INDIA RESURGENCE ARC PRIVATE LIMITED versus M/S. AMIT METALIKS LIMITED & ANR. on 13 May 2021

1. By way of this appeal under Section 62 of the Insolvency andBankruptcy Code, 2016[1], the appellant India Resurgence ARC PrivateLimited seeks to question the order dated 02.03.2021 passed by theNational Company Law Appellate Tribunal, New Delhi[2] in CA(AT)C(Insolvency) No. 1061 of 2020, whereby the Appellate Authority rejectedits challenge to the order dated 20.10.2020 passed by the NationalCompany Law Tribunal, Kolkata Bench, Kolkata[3 ]in approval of theresolution plan in the corporate insolvency resolution process[4 ]concerningthe corporate debtor VSP Udyog Private Limited (respondent No. 2herein), as submitted by the resolution applicant Amit Metaliks LimitedD(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 financialcreditor of the corporate debtor, having 3.94% of voting share in theCommittee of Creditors[5].

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3. When the resolution plan submitted by the respondent No. 1was taken up for consideration by the CoC, the appellant expressedreservations on the share being proposed, particularly with reference tothe value of the security interest held by it; and chose to remain adissentient financial creditor. The dissention on the part of the appellantFand response thereto by the resolution professional as also by othermembers of CoC was noted in the 14[th] meeting of CoC dated 31.07.2020in the following words: - “Representative from Religare Finvest/India Resurgence ARC,Mr Shakti inquired about the lower share they are getting as perGResolution 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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INDIA RESURGENCE ARC PVT.LTD. v. M/S. AMIT METALIKS LTD.

more. He also raised question about the fair market value andliquidation value of the CD. On this the RP informed him that thevaluation exercise has been done by registered valuers of IBBIwho were appointed by the erstwhile IRP and he do not find anyinconsistency in the same. Other members also agreed on thesame. Mr Shakti then raised the point that in the present scenarioit will be better for them if the company goes into Liquidation andthey will realize their security interest by exercising option u/s52(1)(b). The RP then replied that Liquidation option may bebeneficial to one creditor but is definitely detrimental to othersecured lenders who are having majority stake of around 96%.Further the RP also said that the objective of IBC is resolutionand revival of a distressed company and is not a recoveryprocedure.”

3.1. However, a substantial majority of other financial creditorsvoted in favour of the resolution plan and, therefore, the resolution plangot the approval of 95.35% of voting share of the financial creditors.

4. The said resolution plan, as approved by the vast majority ofvoting share in the CoC, was submitted for approval by the resolutionprofessional to the Adjudicating Authority. The Adjudicating Authorityexamined, inter alia, the salient features of resolution plan, particularlythose concerning financial proposals; and found the plan to be feasibleand viable with judicious distribution of financial bids by CoC to thestakeholders according to their entitlements as also being compliant ofall the mandatory requirements. The Adjudicating Authority stated itscomplete satisfaction and proceeded to approve the resolution plan whileobserving in its order dated 20.10.2020 (as amended on 21.10.2020) asunder: - “13. Having heard the Ld. Senior Counsel and on perusal of thePlan, it is understood that the assets of the Corporate Debtor aregoing to rest in a safer hand. The RP, Mr. Raj Singhania, deservesspecial appreciation for finding out a Resolution Applicant, whosePlan has been approved by the Committee of Creditors by 95.35%voting share, even in these difficult times of pandemic, due toCOVID-19. All the provisions of mandatory requirements are seencomplied with by the Resolution Applicant, as per Form H,submitted by the RP. It makes provision for the payment of theInsolvency Resolution Process, payment of the debts of A

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AOperational Creditors, Management of the affairs of the CorporateDebtor, and also provision for implementation and supervision ofthe Resolution Plan. It also provides terms of the Plan and itsimplementation schedule. So it is a feasible and viable Plan. Ajudicious distribution of the financial bids by the COC to thestakeholders according to their entitlements can be inferred fromBthe Plan under consideration. No waiver of extinguishments incontravention of the provisions of the Code or in violation of existinglaws is seen not brought out and therefore, there is nothing in thePlan, so as to disapprove it. This CP was admitted on 7[th] August,2019. However, upon expiry of 180 days, the period of CIRP wasCextended, excluding the days last during the period of lockdownimposed by the Central Government in the wake of COVID-19outbreak, not to be counted for the purposes of the time-line forany activity that could not be completed due to such lockdown, inrelation to a Corporate Insolvency Resolution Process and thereby,approval of the Plan by the COC within the period of 270 days.DThe COC has very well deliberated with the Plans received by itand decided the viability, feasibility and financial matrix of eachPlan and approved one with 95.35% vote shares of the membersof the Committee of Creditors.”

5. It does not appear if any objection to the resolution plan wasEplaced before the Adjudicating Authority for consideration. Be that as itmay, against the order so passed by the Adjudicating Authority, theappellant preferred an appeal under Section 61(1) read with Section61(3) of the Code. It was contended on behalf of the appellant, in itscapacity as a dissenting financial creditor, that the approved resolutionFplan failed the test of being ‘feasible and viable’ inasmuch as the valueof the secured asset, on which security interest was created by thecorporate debtor in its favour, was not taken into consideration. It wascontended 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 theGorder of priority among the creditors as also the priority and value of thesecurity interest of a secured creditor; and the resolution applicant andthe CoC having failed to consider the existing security interest in itsfavour, approval of the Adjudicating Authority was not in accordancewith law.H

6. The Appellate Authority took note of the submissions made onbehalf of the appellant and referred to the decision of this Court inCommittee of Creditors of Essar Steel India Limited v. Satish KumarGupta and Ors.: (2020) 8 SCC 531[6]to stress upon the principlesgoverning various classes of creditors in the insolvency resolution process.The Appellate Authority particularly referred to the passages in EssarSteel explaining the meaning and contours of the concept of equitabletreatment of creditors, including the observations that equitable treatmentof creditors meant equitable treatment only within the same class; andthat protection of creditors in general was important but it was alsoimperative that the creditors be protected from each other; and furtherthat the Code should not be read so as to imbue the creditors with greaterrights in a bankruptcy proceeding than they would enjoy under the generallaw, 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 urgedon behalf of the appellant with the following observations and findings: -

“6. Section 30(4) of the I&B Code provides that the Committeeof Creditors may approve a Resolution Plan by a vote which shallnot be less than 66% of voting share of Financial Creditors. Suchapproval is to be done after considering the feasibility and viabilityof the Resolution Plan, the manner of distribution proposed thereinhaving regard to the order of priority amongst the creditors interms of the waterfall mechanism laid down in Section 53 of theI&B Code including the priority and value of security interest ofSecured Creditor besides other requirements specified by IBBI.On a plain reading of this provision it is manifestly clear that theconsiderations regarding feasibility and viability of the ResolutionPlan, distribution proposed with reference to the order of priorityamongst creditors as per statutory distribution mechanismincluding priority and value of security interest of Secured Creditorare matters which fall within the exclusive domain of Committeeof Creditors for consideration. These considerations must bepresent to the mind of the Committee of Creditors while taking adecision in regard to approval of a Resolution Plan with vote shareof requisite majority. As regards amendment introduced in Section30(4), be it seen that the amendment that it, introduced vide Section 6 Hereinafter referred to as the case of ‘Essar Steel’.

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6 (b) of Amending Act of 2019 vests discretion in the Committeeof Creditors to take into account the value of security interest ofa Secured Creditor in approving of a Resolution Plan. It’s a guidelineand not imperative in terms, which may be taken into account bythe Committee of Creditors in arriving at a decision as regardsapproval or rejection of a Resolution Plan, such decision beingessentially a business decision based on commercial wisdom ofthe Committee of Creditors. In this regard the observations ofHon’ble Apex Court in ‘Committee of Creditors of Essar SteelIndia 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 theAmending Act of 2019, again goes to the flexibility thatthe Code gives to the Committee of Creditors to approveor not to approve a resolution plan and which may takeinto account different classes of creditors as is mentionedin Section 53, and different priorities and values of securityinterests of a secured creditor. This flexibility is referred toin the BLRC Report, 2015(see para 56 of this judgment).Also, the discretion given to the Committee of Creditors bythe word “may” again makes it clear that this is only aguideline which is set out by this sub-section which maybe applied by the Committee of Creditors in arriving at abusiness decision as to acceptance or rejection of aresolution plan. For all these reasons, therefore, it is difficultto hold that any of these provisions is constitutionallyinfirm.”

7. It abundantly clear that the considerations including priority inscheme of distribution and the value of security are matters fallingwithin the realm of Committee of Creditors. Such considerations,being relevant only for purposes for arriving at a business decisionin exercise of commercial wisdom of the Committee of Creditors,cannot be the subject of judicial review in appeal within theparameters of Section 61(3) of I&B Code. While it is true thatprior to amendment of Section 30(4) the Committee of Creditorswas not required to consider the value of security interest obtainingin favour of a Secured Creditor while arriving at a decision inregard to feasibility and viability of a Resolution Plan, legislature

brought in the amendment to amplify the scope of considerationswhich may be taken into consideration by the Committee ofCreditors while exercising their commercial wisdom in taking thebusiness decision to approve or reject the Resolution Plan. Suchconsideration is only aimed at arming the Committee of Creditorswith more teeth so as to take an informed decision in regard toviability and feasibility of a Resolution Plan, fairness of distributionamongst similarly situated creditors being the bottomline. However,such business decision taken in exercise of commercial wisdomof Committee of creditors would not warrant judicial interventionunless creditors belonging to a class being similarly situated arenot 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, themain plank of submissions of learned counsel for the appellant before usagain revolves around Section 30(4) of Code. It is contended that theCoC could not have approved the resolution plan which failed to considerthe priority and value of security interest of the creditors while decidingthe manner of distribution to each creditor even though the legislature inits wisdom has amended Section 30(4) of the Code, requiring the CoC totake into account the order of priority amongst creditors as laid down inSection 53(1) of the Code, including the priority and value of the securityinterest of a secured creditor. Learned counsel would submit that theprimary reason for appellant’s dissent to the resolution plan was that, asagainst total admitted claim of over INR 13.38 crores, the resolutionapplicant had offered the appellant a meagre amount of about INR 2.026crores without even considering the valuation of the security held by theappellant, which admittedly had the valuation of more than INR 12 crores.Learned counsel has referred to the decision in Essar Steel (supra) asalso the recent decision of this Court in the case of Jaypee KensingtonBoulevard Apartments Welfare Association and Ors. v. NBCC(India) Ltd. and Ors., rendered on 24.03.2021[7]. Learned counsel wouldsubmit that the consideration of NCLAT that the amendment to Section30(4) of the Code was merely a guideline fails to take into account thefact that CoC does not have an unfettered and arbitrary right to exerciseits commercial wisdom and to approve the plan which does not stand inconformity with the provisions of the Code.

7 Hereinafter referred to as the case of ‘Jaypee Kensington’.

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A8. Having heard the learned counsel and having perused thematerial placed on record, we are clearly of the view that this appealremains totally bereft of substance and does not merit admission.

9. The requirements of law, particularly in regard to the contentionssought to be urged on behalf of the appellant, are referable to the provisionsBcontained in Section 30 of the Code dealing with the processes relatingto submission of a resolution plan, its mandatory contents, its considerationand approval by the Committee of Creditors, and its submission to theAdjudicating Authority for approval. Sub-sections (2) and (4) of Section30 of the Code, being relevant for the present purpose, could be usefullyreproduced, while omitting the other parts, as under:-C“Section30. Submission of resolution plan.-(1) xxxxxxxxx

(2) The resolution professional shall examine each resolution planreceived by him to confirm that each resolution plan- D(a) provides for the payment of insolvency resolution processcosts in a manner specified by the Board in priority to the8[payment] of other debts of the corporate debtor; 9[(b) provides for the payment of debts of operational creditorsin such manner as may be specified by the Board which shallEnot be less than-

(i) the amount to be paid to such creditors in the event of aliquidation 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 hadFbeen distributed in accordance with the order of priority insub-section (1)of section 53, whichever is higher, and provides for the payment of debts offinancial 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).G9 Substituted by Act 26 of 2019, sec. 6(a), for clause (b) (w.e.f. 16.08.2019). Earlierclause (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 suchmanner as may be specified by the Board which shall not be less than theamount to be paid to the operational creditors in the event of a liquidation ofHthe corporate debtor under section 53;”

plan, in such manner as may be specified by the Board, whichshall not be less than the amount to be paid to such creditors inaccordance with sub-section (1) of section 53 in the event of aliquidation of the corporate debtor.

Explanation 1.—For the removal of doubts, it is hereby clarifiedthat a distribution in accordance with the provisions of this clauseshall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is herebydeclared that on and from the date of commencement of theInsolvency and Bankruptcy Code (Amendment) Act, 2019, theprovisions of this clause shall also apply to the corporate insolvencyresolution process of a corporate debtor-

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

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

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

(c) provides for the management of the affairs of the Corporatedebtor 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 thetime being in force; (f) conforms to such other requirements as may be specified bythe Board.

10[Explanation.—For the purposes of clause (e), if any approvalof shareholders is required under the Companies Act, 2013 (18 of2013) or any other law for the time being in force for theimplementation of actions under the resolution plan, such approvalshall be deemed to have been given and it shall not be acontravention of that Act or law.]

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11[(4) The committee of creditors may approve a resolution planby a vote of not less than [12][sixty-six]per cent. of voting share ofthe financial creditors, after considering its feasibility and viability,13[the manner of distribution proposed, which may take intoBaccount the order of priority amongst creditors as laid down insub-section (1) of section 53, including the priority and value ofthe security interest of a secured creditor]and such otherrequirements as may be specified by the Board:

Provided that the committee of creditors shall not approve aCresolution plan, submitted before the commencement of theInsolvency and Bankruptcy Code (Amendment) Ordinance, 2017(Ord. 7 of 2017), where the resolution applicant is ineligible undersection 29A and may require the resolution professional to invitea fresh resolution plan where no other resolution plan is availablewith it:D

Provided further that where the resolution applicant referred to inthe first proviso is ineligible under clause (c) of section 29A, theresolution applicant shall be allowed by the committee of creditorssuch period, not exceeding thirty days, to make payment of overdueamounts in accordance with the proviso to clause (c) of sectionE29A:

Provided also that nothing in the second proviso shall be construedas extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolutionprocess shall be completed within the period specified in that sub-Fsection.]

14[Provided also that the eligibility criteria in section 29A asamended by the Insolvency and Bankruptcy Code (Amendment)Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolutionapplicant who has not submitted resolution plan as on the date ofG11 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 lessthan 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).H14 Inserted by Act 26 of 2018, sec. 23(iii)(b) (w.r.e.f. 06.06.2018).

commencement of the Insolvency and Bankruptcy Code(Amendment) Ordinance, 2018 (Ord. 6 of 2018).]

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10. As regards the process of consideration and approval ofresolution plan, it is now beyond a shadow of doubt that the matter isessentially that of the commercial wisdom of Committee of Creditorsand the scope of judicial review remains limited within the four-cornersof Section 30(2) of the Code for the Adjudicating Authority; and Section30(2) read with Section 61(3) for the Appellate Authority. In the case ofJaypee Kensington (supra), this Court, after taking note of the previousdecisions in Essar Steel (supra) as also in K. Sashidhar v. IndianOverseas Bank and Ors.: (2019) 12 SCC 150 and MaharashtraSeamless Limited v. Padmanabhan Venkatesh and Ors.: (2020) 11SCC 467, summarised the principles as follows:- “77. In the scheme of IBC, where approval of resolution plan isexclusively in the domain of the commercial wisdom of CoC, thescope of judicial review is correspondingly circumscribed by theprovisions contained in Section 31 as regards approval of theAdjudicating Authority and in Section 32 read with Section 61 asregards the scope of appeal against the order of approval.

77.1. Such limitations on judicial review have been dulyunderscored by this Court in the decisions above-referred, whereit has been laid down in explicit terms that the powers of theAdjudicating Authority dealing with the resolution plan do notextend to examine the correctness or otherwise of the commercialwisdom exercised by the CoC. The limited judicial review availableto Adjudicating Authority lies within the four corners of Section30(2) of the Code, which would essentially be to examine that theresolution plan does not contravene any of the provisions of lawfor the time being in force, it conforms to such other requirementsas may be specified by the Board, and it provides for: (a) paymentof insolvency resolution process costs in priority; (b) payment ofdebts of operational creditors; (c) payment of debts of dissentingfinancial creditors; (d) for management of affairs of corporatedebtor after approval of the resolution plan; and (e) implementationand supervision of the resolution plan.

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A77.2. The limitations on the scope of judicial review are reinforcedby the limited ground provided for an appeal against an orderapproving a resolution plan, namely, if the plan is in contraventionof the provisions of any law for the time being in force; or therehas been material irregularity in exercise of the powers by theresolution professional during the corporate insolvency resolutionBperiod; or the debts owed to the operational creditors have notbeen provided for; or the insolvency resolution process costs havenot been provided for repayment in priority; or the resolution plandoes not comply with any other criteria specified by the Board.

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77.3. The material propositions laid down in Essar Steel (supra)Con the extent of judicial review are that the Adjudicating Authoritywould see if CoC has taken into account the fact that the corporatedebtor needs to keep going as a going concern during theinsolvency resolution process; that it needs to maximise the valueof its assets; and that the interests of all stakeholders includingoperational creditors have been taken care of. And, if theDAdjudicating Authority would find on a given set of facts that therequisite parameters have not been kept in view, it may send theresolution plan back to the Committee of Creditors for re-submission after satisfying the parameters. Then, as observed inMaharashtra Seamless Ltd. (supra), there is no scope for theEAdjudicating Authority or the Appellate Authority to proceed onany equitable perception or to assess the resolution plan on thebasis of quantitative analysis. Thus, the treatment of any debt orasset is essentially required to be left to the collective commercialwisdom of the financial creditors.”

11. It needs hardly any elaboration that financial proposal in theFresolution plan forms the core of the business decision of Committee ofCreditors. Once it is found that all the mandatory requirements havebeen duly complied with and taken care of, the process of judicial reviewcannot be stretched to carry out quantitative analysis qua a particularcreditor or any stakeholder, who may carry his own dissatisfaction. InGother words, in the scheme of IBC, every dissatisfaction does not partakethe character of a legal grievance and cannot be taken up as a ground ofappeal.[15]

15 For the purpose of illustration, reference may be made to the decision in JaypeeKensington (supra) wherein, as regards the grounds sought to be urged by minorityshareholders against the resolution plan, this Court held that their grievances could notHbe recognised as legal grievances (vide paragraph 154). Similarly, when this Court

12. The provisions of amended sub-section (4) of Section 30 ofthe 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 resolutionplan at the instance of the appellant. The purport and effect of theamendment 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 explainedby this Court in Essar Steel (supra), as duly taken note of by the AppellateAuthority (vide the extraction hereinbefore).The NCLAT was, therefore,right in observing that such amendment to sub-section (4) of Section 30only amplified the considerations for the Committee of Creditors whileexercising its commercial wisdom so as to take an informed decision inregard to the viability and feasibility of resolution plan, with fairness ofdistribution amongst similarly situated creditors; and the business decisiontaken in exercise of the commercial wisdom of CoC does not call forinterference unless creditors belonging to a class being similarly situatedare 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 havereturned concurrent findings in favour of the resolution plan yet, to satisfyourselves, we have gone through the financial proposal in the resolutionplan. What we find is that the proposal for payment to all the securedfinancial creditors (all of them ought to be carrying security interest withthem) is equitable and the proposal for payment to the appellant is at parwith the percentage of payment proposed for other secured financialcreditors. No case of denial of fair and equitable treatment or disregardof priority is made out.

13. The repeated submissions on behalf of the appellant withreference to the value of its security interest neither carry any meaningnor any substance. What the dissenting financial creditor is entitled to isspecified in the later part of sub-section (2)(b) of Section 30 of the Codeand the same has been explained by this Court in Essar Steel as under:- “128. When it comes to the validity of the substitution of Section30(2)(b) by Section 6 of the Amending Act of 2019, it is clear thatthe substituted Section 30(2)(b) gives operational creditors noticed that the homebuyers as a class assented to the plan, it was held that anyindividual homebuyer or association was not entitled to maintain achallenge to theresolution plan and could not be treated as carrying any legal grievance (vide paragraph170).

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SUPREME COURT REPORTS

Asomething more than was given earlier as it is the higher of thefigures mentioned in sub-clauses (i) and (ii) of sub-clause (b)that is now to be paid as a minimum amount to operationalcreditors. The same goes for the latter part of sub-clause (b)which refers to dissentient financial creditors. Ms Madhavi Divanis correct in her argument that Section 30(2)(b) is in fact aBbeneficial provision in favour of operational creditors and dissentientfinancial creditors as they are now to be paid a certain minimumamount, the minimum in the case of operational creditors beingthe higher of the two figures calculated under sub-clauses (i) and(ii) of clause (b), and the minimum in the case of dissentientCfinancial creditor being a minimum amount that was not earlierpayable. As a matter of fact, pre-amendment, secured financialcreditors may cramdown unsecured financial creditors who aredissentient, the majority vote of 66% voting to give them nothingor next to nothing for their dues. In the earlier regime it may havebeen possible to have done this but after the amendment suchDfinancial creditors are now to be paid the minimum amountmentioned in sub-section (2). Ms Madhavi Divan is also correctin stating that the order of priority of payment of creditorsmentioned in Section 53 is not engrafted in sub-section (2)(b) asamended. Section 53 is only referred to in order that a certainEminimum figure be paid to different classes of operational andfinancial creditors. It is only for this purpose that Section 53(1) isto be looked at as it is clear that it is the commercial wisdom ofthe Committee of Creditors that is free to determine what amountsbe paid to different classes and sub-classes of creditorsinaccordance with the provisions of the Code and the RegulationsFmade thereunder.”

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 theGrelated Regulations, is essentially the commercial wisdom of theCommittee of Creditors; and a dissenting secured creditor like theappellant cannot suggest a higher amount to be paid to it with referenceto the value of the security interest.

14. In the case of Jaypee Kensington (supra), the proposal inHthe resolution plan was to the effect that if the dissenting financial creditors

would be entitled to some amount in the nature of liquidation value interms of Sections 30 and 53 of IBC read with Regulation 38 of the CIRPRegulations, they would be provided such liquidation value in the form ofproportionate share in the equity of a special purpose vehicle proposedto be set up and with transfer of certain land parcels belonging tocorporate debtor. Such method of meeting with the liability towardsdissenting financial creditors in the resolution plan was disapproved bythe Adjudicating Authority; and this part of the order of the AdjudicatingAuthority was upheld by this Court with the finding that the proposal inthe resolution plan was not in accord with the requirement of ‘payment’as envisaged by clause (b) of Section 30(2) of the Code[16]. In that context,this Court held that such action of ‘payment’ could only be by handingover the quantum of money or allowing the recovery of such money byenforcement of security interest, as per the entitlement of a dissentingfinancial creditor. This Court further made it clear that in case a validsecurity interest is held by a dissenting financial creditor, the entitlementof such dissenting financial creditor to receive the amount could besatisfied by allowing him to enforce the security interest, to the extent ofthe value receivable by him and in the order of priority available to him.This Court clarified that by enforcing such a security interest, a dissentingfinancial creditor would receive payment to the extent of his entitlementand 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 ofobligation mentioned in the second part of clause (b) of Section30(2) of the Code, the dissenting financial creditors are to be “paid”an “amount” quantified in terms of the “proceeds” of assetsreceivable under Section 53 of the Code; and the “amount payable”is to be “paid” in priority over their assenting counterparts, thestatute is referring only to the sum of money and not anythingelse. In the frame and purport of the provision and also the scheme 16 In Jaypee Kensington, after disapproving the proposition of the resolution planregarding dissenting financial creditor, the Adjudicating Authority itself modified theoffending terms of the plan and provided for monetary payment to the dissentingfinancial creditor. This latter part of the order of the Adjudicating Authority was notapproved by this Court while holding that after disapproval of such term related withfinancial model proposed in the resolution plan, the Adjudicating Authority itself couldnot have modified the same and ought to have sent the matter back to CoC forreconsideration. However, that part of the decision in Jaypee Kensington is not relevantfor the present purpose.

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of the Code, the expression “payment” is clearly descriptive ofthe action of discharge of obligation and at the same time, is alsoprescriptive of the mode of undertaking such an action. And, thataction could only be of handing over the quantum of money, orallowing the recovery of such money by enforcement of securityinterest, as per the entitlement of the dissenting financial creditor.

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121.2. We would hasten to observe that in case a dissentingfinancial creditor is a secured creditor and a valid security interestis created in his favour and is existing, the entitlement of such adissenting financial creditor to receive the “amount payable” couldalso be satisfied by allowing him to enforce the security interest,Cto the extent of the value receivable by him and in the order ofpriority available to him.Obviously, by enforcing such a securityinterest, a dissenting financial creditor would receive “payment”to the extent of his entitlement and that would satisfy therequirement of Section 30(2)(b) of the Code….”

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14.1. In Jaypee Kensington (supra), this Court repeatedly madeit clear that a dissenting financial creditor would be receiving the paymentof the amount as per his entitlement; and that entitlement could also besatisfied by allowing him to enforce the security interest, to the extent ofEthe value receivable by him. It has never been laid down that if a dissentingfinancial creditor is having a security available with him, he would beentitled to enforce the entire of security interest or to receive the entirevalue of the security available with him. It is but obvious that his dealingwith the security interest, if occasion so arise, would be conditioned byFthe extent of value receivable by him.

14.2. The extent of value receivable by the appellant is distinctlygiven out in the resolution plan i.e., a sum of INR 2.026 crores which isin the same proportion and percentage as provided to the other securedfinancial creditors with reference to their respective admitted claims.GRepeated reference on behalf of the appellant to the value of security atabout INR 12 crores is wholly inapt and is rather ill-conceived.

15. The limitation on the extent of the amount receivable by adissenting financial creditor is innate in Section 30(2)(b) of the Codeand has been further exposited in the decisions aforesaid. It has notbeen the intent of the legislature that a security interest available to aH

dissenting financial creditor over the assets of the corporate debtor giveshim some right over and above other financial creditors so as to enforcethe entire of the security interest and thereby bring about an inequitablescenario, by receiving excess amount, beyond the receivable liquidationvalue proposed for the same class of creditors.

16. It needs hardly any emphasis that if the propositions suggestedon behalf of the appellant were to be accepted, the result would be thatrather than insolvency resolution and maximisation of the value of assetsof the corporate debtor, the processes would lead to more liquidations,with every secured financial creditor opting to stand on dissent. Such aresult would be defeating the very purpose envisaged by the Code; andcannot be countenanced. We may profitably refer to the relevantobservations in this regard by this Court in Essar Steel as follows:- “85. Indeed, if an “equality for all” approach recognising the rightsof different classes of creditors as part of an insolvency resolutionprocess is adopted, secured financial creditors will, in many cases,be incentivised to vote for liquidation rather than resolution, asthey would have better rights if the corporate debtor was to beliquidated rather than a resolution plan being approved. This woulddefeat the entire objective of the Code which is to first ensurethat resolution of distressed assets takes place and only if thesame is not possible should liquidation follow.”

17. Viewed from any angle, the submissions made on behalf ofthe appellant do not merit acceptance and are required to be rejected.

18. For what has been discussed hereinabove, this appeal failsand stands dismissed.

Devika Gujral

Appeal dismissed.

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