INDIA RESURGENCE ARC PRIVATE LIMITED versus M/S. AMIT METALIKS LIMITED & ANR.
[2021] 6 S.C.R. 611, Supreme Court of India, 2021
Outcome: Dismissed (Dismissed)
Segment: Ratio
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[2021] 6 S.C.R. 611
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INDIA RESURGENCE ARC PRIVATE LIMITED
v.
M/S. AMIT METALIKS LIMITED & ANR.
(Civil Appeal No. 1700 of 2021)
MAY 13, 2021
[VINEET SARAN AND DINESH MAHESHWARI, JJ.]
Insolvency and Bankruptcy Code, 2016: s. 30(4) – Resolution
plan – Approval of, in the corporate insolvency resolution process
– Resolution plan submitted by resolution applicant taken up for
consideration by the CoC – Appellant expressed reservations on
the share proposed particularly with reference to the value of security
interest held by it and chose to remain dissentient financial creditor
– Resolution plan as approved by the vast majority of voting share
in the CoC was submitted for approval by resolution professional
to the Adjudicating Authority – Adjudicating Authority found the
plan to be feasible and viable with judicious distribution of financial
bids by CoC to the stakeholders according to their entitlement –
Adjudicating Authority approved resolution plan – Appellant
unsuccessfully challenged the same before the Appellate Authority
– Hence the instant appeal – Held: The matter of the process of
consideration and approval of resolution plan is essentially that of
the commercial wisdom of CoC and the scope of judicial review
remains limited within the four-corners of s.30(2) of the Code for
the Adjudicating Authority; and s.30(2) read with s.61(3) for the
Appellate Authority – The financial proposal in the resolution plan
forms the core of the business decision
of CoC – Once it is found
that all the mandatory requirements have been duly complied with
and taken care of, the process of judicial review cannot be stretched
to carry out quantitative analysis qua a particular creditor or any
stakeholder, who may carry his own dissatisfaction – The proposal
for payment to the appellant is at par with the percentage of payment
proposed for other secured financial creditors – Therefore, no case
of denial of fair and equitable treatment or disregard of priority is
made out – Judicial review.
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Dismissing the appeal, the Court
HELD: 1.1 The matter as regards the process of
consideration and approval of resolution plan is essentially that
of the commercial wisdom of Committee of Creditors and the
scope of judicial review remains limited within the four-corners
of Section 30(2) of the Code for the Adjudicating Authority; and
Section 30(2) read with Section 61(3) for the Appellate Authority.
[Para 10][623-B-C]
1.2 The financial proposal in the resolution plan forms the
core of the business decision of Committee of Creditors. Once it
is found that all the mandatory requirements have been duly
complied with and taken care of, the process of judicial review
cannot be stretched to carry out quantitative analysis qua a
particular creditor or any stakeholder, who may carry his own
dissatisfaction. In other words, in the scheme of IBC, every
dissatisfaction does not partake the character of a legal grievance
and cannot be taken up as a ground of appeal. [Para 11][624-F-G]
K. Sashidhar v. Indian Overseas Bank and Ors. (2019)
12 SCC 150 : [2019] 3 SCR 845; Maharashtra
Seamless Limited v. Padmanabhan Venkatesh and Ors.
(2020) 11 SCC 467 – referred to.
2.1 The provisions of amended sub-section (4) of Section
30 of the Code, on which excessive reliance is placed on behalf
of the appellant do not make out any case for interference with
the resolution plan at the instance of the appellant. The NCLAT
was right in observing
that such amendment to sub-section (4) of
Section 30 only amplified the considerations for the Committee
of Creditors while exercising its commercial wisdom so as to
take an informed decision in regard to the viability and feasibility
of resolution plan, with fairness of distribution amongst similarly
situated creditors; and the business decision taken in exercise
of the commercial wisdom of CoC does not call for interference
unless creditors belonging to a class being similarly situated are
denied fair and equitable treatment. [Para 12][625-A-D]
2.2 In regard to the question of fair and equitable treatment,
though the Adjudicating Authority as also the Appellate Authority
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have returned concurrent findings in favour of the resolution plan.
The proposal for payment to the appellant is at par with the
percentage of payment proposed for other secured financial
creditors. No case of denial of fair and equitable treatment or
disregard of priority is made out. [Para 12.1][625-D-E]
2.3 The repeated submissions on behalf of the appellant
with reference to the value of its security interest neither carry
any meaning nor any substance. What the dissenting financial
creditor is entitled to is specified in the later part of sub-section
(2)(b) of Section 30 of the Code . [Para 13][625-F-G]
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta and Ors. (2020) 8 SCC 531 :
[2019] 16  SCR 275; Jaypee Kensington Boulevard
Apartments Welfare Association and Ors. v. NBCC
(India) Ltd. and Ors. [2021] 5 SCALE 142 – relied on.
3. The limitation on the extent of the amount receivable by
a dissenting financial creditor is innate in Section 30(2)(b) of the
Code. 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. [Para 15][628-G-H;
629-A-B]
Case Law Reference
[2019] 16  SCR 275
relied on
Para 6
[2019] 3 SCR 845 
referred to
Para 10
(2020) 11 SCC 467
referred to
Para 10
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1700
of 2021.
From the Judgment and Order dated 02.03.2021 of the National
Company Law Appellate Tribunal, Principal Bench, New Delhi (NCLAT),
in CA(AT) (Insolvency) No.1061 of 2020.
INDIA RESURGENCE ARC PVT.LTD. v. M/S. AMIT METALIKS LTD.
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Sanjeev Singh, Ms. Kajal Bhatia, Prashant Tripathi, Sudhansu Palo,
Advs. for the Appellant.
Kumarjit Banerjee, Gaurabh Gupta, Advs. for the Respondents.
The following Judgment of the Court was delivered:
JUDGMENT
1. By way of this appeal under Section 62 of the Insolvency and
Bankruptcy Code, 20161, the appellant India Resurgence ARC Private
Limited seeks to question the order dated 02.03.2021 passed by the
National Company Law Appellate Tribunal, New Delhi2 in CA(AT)
(Insolvency) No. 1061 of 2020, whereby the Appellate Authority rejected
its challenge to the order dated 20.10.2020 passed by the National
Company Law Tribunal, Kolkata Bench, Kolkata3 in approval of the
resolution plan in the corporate insolvency resolution process4 concerning
the corporate debtor VSP Udyog Private Limited (respondent No. 2
herein), as submitted by the resolution applicant Amit Metaliks Limited
(respondent No. 1 herein).
2. The appellant company is said to be the assignee of the rights,
title and interest carried by Religare Finvest Limited as secured financial
creditor of the corporate debtor, having 3.94% of voting share in the
Committee of Creditors5.
3. When the resolution plan submitted by the respondent No. 1
was taken up for consideration by the CoC, the appellant expressed
reservations on the share being proposed, particularly with reference to
the value of the security interest held by it; and chose to remain a
dissentient
financial creditor. The dissention on the part of the appellant
and response thereto by the resolution professional as also by other
members of CoC was noted in the 14th meeting of CoC dated 31.07.2020
in the following words: -
“Representative from Religare Finvest/India Resurgence ARC,
Mr Shakti inquired about the lower share they are getting as per
Resolution Plan whereas the security interest held by them is far
1 Hereinafter also referred to as ‘the Code’ or ‘IBC’.
2 Hereinafter also referred to as ‘the Appellate Authority’ or
‘NCLAT’.
3 Hereinafter also referred to as ‘the Adjudicating Authority’ or ‘NCLT’.
4 ‘CIRP’ for short.
5 ‘CoC’ for short.
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more. He also raised question about the fair market value and
liquidation value of the CD. On this the RP informed him that the
valuation exercise has been done by registered valuers of IBBI
who were appointed by the erstwhile IRP and he do not find any
inconsistency in the same. Other members also agreed on the
same. Mr Shakti then raised the point that in the present scenario
it will be better for them if the company goes into Liquidation and
they will realize their security interest by exercising option u/s
52(1)(b). The RP then replied that Liquidation option may be
beneficial to one creditor but is definitely detrimental to other
secured lenders who are having majority stake of around 96%.
Further the RP also said that the objective of IBC is resolution
and revival of a distressed company and is not a recovery
procedure.”
3.1. However, a substantial majority of other financial creditors
voted in favour of the resolution plan and, therefore, the resolution plan
got the approval of 95.35% of voting share of the financial creditors.
4. The said resolution plan, as approved by the vast majority of
voting share in the CoC, was submitted for approval by the resolution
professional to the Adjudicating Authority. The Adjudicating Authority
examined, inter alia, the salient features of resolution plan, particularly
those concerning financial proposals; and found the plan to be feasible
and viable with judicious distribution of financial bids by CoC to the
stakeholders according to their entitlements as also being compliant of
all the mandatory requirements. The Adjudicating Authority stated its
complete satisfaction and proceeded to approve the resolution plan while
observing in its order dated 20.10.2020 (as amended on 21.10.2020) as
under: -
“13. Having heard the Ld. Senior Counsel and on perusal of the
Plan, it is understood that the assets of the Corporate Debtor are
going to rest in a safer hand. The RP, Mr. Raj Singhania, deserves
special appreciation for finding out a Resolution Applicant, whose
Plan has been approved by the Committee of Creditors by 95.35%
voting share, even in these difficult times of pandemic, due to
COVID-19. All the provisions of mandatory requirements are seen
complied with by the Resolution Applicant, as per Form H,
submitted by the RP. It makes provision for the payment of the
Insolvency Resolution Process, payment of the debts of
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Operational Creditors, Management of the affairs of the Corporate
Debtor, and also provision for implementation and supervision of
the Resolution Plan. It also provides terms of the Plan and its
implementation schedule. So it is a feasible and viable Plan. A
judicious distribution of the financial bids by the COC to the
stakeholders according to their entitlements can be inferred from
the Plan under consideration. No waiver of extinguishments in
contravention of the provisions of the Code or in violation of existing
laws is seen not brought out and therefore, there is nothing in the
Plan, so as to disapprove it. This CP was admitted on 7th August,
2019. However, upon expiry of 180 days, the period of CIRP was
extended, excluding the days last during the period of lockdown
imposed by the Central Government in the wake of COVID-19
outbreak, not to be counted for the purposes of the time-line for
any activity that could not be completed due to such lockdown, in
relation to a Corporate Insolvency Resolution Process and thereby,
approval of the Plan by the COC within the period of 270 days.
The COC has very well deliberated with the Plans received by it
and decided the viability, feasibility and financial matrix of each
Plan and approved one with 95.35% vote shares of the members
of the Committee of Creditors.”
5. It does not appear if any objection to the resolution plan was
placed before the Adjudicating Authority for
consideration. Be that as it
may, against the order so passed by the Adjudicating Authority, the
appellant preferred an appeal under Section 61(1) read with Section
61(3) of the Code. It was contended on behalf of the appellant, in its
capacity as a dissenting financial creditor, that the approved resolution
plan failed the test of being ‘feasible and viable’ inasmuch as the value
of the secured asset, on which security interest was created by the
corporate debtor in its favour, was not taken into consideration. It was
contended by the appellant that after the amendment to sub-section (4)
of Section 30 of IBC, which came into effect from 16.08.2019, the CoC
was to ensure that the manner of distribution takes into account the
order of priority among the creditors as also the priority and value of the
security interest of a secured creditor; and the resolution applicant and
the CoC having failed to consider the existing security interest in its
favour, approval of the Adjudicating Authority was not in accordance
with law.
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6. The Appellate Authority took note of the submissions made on
behalf of the appellant and referred to the decision of this Court in
Committee of Creditors of Essar Steel India Limited v. Satish Kumar
Gupta and Ors.: (2020) 8 SCC 5316 to stress upon the principles
governing various classes of creditors in the insolvency resolution process.
The Appellate Authority particularly referred to the passages in Essar
Steel explaining the meaning and contours of the concept of equitable
treatment of creditors, including the observations that equitable treatment
of creditors meant equitable treatment only within the same class; and
that protection of creditors in general was important but it was also
imperative that the creditors be protected from each other; and further
that the Code should not be read so as to imbue the creditors with greater
rights in a bankruptcy proceeding than they would enjoy under the general
law, unless it is to serve some bankruptcy purpose.
6.1. Having taken note of the principles expounded in Essar Steel
(supra), the Appellate Authority proceeded to reject the contentions urged
on behalf of the appellant with the following observations and findings: -
“6. Section 30(4) of the I&B Code provides that the Committee
of Creditors may approve a Resolution Plan by a vote which shall
not be less than 66% of voting share of Financial Creditors. Such
approval is to be done after considering the feasibility and viability
of the Resolution Plan,
the manner of distribution proposed therein
having regard to the order of priority amongst the creditors in
terms of the waterfall mechanism laid down in Section 53 of the
I&B Code including the priority and value of security interest of
Secured Creditor besides other requirements specified by IBBI.
On a plain reading of this provision it is manifestly clear that the
considerations regarding feasibility and viability of the Resolution
Plan, distribution proposed with reference to the order of priority
amongst creditors as per statutory distribution mechanism
including priority and value of security interest of Secured Creditor
are matters which fall within the exclusive domain of Committee
of Creditors for consideration. These considerations must be
present to the mind of the Committee of Creditors while taking a
decision in regard to approval of a Resolution Plan with vote share
of requisite majority. As regards amendment introduced in Section
30(4), be it seen that the amendment that it, introduced vide Section
6 Hereinafter referred to as the case of ‘Essar Steel’.
INDIA RESURGENCE ARC PVT.LTD. v. M/S. AMIT METALIKS LTD.
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6 (b) of Amending Act of 2019 vests discretion in the Committee
of Creditors to take into account the value of security interest of
a Secured Creditor in approving of a Resolution Plan. It’s a guideline
and not imperative in terms, which may be taken into account by
the Committee of Creditors in arriving at a decision as regards
approval or rejection of a Resolution Plan, such decision being
essentially a business decision based on commercial wisdom of
the Committee of Creditors. In this regard the observations of
Hon’ble Apex Court in ‘Committee of Creditors of Essar Steel
India Limited vs. Satish Kumar Gupta and Others’ (Supra)
are significant. The Hon’ble Apex Court observed as under:-
“131. The challenge to sub-clause (b) of Section 6 of the
Amending Act of 2019, again goes to the flexibility that
the Code gives to the Committee of Creditors to approve
or not to approve a resolution plan and which may take
into account different classes of creditors as is mentioned
in Section 53, and different priorities and values of security
interests of a secured creditor. This flexibility is referred to
in the BLRC Report, 2015(see para 56 of this judgment).
Also, the discretion given to the Committee of Creditors by
the word “may” again makes it clear that this is only a
guideline which is set out by this sub-section which may
be applied by the Committee of Creditors in arriving at a
business decision as to acceptance or
rejection of are
solution plan. For all these reasons, therefore, it is difficult
to hold that any of these provisions is constitutionally
infirm.”
7. It abundantly clear that the considerations including priority in
scheme of distribution and the value of security are matters falling
within the realm of Committee of Creditors. Such considerations,
being relevant only for purposes for arriving at a business decision
in exercise of commercial wisdom of the Committee of Creditors,
cannot be the subject of judicial review in appeal within the
parameters of Section 61(3) of I&B Code. While it is true that
prior to amendment of Section 30(4) the Committee of Creditors
was not required to consider the value of security interest obtaining
in favour of a Secured Creditor while arriving at a decision in
regard to feasibility and viability of a Resolution Plan, legislature
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brought in the amendment to amplify the scope of considerations
which may be taken into consideration by the Committee of
Creditors while exercising their commercial wisdom in taking the
business decision to approve or reject the Resolution Plan. Such
consideration is only aimed at arming the Committee of Creditors
with more teeth so as to take an informed decision in regard to
viability and feasibility of a Resolution Plan, fairness of distribution
amongst similarly situated creditors being the bottomline. However,
such business decision taken in exercise of commercial wisdom
of Committee of creditors would not warrant judicial intervention
unless creditors belonging to a class being similarly situated are
not given a fair and equitable treatment.
8. We find no merit in this appeal, it is accordingly dismissed.”
7. Seeking to question the decision of the Appellate Authority, the
main plank of submissions of learned counsel for the appellant before us
again revolves around Section 30(4) of Code. It is contended that the
CoC could not have approved the resolution plan which failed to consider
the priority and value of security interest of the creditors while deciding
the manner of distribution to each creditor even though the legislature in
its wisdom has amended Section 30(4) of the Code, requiring the CoC to
take into account the order of priority amongst creditors as laid down in
Section 53(1) of the Code, including the priority and value of the
security
interest of a secured creditor. Learned counsel would submit that the
primary reason for appellant’s dissent to the resolution plan was that, as
against total admitted claim of over INR 13.38 crores, the resolution
applicant had offered the appellant a meagre amount of about INR 2.026
crores without even considering the valuation of the security held by the
appellant, which admittedly had the valuation of more than INR 12 crores.
Learned counsel has referred to the decision in Essar Steel (supra) as
also the recent decision of this Court in the case of Jaypee Kensington
Boulevard Apartments Welfare Association and Ors. v. NBCC
(India) Ltd. and Ors., rendered on 24.03.20217. Learned counsel would
submit that the consideration of NCLAT that the amendment to Section
30(4) of the Code was merely a guideline fails to take into account the
fact that CoC does not have an unfettered and arbitrary right to exercise
its commercial wisdom and to approve the plan which does not stand in
conformity with the provisions of the Code.
7 Hereinafter referred to as the case of ‘Jaypee Kensington’.
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8. Having heard the learned counsel and having perused the
material placed on record, we are clearly of the view that this appeal
remains totally bereft of substance and does not merit admission.
9. The requirements of law, particularly in regard to the contentions
sought to be urged on behalf of the appellant, are referable to the provisions
contained in Section 30 of the Code dealing with the processes relating
to submission of a resolution plan, its mandatory contents, its consideration
and approval by the Committee of Creditors, and its submission to the
Adjudicating Authority for approval. Sub-sections (2) and (4) of Section
30 of the Code, being relevant for the present purpose, could be usefully
reproduced, while omitting the other parts, as under:-
“Section30. Submission of resolution plan.-(1) xxx
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(2) The resolution professional shall examine each resolution plan
received by him to confirm that each resolution plan-
(a) provides for the payment of insolvency resolution process
costs in a manner specified by the Board in priority to the
8[payment] of other debts of the corporate debtor;
9[(b) provides for the payment of debts of operational creditors
in such manner as may be specified by the Board which shall
not be less than-
(i) the amount to be paid to such creditors in the event of a
liquidation of the corporate debtor under section 53; or
(ii) the amount that would have been paid to such
creditors,
if the amount to be distributed under the resolution plan had
been distributed in accordance with the order of priority in
sub-section (1)of section 53,
whichever is higher, and provides for the payment of debts of
financial creditors, who do not vote in favour of the resolution
8 Substituted by Act 26 of 2018, sec. 23 (ii)(A), for “repayment” (w.r.e.f. 06.06.2018).
9 Substituted by Act 26 of 2019, sec. 6(a), for clause (b) (w.e.f. 16.08.2019). Earlier
clause (b) was amended by Act 26 of 2018, sec. 23(ii)(A) (w.r.e.f. 06.06.2018). Clause
(b), before substitution, stood as under:
 “(b) provides for the payment of the debts of operational creditors in such
manner as may be specified by the Board which shall not be less than the
amount to be paid to the operational creditors in the event of a liquidation of
the corporate debtor under section 53;”
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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;
(ii) where an appeal has been preferred under section 61 or
section 62 or such an appeal is not time barred under any
provision of law for the time being in force; or
(iii) where a legal proceeding has been initiated in any court
against the decision of the Adjudicating Authority in respect of
a resolution plan;]
(c) provides for the management of the affairs of the Corporate
debtor after approval of the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the
time being in force;
(f) conforms to such other requirements as may be specified by
the Board.
10[Explanation.—For the purposes of
clause (e), if any approval
of shareholders is required under the Companies Act, 2013 (18 of
2013) or any other law for the time being in force for the
implementation of actions under the resolution plan, such approval
shall be deemed to have been given and it shall not be a
contravention of that Act or law.]
10 Inserted by Act 26 of 2018, sec. 23(ii)(B) (w.r.e.f. 06.06.2018).
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(3) xxx
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11[(4) The committee of creditors may approve a resolution plan
by a vote of not less than 12[sixty-six]per cent. of voting share of
the financial creditors, after considering its feasibility and viability,
13[the manner of distribution proposed, which may take into
account the order of priority amongst creditors as laid down in
sub-section (1) of section 53, including the priority and value of
the security interest of a secured creditor]and such other
requirements as may be specified by the Board:
Provided that the committee of creditors shall not approve a
resolution plan, submitted before the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017
(Ord. 7 of 2017), where the resolution applicant is ineligible under
section 29A and may require the resolution professional to invite
a fresh resolution plan where no other resolution plan is available
with it:
Provided further that where the resolution applicant referred to in
the first proviso is ineligible under clause (c) of section 29A, the
resolution applicant shall be allowed by the committee of creditors
such period, not exceeding thirty days, to make payment of overdue
amounts in accordance with the proviso to clause (c) of section
29A:
Provided also that nothing in the second proviso shall be construed
as extension of period for the purposes of the proviso to sub-
section (3) of section 12, and the corporate insolvency
resolution
process shall be completed within the period specified in that sub-
section.]
14[Provided also that the eligibility criteria in section 29A as
amended by the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution
applicant who has not submitted resolution plan as on the date of
11 Substituted by Act 8 of 2018, sec. 6, for sub-section (4) (w.r.e.f. 23.11.2017). Sub-
section (4), before substitution, stood as under:
“(4) The committee of creditors may approve a resolution plan by a vote of not less
than seventy five per cent of voting share of the financial creditors.”.
12 Substituted by Act 26 of 2018, sec. 23(iii)(a) for “seventy-five” (w.r.e.f. 06.06.2018).
13 Inserted by Act 26 of 2019, sec. 6(b) (w.e.f. 16.08.2019).
14 Inserted by Act 26 of 2018, sec. 23(iii)(b) (w.r.e.f. 06.06.2018).
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commencement of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018 (Ord. 6 of 2018).]
(5) xxx
xxx
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(6) xxx
xxx
xxx”
10. As regards the process of consideration and approval of
resolution plan, it is now beyond a shadow of doubt that the matter is
essentially that of the commercial wisdom of Committee of Creditors
and the scope of judicial review remains limited within the four-corners
of Section 30(2) of the Code for the Adjudicating Authority; and Section
30(2) read with Section 61(3) for the Appellate Authority. In the case of
Jaypee Kensington (supra), this Court, after taking note of the previous
decisions in Essar Steel (supra) as also in K. Sashidhar v. Indian
Overseas Bank and Ors.: (2019) 12 SCC 150 and Maharashtra
Seamless Limited v. Padmanabhan Venkatesh and Ors.: (2020) 11
SCC 467, summarised the principles as follows:-
“77. In the scheme of IBC, where approval of resolution plan is
exclusively in the domain of the commercial wisdom of CoC, the
scope of judicial review is correspondingly circumscribed by the
provisions contained in Section 31 as regards approval of the
Adjudicating Authority and in Section 32 read with Section 61 as
regards the scope of appeal against the order of approval.
77.1. Such limitations on judicial review have been duly
underscored by this Court in the decisions above-referred, where
it has been laid down in explicit terms that the powers of the
Adjudicating Authority dealing with the resolution plan do
not
extend to examine the correctness or otherwise of the commercial
wisdom exercised by the CoC. The limited judicial review available
to Adjudicating Authority lies within the four corners of Section
30(2) of the Code, which would essentially be to examine that the
resolution plan does not contravene any of the provisions of law
for the time being in force, it conforms to such other requirements
as may be specified by the Board, and it provides for: (a) payment
of insolvency resolution process costs in priority; (b) payment of
debts of operational creditors; (c) payment of debts of dissenting
financial creditors; (d) for management of affairs of corporate
debtor after approval of the resolution plan; and (e) implementation
and supervision of the resolution plan.
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77.2. The limitations on the scope of judicial review are reinforced
by the limited ground provided for an appeal against an order
approving a resolution plan, namely, if the plan is in contravention
of the provisions of any law for the time being in force; or there
has been material irregularity in exercise of the powers by the
resolution professional during the corporate insolvency resolution
period; or the debts owed to the operational creditors have not
been provided for; or the insolvency resolution process costs have
not been provided for repayment in priority; or the resolution plan
does not comply with any other criteria specified by the Board.
77.3. The material propositions laid down in Essar Steel (supra)
on the extent of judicial review are that the Adjudicating Authority
would see if CoC has taken into account the fact that the corporate
debtor needs to keep going as a going concern during the
insolvency resolution process; that it needs to maximise the value
of its assets; and that the interests of all stakeholders including
operational creditors have been taken care of. And, if the
Adjudicating Authority would find on a given set of facts that the
requisite parameters have not been kept in view, it may send the
resolution plan back to the Committee of Creditors for re-
submission after satisfying the parameters. Then, as observed in
Maharashtra Seamless Ltd. (supra), there is no scope for the
Adjudicating Authority or the Appellate Authority to proceed on
any equitable perception or to assess the resolution plan on the
basis of quantitative analysis. Thus, the treatment of any debt or
asset is essentially required to be left to the collective commercial
wisdom of the financial creditors.”
11. It needs hardly any elaboration that financial proposal in the
resolution plan forms the core of the business decision of Committee of
Creditors. Once it is found that all the mandatory requirements have
been duly complied with and taken care of, the process of judicial review
cannot be stretched to carry out quantitative analysis qua a particular
creditor or any stakeholder, who may carry his own dissatisfaction. In
other words, in the scheme of IBC, every dissatisfaction does not partake
the character of a legal grievance and cannot be taken up as a ground of
appeal.15
15 For the purpose of illustration, reference may be made to the decision in Jaypee
Kensington (supra) wherein, as regards the grounds sought to be urged by minority
shareholders against the resolution plan, this Court held that their grievances could not
be recognised as legal grievances (vide paragraph 154). Similarly, when this Court
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12. The provisions of amended sub-section (4) of Section 30 of
the Code, on which excessive reliance is placed on behalf of the appellant,
in our view, do not make out any case for interference with the resolution
plan at the instance of the appellant. The purport and effect of the
amendment to sub-section (4) of Section 30 of the Code, by way of sub-
clause (b) of Section 6 of the Amending Act of 2019, was also explained
by this Court in Essar Steel (supra), as duly taken note of by the Appellate
Authority (vide the extraction hereinbefore).The NCLAT was, therefore,
right in observing that such amendment to sub-section (4) of Section 30
only amplified the considerations for the Committee of Creditors while
exercising its commercial wisdom so as to take an informed decision in
regard to the viability and feasibility of resolution plan, with fairness of
distribution amongst similarly situated creditors; and the business decision
taken in exercise of the commercial wisdom of CoC does not call for
interference unless creditors belonging to a class being similarly situated
are denied fair and equitable treatment.
12.1. In regard to the question of fair and equitable treatment,
though the Adjudicating Authority as also the Appellate Authority have
returned concurrent findings in favour of the resolution plan yet, to satisfy
ourselves, we have gone through the financial proposal in the resolution
plan. What we find is that the proposal for payment to all the
secured
financial creditors (all of them ought to be carrying security interest with
them) is equitable and the proposal for payment to the appellant is at par
with the percentage of payment proposed for other secured financial
creditors. No case of denial of fair and equitable treatment or disregard
of priority is made out.
13. The repeated submissions on behalf of the appellant with
reference to the value of its security interest neither carry any meaning
nor any substance. What the dissenting financial creditor is entitled to is
specified in the later part of sub-section (2)(b) of Section 30 of the Code
and the same has been explained by this Court in Essar Steel as under:-
“128. When it comes to the validity of the substitution of Section
30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that
the substituted Section 30(2)(b) gives operational creditors
noticed that the homebuyers as a class assented to the plan, it was held that any
individual homebuyer or association was not entitled to maintain achallenge to the
resolution plan and could not be treated as carrying any legal grievance (vide paragraph
170).
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something more than was given earlier as it is the higher of the
figures mentioned in sub-clauses (i) and (ii) of sub-clause (b)
that is now to be paid as a minimum amount to operational
creditors. The same goes for the latter part of sub-clause (b)
which refers to dissentient financial creditors. Ms Madhavi Divan
is correct in her argument that Section 30(2)(b) is in fact a
beneficial provision in favour of operational creditors and dissentient
financial creditors as they are now to be paid a certain minimum
amount, the minimum in the case of operational creditors being
the higher of the two figures calculated under sub-clauses (i) and
(ii) of clause (b), and the minimum in the case of dissentient
financial creditor being a minimum amount that was not earlier
payable. As a matter of fact, pre-amendment, secured financial
creditors may cramdown unsecured financial creditors who are
dissentient, the majority vote of 66% voting to give them nothing
or next to nothing for their dues. In the earlier regime it may have
been possible to have done this but after the amendment such
financial creditors are now to be paid the minimum amount
mentioned in sub-section (2). Ms Madhavi Divan is also correct
in stating that the order of priority of payment of creditors
mentioned in Section 53 is not engrafted in sub-section (2)(b) as
amended. Section 53 is only referred to in order that a certain
minimum figure be paid to different
classes of operational and
financial creditors. It is only for this purpose that Section 53(1) is
to be looked at as it is clear that it is the commercial wisdom of
the Committee of Creditors that is free to determine what amounts
be paid to different classes and sub-classes of creditors in
accordance with the provisions of the Code and the Regulations
made thereunder.”
(underlining supplied for emphasis)
13.1. Thus, what amount is to be paid to different classes or sub-
classes of creditors in accordance with provisions of the Code and the
related Regulations, is essentially the commercial wisdom of the
Committee of Creditors; and a dissenting secured creditor like the
appellant cannot suggest a higher amount to be paid to it with reference
to the value of the security interest.
14. In the case of Jaypee Kensington (supra), the proposal in
the resolution plan was to the effect that if the dissenting financial creditors
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would be entitled to some amount in the nature of liquidation value in
terms of Sections 30 and 53 of IBC read with Regulation 38 of the CIRP
Regulations, they would be provided such liquidation value in the form of
proportionate share in the equity of a special purpose vehicle proposed
to be set up and with transfer of certain land parcels belonging to
corporate debtor. Such method of meeting with the liability towards
dissenting financial creditors in the resolution plan was disapproved by
the Adjudicating Authority; and this part of the order of the Adjudicating
Authority was upheld by this Court with the finding that the proposal in
the resolution plan was not in accord with the requirement of ‘payment’
as envisaged by clause (b) of Section 30(2) of the Code16. 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, interalia, observed and held as under: -
“121.1.
Therefore, when, for the purpose of discharge of
obligation mentioned in the second part of clause (b) of Section
30(2) of the Code, the dissenting financial creditors are to be “paid”
an “amount” quantified in terms of the “proceeds” of assets
receivable under Section 53 of the Code; and the “amount payable”
is to be “paid” in priority over their assenting counterparts, the
statute is referring only to the sum of money and not anything
else. In the frame and purport of the provision and also the scheme
16 In Jaypee Kensington, after disapproving the proposition of the resolution plan
regarding dissenting financial creditor, the Adjudicating Authority itself modified the
offending terms of the plan and provided for monetary payment to the dissenting
financial creditor. This latter part of the order of the Adjudicating Authority was not
approved by this Court while holding that after disapproval of such term related with
financial model proposed in the resolution plan, the Adjudicating Authority itself could
not have modified the same and ought to have sent the matter back to CoC for
reconsideration. However, that part of the decision in Jaypee Kensington is not relevant
for the present purpose.
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of the Code, the expression “payment” is clearly descriptive of
the action of discharge of obligation and at the same time, is also
prescriptive of the mode of undertaking such an action. And, that
action could only be of handing over the quantum of money, or
allowing the recovery of such money by enforcement of security
interest, as per the entitlement of the dissenting financial creditor.
121.2.We would hasten to observe that in case a dissenting
financial creditor is a secured creditor and a valid security interest
is created in his favour and is existing, the entitlement of such a
dissenting financial creditor to receive the “amount payable” could
also be satisfied by allowing him to enforce the security interest,
to the extent of the value receivable by him and in the order of
priority available to him. Obviously, by enforcing such a security
interest, a dissenting financial creditor would receive “payment”
to the extent of his entitlement and that would satisfy the
requirement of Section 30(2)(b) of the Code….”
(underlining supplied for emphasis)
14.1. In Jaypee Kensington (supra), this Court repeatedly made
it clear that a dissenting financial creditor would be receiving the payment
of the amount as per his entitlement; and that entitlement could also be
satisfied by allowing him to enforce the security interest, to the extent of
the value receivable by him. It has never been laid down that if a dissenting
financial creditor is having a security available with him, he would be
entitled to enforce the entire of security interest or to receive the entire
value of the security available with him. It is but obvious that his dealing
with the security interest, if occasion so arise, would be conditioned by
the extent of value receivable by him.
14.2. The extent of value receivable by the appellant is distinctly
given out in the resolution plan i.e., a sum of INR 2.026 crores which is
in the same proportion and percentage as provided to the other secured
financial creditors with reference to their respective admitted claims.
Repeated reference on behalf of the appellant to the value of security at
about INR 12 crores is wholly inapt and is rather ill-conceived.
15. The limitation on the extent of the amount receivable by a
dissenting financial creditor is innate in Section 30(2)(b) of the Code
and has been further exposited in the decisions aforesaid. It has not
been the intent of the legislature that a security interest available to a
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dissenting financial creditor over the assets of the corporate debtor gives
him some right over and above other financial creditors so as to enforce
the entire of the security interest and thereby bring about an inequitable
scenario, by receiving excess amount, beyond the receivable liquidation
value proposed for the same class of creditors.
16. It needs hardly any emphasis that if the propositions suggested
on behalf of the appellant were to be accepted, the result would be that
rather than insolvency resolution and maximisation of the value of assets
of the corporate debtor, the processes would lead to more liquidations,
with every secured financial creditor opting to stand on dissent. Such a
result would be defeating the very purpose envisaged by the Code; and
cannot be countenanced. We may profitably refer to the relevant
observations in this regard by this Court in Essar Steel as follows:-
“85. Indeed, if an “equality for all” approach recognising the rights
of different classes of creditors as part of an insolvency resolution
process is adopted, secured financial creditors will, in many cases,
be incentivised to vote for liquidation rather than resolution, as
they would have better rights if the corporate debtor was to be
liquidated rather than a resolution plan being approved. This would
defeat the entire objective of the Code which is to first ensure
that resolution of distressed assets takes place and only if the
same is not possible should
liquidation follow.”
17. Viewed from any angle, the submissions made on behalf of
the appellant do not merit acceptance and are required to be rejected.
18. For what has been discussed hereinabove, this appeal fails
and stands dismissed.
Devika Gujral
Appeal dismissed.
INDIA RESURGENCE ARC PVT.LTD. v. M/S. AMIT METALIKS LTD.