Summary
The Supreme Court referred to a larger Bench whether a dissenting secured financial creditor is entitled under amended Section 30(2)(b) IBC to a minimum payment reflecting the value of its security interest. The Bench favoured that interpretation but differed from India Resurgence ARC. It also held that the 2019 amendment applied to the pending appeals.
Issues
- Whether the 2019 amendment to Section 30(2)(b) applied while appeals against approval of the resolution plan were pending.
- Whether the minimum payment to a dissenting secured financial creditor must reflect the liquidation value of its particular security interest.
- Whether India Resurgence ARC required reconsideration by a larger Bench.
Provisions considered
- Section 30(2)(b), including Explanation 2, as amended in 2019, Insolvency and Bankruptcy Code, 2016The amendment applied to the pending NCLAT appeals. On the disputed minimum-payment question, the Bench favoured payment reflecting the security’s liquidation value but referred the issue to a larger Bench because its interpretation differed from India Resurgence ARC. (¶¶ 21, 22, 23, 24, 25, 26, 31, 33, 36, 37, 38, 40, 49)
- Section 30(4), Insolvency and Bankruptcy Code, 2016The Bench respected the CoC’s commercial wisdom on approval and distribution, while reasoning that it operates subject to the statutory minimum for dissenting creditors under Section 30(2)(b). The disputed security-value interpretation was referred for larger-Bench consideration. (¶¶ 21, 25, 36, 45, 48, 49)
- Sections 52 and 53(1), Insolvency and Bankruptcy Code, 2016The Bench reasoned that Section 53 supplies the liquidation benchmark for minimum monetary payment and must, where necessary, be read with Section 52. Its view was that a dissenter must relinquish security under the approved plan in exchange for the protected monetary entitlement, rather than enforce assets so as to frustrate resolution; the question was referred. (¶¶ 40, 41, 42, 43, 44, 45, 48, 49)
Held
- Explanation 2 to amended Section 30(2)(b) covers pending proceedings before the adjudicating authority, appellate authority or a court reviewing plan approval. The amendment therefore applied when NCLAT decided these pending appeals after 16 August 2019. It does not reopen an approved plan that has attained finality with no proceedings pending. The alternative argument based on the later final approval date did not require a firm decision. (¶¶ 22, 23, 24)
- The Bench’s view was that CoC commercial wisdom does not extinguish the minimum statutory protection of a dissenting secured financial creditor. It read Section 30(2)(b) as protecting a monetary payment equivalent to the creditor’s security value in liquidation, rather than merely the pro rata distribution offered under the plan. Because this interpretation differed from India Resurgence ARC, the issue was referred to a larger Bench and was not finally resolved in these appeals. (¶¶ 25, 26, 31, 33, 36, 37, 38, 40, 49)
- In explaining its proposed interpretation, the Bench distinguished payment of the protected monetary value from a right to enforce the entire security against the assets under an approved plan. It reasoned that the security must be relinquished to avoid making the plan unworkable. It also rejected the contention that dissent only against distribution, rather than other terms of the plan, disqualified the creditor from statutory protection. These reasons formed the basis for the reference. (¶¶ 40, 41, 42, 43, 44, 45, 46, 47, 48, 49)
Result
The question whether amended Section 30(2)(b) entitles a dissenting financial creditor to the minimum value of its security interest was referred to a larger Bench. The matter was directed to be placed before the Chief Justice for appropriate orders; the appeals were not finally disposed of on that question.