court failed to exercise its

jurisdiction u/s.482, 1973 Code – Impugned judgment set aside,

complaint and summoning order quashed. [Paras 14, 17 and 18]

Code of Criminal Procedure, 1973 – s.482 – Jurisdiction –

Discussed.

Code of Criminal Procedure, 1973 – Summons issued by

Magistrate for trial u/ss.406, 504 and 506, IPC in the complaint

case filed by Respondent no.2 – Appellant sought dismissal

of the complaint on the ground that the complaint should

not have been entertained without arraigning the principal

company as an accused:

Held: The perceived wrongdoing was attributed to the appellant,

though the complaint petition acknowledges that the job-work was

being done for EIL (appellant’s employer) – Moreover, the allegation

of criminal intimidation was against the appellant directly, whatever

be the value or quality of such allegations – Thus, for that reason

the complaint case cannot be rejected at the nascent stage on the

sole ground of not implicating the company – However, the complaint

and the summons quashed for the reasons given. [Para 20]

1136 [2024] 1 S.C.R.

Digital Supreme Court Reports

Case Law Cited

Sharad Kumar Sanghi vs Sangita Rane [2015] 2 SCR

145 : (2015) 12 SCC 781 – held inapplicable.

Jagdish Ram vs State of Rajasthan and Another [2004]

2 SCR 846 : (2004) 4 SCC 432 – relied on.

Neeharika Infrastructure Pvt. Ltd. vs State of Maharashtra

and Ors., [2021] 4 SCR 1044 : (2021) 19 SCC 401;

R.P. Kapur vs State of Punjab, [1960] 3 SCR 388 : AIR

(1960) SC 866; State of Haryana and Ors. vs Bhajan

Lal and Ors., [1992] Supp. (3) SCR 735 : (1992) SCC

(Cr.) 426; State of Bihar and Anr. vs P. P. Sharma, IAS

and Anr., [1991] 2 SCR 1 : (1992) SCC (Cr.) 192; Zandu

Pharmaceutical Works Ltd. and Ors. vs Mohd. Sharaful

Haque and Another [2004] Supp. (5) S.C.R. 790 : (2005)

SCC (Cr.) 283; Deepak Gaba and Ors. vs State of Uttar

Pradesh and Another (2023) 3 SCC 423; Prof. R.K.

Vijayasarathy and Anr. vs Sudha Seetharam and Anr.

[2019] 2 SCR 185 : (2019) 16 SCC 739; Vijay Kumar

Ghai and Ors. vs State of West Bengal and Ors. [2022]

1 SCR 884 : (2022) 7 SCC 124; Dalip Kaur and Ors. vs

Jagnar Singh and Anr., [2009] 10 SCR 264 : (2009) 14

SCC 696; Birla Corporation Ltd. vs Adventz Investments

and Holdings Ltd. and Ors., [2019] 7 SCR 655 : (2019)

16 SCC 610; Smt Nagawwa vs Veeranna Shivalingappa

Konjalgi and Others [1976] 1 Suppl. SCR 123 : (1976) 3

SCC 736; Fiona Shrikhande vs State of Maharashtra and

Another, [2013] 9 SCR 240 : (2013) 14 SCC 44; Binod

Kumar and Ors. vs State of Bihar and Another, [2014]

11 SCR 85 : (2014) 10 SCC 663; Pepsi Foods Ltd. and

Anr. vs Special Judicial Magistrate and Ors., [1997] 5

Suppl. SCR 12 : (1998) 5 SCC 749 – referred to.

List of Acts

Code of Criminal Procedure, 1973; Penal Code, 1860.

List of Keywords

Commercial dispute; Criminal colour; Stage of issuing summons;

Duty of Magistrate; Quashing; Quashing of summons; Dishonest

misappropriation/conversion of material for personal use; Criminal

intimidation; Non-application of mind; Principal company not implicated.

[2024] 1 S.C.R. 1137

Sachin Garg v. State of U.P. and Anr.

Case Arising From

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.497

of 2024.

From the Judgment and Order dated 23.03.2023 of the High Court

of Judicature at Allahabad in A482 No.18603 of 2021.

Appearances for Parties

Mukul Rohatgi, Guru Krishna Kumar, Sr. Advs., Ms. Misha Rohatgi,

Sushil Shukla, Nakul Mohta, Ms. Alina Merin Mathew, Muthu

Thangathurai, Advs. for the Appellant.

Sarvesh Singh Baghel, Aviral Saxena, Arun Pratap Singh Rajawat,

Ms. Vanshaja Shukla, Ms. Divya Jyoti Singh, Ms. Ankeeta Appanna,

Manish Gupta, Advs. for the Respondents.

Judgment / Order of the Supreme Court

Judgment

Aniruddha Bose, J.

Leave granted.

2. The appellant, at the material point of time, stood posted as the

Head of factory of Exide Industries Limited (“EIL”), a corporate entity,

situated at Bawal, District Rewari, Haryana. The respondent no.2,

ran a proprietary concern, Ambika Gases. He was the supplier of

Dissolved Acetylene Gas (“DA Gas”), which is used for manufacturing

battery in the said factory. So far as the present appeal is concerned,

the dispute is over a purchase order issued for the supply of the said

item. The original purchase order dated 01.04.2019 was amended

twice on the basis of representations made by the respondent no.2.

The first amendment was made on 18.07.2019 by which the rate was

increased from Rs.1.55 per unit to Rs.1.65 per unit and the second

amendment was made on 20.12.2019 through which the rate per unit

was brought down to Rs.1.48 from Rs.1.65. An invoice was raised

by the respondent no.2 with the aforesaid rates for a total sum of

Rs.9,36,693.18/-. The dispute revolves around non-payment of the

said sum. However, it has been contended by the appellant that EIL,

after ascertaining the market price of DA Gas from other vendors,

by a letter dated 29.06.2020, reconciled the accounts by informing

respondent no.2 of what it claimed was foul play with respect to 

1138 [2024] 1 S.C.R.

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revision of rates and appropriated the alleged illegal amounts claimed

by the vendor (respondent no.2) from the invoice.

3. The respondent no.2 instituted a complaint case in the Court of

the Chief Judicial Magistrate, Ghaziabad and the substance of the

complaint would be revealed from the following passages of the

petition of complaint (registered as Misc. Application No.317/2020):-

“….The Applicant through his aboenamed work do the job

work of D.A. Gas. Opposite Party Sachin Garg is posted

as Material Head of Exide Industries Ltd. situated at Plot

No. 179, Sector-3, Bawal, District- Rewari, Haryana and

Opposite Party Sachin Garg also used to issue Purchase

Order to the Applicant’s company on behalf of the Exide

Company and only the Opposite Party Sachin Garg used

to make payment of Job Work to the Applicant. Previously,

the Transaction of Opposite Party was normal with the

Applicant’s company and no problem was ever persisted

in the payment, due to which, the Applicant started trusting

on the Opposite Party and Company. Sachin Garg through

the aforesaid company in the capacity of Purchase Head,

issued Purchase Order to the Applicant’s Company, in

which, it was agreed between the Opposite Party and

Applicant to do job work @ Rs.1.65/- per piece w.e.f.

18.02.2019, which remained continued on the same rates

till December, 2019 and the Opposite Party was regularly

making the payment of job work to the Applicant on the

same rates. In the month of December, in pursuance of the

Purchase Order of Opposite Party, According to Purchase

No. 4800253593 dated 01.04.2019, done the job work of

Filled DA Gases HSN Code 290129910 quantity 3,07,114/-

pieces @ Rs.165 to the tune of Rs.5,06,738.10/-, and Filled

DA Gases H{SN Code 29012910 quantity 1,93,966/- pieces

@ Rs.1.48 per piece to the tune of Rs. 2,87,069.68/- and

18% GST to the tune of Rs.1,42,885.40/-0, in this manner

did the job work of total amount Rs.9,36,693.18/-. The

material Head of Opposite Company namely Sachin

Garg by admitting the job work done by the Applicant

vide Purchaser Order No. 4800253593 dated 01.04.2019,

and got done the job work according to the piece rate

quoted by the Applicant. On 03.07.2020, Applicant sent 

[2024] 1 S.C.R. 1139

Sachin Garg v. State of U.P. and Anr.

Bill/Invoice No. AG.SR/20-21/01 dated 02.07.2020 of

Rs.9,36,693.18/- to the Material Head of Opposite Party

Company namely Sachin Garg through registered post

and also sent the aforesaid invoice through email on

14.07.2020, which were received by Opposite Party Sachin

Garg. Applicant repeatedly requested the Opposite Party

for payment through email, but, the Opposite Party did not

make payment of Rs.9,36,693.18/- of job work done by the

Applicant Company in the month of December, 2019 and

he by keeping the Applicant in dark, kept giving assurances

of making full payment. When, the Applicant put more

pressure on the Opposite Party for payment, then, Opposite

Party stopped to get done the job work from the Applicant

Company, and on 29.06.2020, sent a letter with quotation

to the Applicant Company, in which, the Opposite Party has

fixed the rate of job work done by the Applicant company

@ Rs.1.40/- per piece w.e.f. April, 2019, whereas, the job

work of Opposite Party was completed by the Applicant

Company in the month of December, 2019, in which,

Opposite Party on 20.12.2019, requested to change the

rate of job work at the rate of Rs.1.48/- per piece, which

was accepted by the Applicant w.e.f. 20.12.2019. In this

manner, after 20.12.2019, Rs.1.48/- per piece and prior

to that the rate of Rs.1.65/- per piece was payable by the

Opposite Party, but, the Opposite Party with intention to

cheat the Applicant in deliberate manner, and with intention

to cause financial loss to him and not to pay the money,

has committed criminal breach of trust with the Applicant,

which is a cognizable offence. On demanding money by

the Applicant, the Opposite Party is abusing him with filthy

language and threatening him to kill…..”

(quoted verbatim from the paperbook)

4. The learned Magistrate upon recording initial deposition of Saurabh

Sharma, the proprietor of the supplier firm and his father Padam

Kant Sharma issued summons for trial under Sections 406, 504 and

506 of the Indian Penal Code, 1860 (“1860 Code”) on 18.08.2021.

5. The appellant had approached the High Court at Allahabad under

Section 482 of Code of Criminal Procedure, 1973 (“the 1973 Code”) 

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by filing, Criminal Miscellaneous Application No.18603/2021, for

quashing the said summons and also the complaint case itself. The

judgment of the High Court was delivered dismissing the application

filed by the appellant on 23.03.2023 and it is this judgment which

is under appeal before us. The main reason for dismissal of the

appellant’s quashing plea was that the subject-complaint involved

adjudication of disputed questions of fact. Referring to the judgments

of this Court in the cases of Neeharika Infrastructure Pvt. Ltd.

-vs- State of Maharashtra and Ors. [(2021) 19 SCC 401], R.P.

Kapur -vs- State of Punjab [AIR 1960 SC 866], State of Haryana

and Ors. -vs- Bhajan Lal and Ors. [1992 SCC (Cr.) 426], State of

Bihar and Anr. -vs- P. P. Sharma, IAS and Anr. [1992 SCC (Cr.)

192] and lastly Zandu Pharmaceutical Works Ltd. and Ors. -vsMohd. Sharaful Haque and Another [2005 SCC (Cr.) 283], the

High Court refrained from considering the defence of the accused.

6. In the case of Neeharika Infrastructure Ltd (supra), a three-judge

Bench of this Court examined the factors which were to be considered

by the High Court for quashing an F.I.R. at the threshold, relating to

factors which would apply to a proceeding which forms the subjectmatter of the present case. Referring to the judgment in the case

of R.P. Kapur (supra), principles for quashing were set down as:-

“10.1 The first case on the point which is required to be noticed

is the decision of this Court in the case ofc8R.P. Kapur (supra).

While dealing with the inherent powers of the High Court under

Section 561-A of the earlier Code (which is pari materia with

Section 482 of the Code), it is observed and held that the inherent

powers of the High Court under Section 561 of the earlier Code

cannot be exercised in regard to the matters specifically covered

by the other provisions of the Code; the inherent jurisdiction

of the High Court can be exercised to quash proceedings in

a proper case either to prevent the abuse of the process of

any court or otherwise to secure the ends of justice; ordinarily

criminal proceedings instituted against an accused person must

be tried under the provisions of the Code, and the High Court

would be reluctant to interfere with the said proceedings at an

interlocutory stage. After observing this, thereafter this Court

then carved out some exceptions to the above-stated rule,

which are as under:

[2024] 1 S.C.R. 1141

Sachin Garg v. State of U.P. and Anr.

“(i) Where it manifestly appears that there is a legal bar

against the institution or continuance of the criminal

proceeding in respect of the offence alleged. Absence

of the requisite sanction may, for instance, furnish

cases under this category.

(ii) Where the allegations in the first information report

or the complaint, even if they are taken at their face

value and accepted in their entirety, do not constitute

the offence alleged; in such cases no question of

appreciating evidence arises; it is a matter merely of

looking at the complaint or the first information report

to decide whether the offence alleged is disclosed

or not.

(iii) Where the allegations made against the accused

person do constitute an offence alleged but there is

either no legal evidence adduced in support of the

case or the evidence adduced clearly or manifestly

fails to prove the charge. In dealing with this class of

cases it is important to bear in mind the distinction

between a case where there is no legal evidence

or where there is evidence which is manifestly and

clearly inconsistent with the accusation made and

cases where there is legal evidence which on its

appreciation may or may not support the accusation

in question. In exercising its jurisdiction under Section

561-A the High Court would not embark upon an

enquiry as to whether the evidence in question

is reliable or not. That is the function of the trial

Magistrate, and ordinarily it would not be open to any

party to invoke the High Court’s inherent jurisdiction

and contend that on a reasonable appreciation of the

evidence the accusation made against the accused

would not be sustained.””

7. In the same decision (i.e. Neeharika Infrastructure Ltd.) (supra),

the seven-point edict laid down in the case of Bhajan Lal (supra)

was also referred to. These are:-

“102.(1) Where the allegations made in the first information

report or the complaint, even if they are taken at their 

1142 [2024] 1 S.C.R.

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face value and accepted in their entirety do not prima

facie constitute any offence or make out a case against

the accused.

(2) Where the allegations in the first information report

and other materials, if any, accompanying the FIR do not

disclose a cognizable offence, justifying an investigation

by police officers under Section 156(1) of the Code except

under an order of a Magistrate within the purview of Section

155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR

or complaint and the evidence collected in support of the

same do not disclose the commission of any offence and

make out a case against the accused.

(4) Where the allegations in the FIR do not constitute a

cognizable offence but constitute only a non-cognizable

offence, no investigation is permitted by a police officer

without an order of a Magistrate as contemplated under

Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint

are so absurd and inherently improbable on the basis of

which no prudent person can ever reach a just conclusion

that there is sufficient ground for proceeding against the

accused.

(6) Where there is an express legal bar engrafted in any

of the provisions of the Code or the Act concerned (under

which a criminal proceeding is instituted) to the institution

and continuance of the proceedings and/or where there

is a specific provision in the Code or the Act concerned,

providing efficacious redress for the grievance of the

aggrieved party.

(7) Where a criminal proceeding is manifestly attended

with mala fide and/or where the proceeding is maliciously

instituted with an ulterior motive for wreaking vengeance

on the accused and with a view to spite him due to private

and personal grudge.”

[2024] 1 S.C.R. 1143

Sachin Garg v. State of U.P. and Anr.

8. It was observed in the judgment under appeal that the applicant

has got the right of discharge which could be freely taken up by him

before the Trial Court. Mr. Mukul Rohatgi, learned senior counsel

has appeared in this matter on behalf of the appellant along with Mr.

Guru Krishna Kumar, while the case of respondent no.2 has been

argued by Ms. Divya Jyoti Singh. State was represented before

us by Mr. Sarvesh Singh Baghel. The main contentions urged by

Mr. Rohatgi is that the complaint made against the appellant does

not disclose any criminal offence and at best, it is a commercial

dispute, which ought to be determined by a Civil Court. In so far as

the allegations of commission of offence under Sections 405 and

406 are concerned, he has relied on a judgment of this Court in the

case of Deepak Gaba and Ors. -vs- State of Uttar Pradesh and

Another [(2023) 3 SCC 423]. This decision deals with the basic

ingredients of a complaint under Sections 405 and 406 of the 1860

Code and it has been held in this judgment:-

“15. For Section 405 IPC to be attracted, the following

have to be established:

(a) the accused was entrusted with property, or entrusted

with dominion over property;

(b) the accused had dishonestly misappropriated

or converted to their own use that property, or

dishonestly used or disposed of that property or

wilfully suffer any other person to do so; and

(c) such misappropriation, conversion, use or disposal

should be in violation of any direction of law prescribing

the mode in which such trust is to be discharged, or

of any legal contract which the person has made,

touching the discharge of such trust.”

9. The judgment in Deepak Gaba (supra) was delivered in a case

in which there was subsisting commercial relationship between

the parties and the complainant had made allegations of a forged

demand, for a sum of around rupees six and a half lakhs. On that

basis a summoning order was issued for trial under Section 406 of

the 1860 Code. A coordinate Bench of this Court held:-

“17. However, in the instant case, materials on record fail

to satisfy the ingredients of Section 405 IPC. The complaint

does not directly refer to the ingredients of Section 405IPC 

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and does not state how and in what manner, on facts, the

requirements are satisfied. Pre-summoning evidence is

also lacking and suffers on this account. On these aspects,

the summoning order is equally quiet, albeit, it states that

“a forged demand of Rs 6,37,252.16p had been raised by

JIPL, which demand is not due in terms of statements by

Shubhankar P. Tomar and Sakshi Tilak Chand”. A mere

wrong demand or claim would not meet the conditions

specified by Section 405IPC in the absence of evidence

to establish entrustment, dishonest misappropriation,

conversion, use or disposal, which action should be in

violation of any direction of law, or legal contract touching

the discharge of trust. Hence, even if Respondent 2

complainant is of the opinion that the monetary demand

or claim is incorrect and not payable, given the failure to

prove the requirements of Section 405 IPC, an offence

under the same section is not constituted. In the absence

of factual allegations which satisfy the ingredients of the

offence under Section 405IPC, a mere dispute on monetary

demand of Rs 6,37,252.16p, does not attract criminal

prosecution under Section 406IPC.”

10. The same view was expressed by this Court in the cases of Prof.

R.K. Vijayasarathy and Anr. -vs- Sudha Seetharam and Anr.

[(2019) 16 SCC 739] and Vijay Kumar Ghai and Ors. -vs- State

of West Bengal and Ors. [(2022) 7 SCC 124]. The judgment of

this Court in the case of Dalip Kaur and Ors. -vs- Jagnar Singh

and Anr. [(2009) 14 SCC 696] has also been cited in support of the

appellant’s case and in this decision it has been, inter-alia, held:-

“10. The High Court, therefore, should have posed a

question as to whether any act of inducement on the part

of the appellant has been raised by the second respondent

and whether the appellant had an intention to cheat him

from the very inception. If the dispute between the parties

was essentially a civil dispute resulting from a breach of

contract on the part of the appellants by non-refunding

the amount of advance the same would not constitute an

offence of cheating. Similar is the legal position in respect

of an offence of criminal breach of trust having regard to

its definition contained in Section 405 of the Penal Code.”

[2024] 1 S.C.R. 1145

Sachin Garg v. State of U.P. and Anr.

This goes for allegations relating to Section 406 of the 1860 Code.

11. So far as the allegations of commission of offence under Sections 504

and 506 of the 1860 Code are concerned, we have gone through the

petition of complaint as well as the initial depositions. The allegations

pertaining to the aforesaid provisions of the 1860 Code surfaces in

the last portion of the petition of complaint. The complainant, in his

initial deposition has not made any statement relatable to criminal

intimidation. But his father made the following statement at that stage

under Section 202 of the 1973 Code:-

“…With effect from 18.07.2019, the Opposite Party

had fixed rate of job work as Rs.1.65/- per piece with

the company of my son, which remained continued till

December, 2019 and Opposite Party used to make payment

of job work to my son, also on this rate and an amount of

Rs. 9,36,693.18/- of my son was due for payment on the

Opposite Party, due to which, he demanded the Opposite

Party to make payment, but, Opposite Party did not make

payment and after doing calculation on less rates, he said

that no amount is due for payment and on demanding

money, the Opposite Party has abused my son with filthy

language and has threatened him to kill. An amount of

Rs. 9,36,693.18/- of my son is due for payment on the

Opposite Party, which he clearly refused to pay the same.”

(quoted verbatim from paperbook)

12. On behalf of the complainant, it has been urged that a detailed

description of the offending acts need not be disclosed at the stage

at which the appellant wants invalidation of the complaint. He has

drawn our attention to the judgment of this Court in the case of

Jagdish Ram -vs- State of Rajasthan and Another [(2004) 4 SCC

432]. In this judgment it has been, inter-alia, held:-

“10…. It is well settled that notwithstanding the opinion of

the police, a Magistrate is empowered to take cognizance

if the material on record makes out a case for the said

purpose. The investigation is the exclusive domain of the

police. The taking of cognizance of the offence is an area

exclusively within the domain of a Magistrate. At this stage,

the Magistrate has to be satisfied whether there is sufficient 

1146 [2024] 1 S.C.R.

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ground for proceeding and not whether there is sufficient

ground for conviction. Whether the evidence is adequate

for supporting the conviction, can be determined only at

the trial and not at the stage of inquiry. At the stage of

issuing the process to the accused, the Magistrate is not

required to record reasons.”

Similar views have been expressed by this Court in the case of Birla

Corporation Ltd. -vs- Adventz Investments and Holdings Ltd.

and Ors. [(2019) 16 SCC 610] as also Smt Nagawwa -vs-Veeranna

Shivalingappa Konjalgi and Others [(1976) 3 SCC 736].

13. As far as the allegations of criminal intimidation are concerned, our

attention has been drawn to the judgment of this Court in the case

of Fiona Shrikhande -vs- State of Maharashtra and Another

[(2013) 14 SCC 44]. It has been held in this case that the petition

of complaint need not repeat the actual words or language of insult

word by word and the complaint has to be read as a whole. If the

Magistrate comes to a conclusion, prima facie, that there has been

an intentional insult so as to provoke any person to break the public

peace or to commit any other offence it should be sufficient to bring

the complaint within the ambit of the aforesaid provision. It has also

been argued on behalf of the respondent no.2 that the appellant in

any event has got the right to apply for discharge and the petition

of complaint does not suffer from the defect of not having made out

any offence at all. This was the view taken by the High Court.

14. Past commercial relationship between the appellant’s employer and

the respondent no.2 is admitted. It would also be evident from the

petition of complaint the dispute between the parties centred around

the rate at which the assigned work was to be done. Neither in the

petition of complainant nor in the initial deposition of the two witnesses

(that includes the complainant) the ingredients of the offence under

Section 405 of the 1860 Code surfaced. Such commercial disputes

over variation of rate cannot per se give rise to an offence under

Section 405 of the 1860 Code without presence of any aggravating

factor leading to the substantiation of its ingredients. We do not find

any material to come to a prima facie finding that there was dishonest

misappropriation or conversion of any material for the personal use of

the appellant in relation to gas supplying work done by the respondent

no.2. The said work was done in course of regular commercial

transactions. It cannot be said that there was misappropriation 

[2024] 1 S.C.R. 1147

Sachin Garg v. State of U.P. and Anr.

or conversion of the subject property, being dissolved acetylene

gas which was supplied to the factory for the purpose of battery

manufacturing at EIL. The dispute pertains to the revision of rate per

unit in an ongoing commercial transaction. What has emerged from

the petition of complaint and the initial deposition made in support

thereof that the accused-appellant wanted a rate variation and the

entire dispute arose out of such stand of the appellant. On the basis

of these materials, it cannot be said that there was evidence for

commission of offence under Section 405/406. The High Court also

did not apply the test formulated in the case of Dalip Kaur (supra).

We have narrated the relevant passage from that decision earlier.

15. In the case of Binod Kumar and Ors. -vs- State of Bihar and

Another [(2014) 10 SCC 663], a coordinate Bench of this Court

dealt with a criminal complaint arising out of retention of bill amount

in course of commercial transaction. The Court found essential

ingredients of criminal breach of trust or dishonest intention of

inducement, which formed the foundation of the complaint were

missing. The High Court’s judgment rejecting the plea for quashing

the criminal proceeding was set aside by this Court. The reasoning for

quashing the criminal proceeding would be revealed from paragraphs

18 and 19 of the Report, which reads:-

“18. In the present case, looking at the allegations in the

complaint on the face of it, we find that no allegations

are made attracting the ingredients of Section 405 IPC.

Likewise, there are no allegations as to cheating or the

dishonest intention of the appellants in retaining the

money in order to have wrongful gain to themselves or

causing wrongful loss to the complainant. Excepting the

bald allegations that the appellants did not make payment

to the second respondent and that the appellants utilised

the amounts either by themselves or for some other work,

there is no iota of allegation as to the dishonest intention

in misappropriating the property. To make out a case of

criminal breach of trust, it is not sufficient to show that

money has been retained by the appellants. It must also

be shown that the appellants dishonestly disposed of the

same in some way or dishonestly retained the same. The

mere fact that the appellants did not pay the money to the

complainant does not amount to criminal breach of trust.

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19. Even if all the allegations in the complaint taken at

the face value are true, in our view, the basic essential

ingredients of dishonest misappropriation and cheating

are missing. Criminal proceedings are not a shortcut for

other remedies. Since no case of criminal breach of trust

or dishonest intention of inducement is made out and the

essential ingredients of Sections 405/420 IPC are missing,

the prosecution of the appellants under Sections 406/120-

B IPC, is liable to be quashed.”

16. So far as the criminal complaint and the initial depositions with which

we are concerned in this case, the factual basis is broadly similar.

We have reproduced these materials earlier in this judgment. We do

not find they carry the ingredients of offence as specified in Section

405 of the 1860 Code.

17. The allegation of criminal intimidation against the accused is made

in the complaint statements made by the appellant, no particulars

thereof have been given. Both in the complaint petition and the

initial deposition of one of the witnesses, there is only reproduction

of part of the statutory provision giving rise to the offence of criminal

intimidation. This would constitute a mere bald allegation, short of any

particulars as regards to the manner in which threat was conveyed.

18. While it is true that at the stage of issuing summons a magistrate only

needs to be satisfied with a prima facie case for taking cognizance,

the duty of the magistrate is also to be satisfied whether there is

sufficient ground for proceeding, as has been held in the case of

Jagdish Ram (supra). The same proposition of law has been laid

down in the case of Pepsi Foods Ltd. and Anr. -vs- Special Judicial

Magistrate and Ors. [(1998) 5 SCC 749]. The learned Magistrate’s

order issuing summons records the background of the case in rather

longish detail but reflects his satisfaction in a cryptic manner. At the

stage of issue of summons, detailed reasoning as to why a Magistrate

is issuing summons, however, is not necessary. But in this case, we

are satisfied that the allegations made by the complainant do not

give rise to the offences for which the appellant has been summoned

for trial. A commercial dispute, which ought to have been resolved

through the forum of Civil Court has been given criminal colour by

lifting from the penal code certain words or phrases and implanting

them in a criminal complaint. The learned Magistrate here failed to 

[2024] 1 S.C.R. 1149

Sachin Garg v. State of U.P. and Anr.

apply his mind in issuing summons and the High Court also failed

to exercise its jurisdiction under Section 482 of the 1973 Code to

prevent abuse of the power of the Criminal Court.

19. It is true that the appellant could seek discharge in course of the

proceeding itself before the concerned Court, but here we find that

no case at all has been made out that would justify invoking the

machinery of the Criminal Courts. The dispute, per se, is commercial

in nature having no element of criminality.

20. The appellant also wanted dismissal of the complaint and the orders

passed in ensuing proceeding on another ground. The respondent

no. 2’s allegations were against EIL, for whom he did the job-work.

The appellant’s argument on this point is that the complaint should

not have been entertained without arraigning the principal company

as an accused. The judgment relied upon on this point is a decision

of a Coordinate Bench in the case of Sharad Kumar Sanghi -vsSangita Rane [(2015) 12 SCC 781]. This was a case where complaint

was made by a consumer for being sold a damaged vehicle under

Section 420 of the 1860 Code. But arraigned as accused was the

managing director of the dealer, the latter being a corporate entity.

Cognizance was taken in that case and summons were issued. The

accused failed to get relief after invoking the High Court’s jurisdiction,

but two-judge Bench of this Court quashed the proceeding primarily

on the ground that the company was not made an accused. The

Coordinate Bench found that the allegations were made against

the company, which was not made a party. Allegations against the

accused (managing director of that company) were vague. So far the

present case is concerned, the ratio of the decision in the case of

Sharad Kumar Sanghi (supra) would not be applicable for ousting

the complaint at the threshold on this ground alone. The perceived

wrongdoing in this case has been attributed to the appellant, though

the complaint petition acknowledges that the job-work was being

done for EIL. Moreover, the allegation of criminal intimidation is

against the appellant directly – whatever be the value or quality of

such allegations. Thus, for that reason the complaint case cannot be

rejected at the nascent stage on the sole ground of not implicating the

company. But as otherwise we have given our reasons for quashing

the complaint and the summons, we do not find any reason to dilate

further on this point. 

1150 [2024] 1 S.C.R.

Digital Supreme Court Reports

21. We accordingly set aside the impugned judgment and quash the

Criminal Complaint Case No.7990 of 2020 as also the summoning

order issued on 18.08.2021. The appeal stands allowed in the above

terms. All consequential steps in connection with the said proceeding

shall stand quashed.

Headnotes prepared by: Divya Pandey Result of the case: Appeal allowed.

observations of advocate commissioner in his report - whereas if the observations in the report are incorrect on ground due to mistaken observation of the directions, the same can be correctly observed now by use of a compass box and that would help the Court to come to a right decision and it would not cause any prejudice to the other side. It is only if the relief is refused, the decision cannot be rendered properly and it would cause prejudice to the appellants.

APHC010002382024

IN THE HIGH COURT OF ANDHRA PRADESH ::

AMARAVATI

(Special Original Jurisdiction)

MONDAY ,THE NINETEENTH DAY OF FEBRUARY

TWO THOUSAND AND TWENTY FOUR

[3311]

PRESENT

THE HONOURABLE MS JUSTICE B S BHANUMATHI

CIVIL REVISION PETITION NO: 15 OF 2024

Between:

AGAMEER KHALEED BASHA AND OTHERS ...PETITIONER(S)

AND

KATWAL KHADAR BASHA AND OTHERS ...RESPONDENT(S)

Counsel for the Petitioner(s): SRI. VUBBARA DUSHYANTH REDDY

Counsel for the Respondents: NIMMAGADDA REVATHI

The Court made the following:

ORDER:

 This revision petition is filed under Article 227 of the

Constitution of India against the orders, dated 19.12.2023,

dismissing the petition in I.A.No.966 of 2023 in A.S.No.2 of 2016 on

the file of the Court of V Additional District Judge, Rayachoty, filed

by the appellants/petitioners herein under Order XXVI Rule 9 and

Section 151 CPC. 

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BSB, J

C.R.P.No.15 of 2024

2. Heard Sri V.Dushyantha Reddy, learned counsel for the

petitioners and Ms. Nimmagadda Revati, learned counsel for the 1st

respondent.

3. The facts, briefly stated, are as follows:

 I.A.No.966 of 2023 is filed to re-entrust the warrant to the

commissioner to inspect the schedule property along with Mandal

Surveyor and to note down the boundaries by confirming the

directions with the help of “Compass box”. The petitioners

contended that they filed I.A.No.738 of 2018 to appoint a

commissioner to locate the suit schedule property as per the F.M.B

with the assistance of a Mandal Surveyor and to note down the

physical features of the suit schedule property, and accordingly, a

commissioner was appointed and on his visit, he noted the ongoing

construction of a building in the plaint schedule property and took

the photographs. He further submitted that in the report, dated

25.07.2023, submitted by the commissioner, it was noted that none

of the boundaries physically tallied on ground with the plaint

schedule property and such observation could be due to mistake in

identifying the directions, and therefore, it is necessary to

re-entrust the warrant to confirm the directions with the help of a

compass box. 

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BSB, J

C.R.P.No.15 of 2024

4. The petition was opposed by filing counter of the respondent

stating that the commissioner executed the warrant as per the

memo given and the contention of the petitioners are to be raised

against the report of the commissioner and for the said purpose,

warrant need not be re-entrusted.

5. After hearing both parties, the trial Court dismissed the

petition observing that if there is any mistake in respect of the

boundaries, the same can be clarified through the evidence of the

appellants/plaintiffs while recording their evidence while examining

the commissioner and the Mandal Surveyor and that re-entrustment

of the warrant would unnecessarily prolong the disposal of the

appeal which is of the year 2016. It is further observed that the

appellants relied on the decision, dated 18.08.1998, of the High

Court of A.P. in Guthula Satyamma Vs. Rudraraju Venkata

Raju1

 in which it was observed that if the earlier report of the

commissioner is creating confusion regarding points in dispute, reentrustment of warrant to another advocate cannot be said to be

illegal, but, in the present case, there is no such confusion except

the alleged mistake pointed out by the appellants and if at all there

is a mistake, the same can be elicited through the evidence of the

1 1998(5) ALD 410 # 1998(5) ALT 95

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BSB, J

C.R.P.No.15 of 2024

commissioner and the Surveyor, and therefore, the above-said

decision does not support the appellants.

6. Aggrieved by the order, this revision petition is filed.

7. The learned counsel for the petitioners submitted that the

appellate Court had erroneously dismissed the petition without

considering the basic contention of the petitioners that the report is

not based on the actual directions existing on ground, and

therefore, it is necessary to re-entrust the warrant and the same

cannot be ascertained through oral evidence in the examination of

witnesses since the report was already submitted basing on the

above observations.

8. The learned counsel for the 1st respondent, since all other

respondents remained ex parte in the appeal, submitted that the

petitioners intended to overcome the adverse observations in the

report of the commissioner by seeking the relief in the petition and

that the appellate Court rightly dismissed the petition with the

observations already noted above.

9. According to the petitioners, the commissioner noted at

paragraph No.3 of 2nd page of his report that “the S.No.855/2 of

Rayachoti village is total extent of Ac.2.54 cents and the boundaries

of the said total extent are: East: Sy.No.373 of Pemmadapalle 

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BSB, J

C.R.P.No.15 of 2024

village….”. Similarly, in para No.4 of the 2nd page, it is observed

that “the S.No.373 of Pemmadapalle village is total extent of

Ac.2.70 cents. The boundaries of the said total extent are: East:

land in S.No.374/3 of Pemmadapalle village.”

10. On the other hand, learned counsel for the 1st respondent

submitted that the commissioner recorded the representation of the

petitioners and identification of the property in the report itself and

therefore, there is no need for re-entrustment of the warrant.

11. Since the very contention of the petitioners is that the

observations of physical features are not tallying with the directions

on ground, the same cannot be clarified by mere oral evidence. If

at all the observations already recorded are correct on ground,

re-entrustment would not cause any prejudice to the other side,

whereas if the observations in the report are incorrect on ground

due to mistaken observation of the directions, the same can be

correctly observed now by use of a compass box and that would

help the Court to come to a right decision and it would not cause

any prejudice to the other side. It is only if the relief is refused, the

decision cannot be rendered properly and it would cause prejudice

to the appellants. It is also pertinent to mention that the learned

counsel for the appellants, basing on the sketch filed by the

commissioner, submitted that the main road is not running exactly 

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BSB, J

C.R.P.No.15 of 2024

from north to south, but it is diagonally running from corner to

corner tilting from the access from north to south, and therefore,

mere observation, without use of compass box, would definitely

lead to incorrect report without any intention to misreport, and

therefore, it is necessary to re-entrust the warrant. But, the

appellate court has not rightly appreciated the contention of the

petitioners. Therefore, it is a fit case to allow the petition.

12. In the result, the Civil Revision Petition is allowed, setting

aside the orders, dated 19.12.2023, passed in I.A.No.966 of 2023 in

A.S.No.2 of 2016. Consequently, I.A.No.966 of 2023 is allowed and

the appellate Court is directed to re-entrust the warrant to the same

commissioner and fix fresh fee payable by the petitioners and fix

the time within which the execution of the warrant shall be

expeditiously completed in view of the long pendency of hearing of

the appeal which is an old case of the year 2016.

 Both the parties are directed to cooperate with the

commissioner who shall execute the warrant with the help of a

Mandal Surveyor. There shall be no order as to costs.

 Pending miscellaneous applications, if any, shall stand closed.

________________

 B.S.BHANUMATHI, J

19.02.2024

RAR 

when there are no contemporaneous signatures, comparison of the disputed signatures with the admitted signatures would not be safe, as there is bound to be clear difference in the signatures. It was further observed that for want of contemporaneous admitted signatures, the request to send, Ex.P1 cheque as was involved in that case, to the handwriting expert could not be acceded to.

APHC010076672024

IN THE HIGH COURT OF ANDHRA PRADESH

AT AMARAVATI

(Special Original Jurisdiction)

[3299]

WEDNESDAY ,THE TWENTIETH DAY OF MARCH

TWO THOUSAND AND TWENTY FOUR

PRESENT

THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI

CIVIL REVISION PETITION NO: 551/2024

Between:

Ponduri Durga Prasad ...PETITIONER

AND

Veluduti Ganesh ...RESPONDENT

Counsel for the Petitioner:

1.NAGABHUSHANAM GUDIPATI

Counsel for the Respondent:

1.

The Court made the following: 

 RNT, J

CRP No.551 of 2024 2

THE HON’BLE SRI JUSTICE RAVI NATH TILHARI

CIVIL REVISION PETITION No. 551 of 2024

JUDGMENT:

Heard Sri Nagabhushanam Gudipati, learned counsel for the petitioner and

perused the material on record.

2. This revision petition under Article 227 of the Constitution of India has been

filed by the defendant in the suit, challenging the order dated 06.12.2023 passed in

I.A.No.188 of 2022 in O.S.No.740 of 2020 pending in the Court of VI Additional Junior

Civil Judge, Kakinada.

3. The plaintiff/respondent filed the said suit for recovery of money based on

the promissory note Ex.A1 on the pleadings that the same was executed by the

petitioner/defendant. The petitioner after filing the written statement filed I.A.No.188

of 2022 under Section 45 of the Indian Evidence Act with the prayer to send the suit

promissory note to the handwriting expert for his opinion by comparing the signatures

on the suit promissory note with the signatures of the defendant/petitioner to be taken

in the open Court.

4. Learned VI Additional Junior Civil Judge, Kakinada has rejected the said

application by the impugned order dated 06.12.2023.

5. Learned counsel for the petitioner submits that the rejection of the

application is unjustified as in the interests of justice, the learned trial Court ought to

have allowed the application.

6. I have considered the submissions as advanced and perused the material on

record.

7. In rejecting the application, the learned trial Court has observed that the

application cannot be allowed for sending the disputed signatures on the promissory 

 RNT, J

CRP No.551 of 2024 3

note with the signatures to be taken in open Court, inasmuch as the

defendant/petitioner may change his signatures. In this respect, the learned trial

Court has placed reliance in the case of Nimmagadda Padmanabharao v. Smt. Kosaraju

Satyavathi {reported in 2006 (5) ALT 586}in which it was held that when there are no

contemporaneous signatures, comparison of the disputed signatures with the admitted

signatures would not be safe, as there is bound to be clear difference in the

signatures. It was further observed that for want of contemporaneous admitted

signatures, the request to send, Ex.P1 cheque as was involved in that case, to the

handwriting expert could not be acceded to.

8. I do not find any illegality in the order impugned. No case for interference is

made out in the exercise of the jurisdiction under Article 227 of the Constitution of

India which is to be invoked in exceptional circumstances and not to correct mere

errors of law although this Court do not find any error of law in the order impugned.

9. The civil revision petition is dismissed, however, leaving it open to the

petitioner/defendant to file application afresh, if he has any contemporaneous

document of his signatures to compare with the disputed signatures, to send to the

handwriting expert. No order as to costs.

 Pending miscellaneous petitions, if any, shall stand closed in consequence.

_______________________

RAVI NATH TILHARI, J

Date: 20.03.2024

Dsr