DBS Bank Ltd Singapore Vs Ruchi Soya Industries Ltd : The Supreme Court refers the matter related to treatment of dissenting secured creditors during CIRP to larger Bench
The Supreme Court in DBS Bank Ltd Singapore Vs. Ruchi Soya Industries Ltd (Civil Appeal 9133 of 2019 ) has referred the matter in respect of treatment of dissenting secured creditors during Corporate Insolvency Resolution Process (CIRP) to a larger bench.
Facts Of The Case
DBS Bank limited has advanced loan of Rs. 243 Crore to Ruchi Soya Industries. This loan was secured by first charge over various assets. Ruchi Soya Industries went into CIRP. DBS Bank filed claims of Rs. 242.96 Crore, which was admitted by the Resolution Professional. Patanjali Ayurvedik Ltd submitted Resolution Plan of Rs. 4134 Crore against admitted claims of Rs. 8398 Crore. DBS Bank requested for liquidation value of security to be considered, which was not considered by Committee of Creditors. Resolution Plan was approved on 30.04.2019 by CoC. DBS Bank voted against the Resolution Plan and as such become dissenting financial creditor. Resolution Plan was conditionally approved by NCLT on 24.07.2019. The Application of DBS Bank challenging the distribution mechanism was also dismissed by the NCLT. An appeal was filed by the DBS Bank before NCLAT.
During Pendency of Appeal Section 30 (2) (b) was amened to the effect that the dissenting Financial Creditors will not be paid an amount lesser than the amount paid to the creditor in event of liquidation of the Corporate Debtor under Section 53 (1) of the Code.
NCLT finally approved the Resolution Plan on 04.09.2019. The DBS Bank also filed appeal against order granting approval to the Resolution Plan. Both appeals were dismissed by NCLAT.
These dismissal orders were challenged before the Supreme Court. By the order of the Supreme Cout an amount of Rs. 99.74 Crore was deposited in escrow account.
Findings Of The Supreme Court
The first issue which the Supreme Court considered was whether amendment to Section 30 (2) (b) which came into effect during pendency of appeal before NCLAT is applicable. The Supreme Court held that the amendment has itself provided that “it will be applicable to 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”. Further, an appellate proceeding is a continuation of the original proceeding. A change in law can always be applied to original or appellate proceedings. The Supreme Court upheld the applicability of amendment during appellate proceedings.
The second issue was related with interpretation of the amendment.
The Court was of the opinion that dissenting creditors have to paid value of their security interest during CIRP. The Court relied on judgments of the Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531, Jaypee Kensington Boulevard Apartments Welfare Association & Others. v. NBCC (India) Limited & Others ((2022) 1 SCC 401).
The Court differed from view in India Resurgence ARC Private Limited v. Amit Metaliks Limited & Another ( 2 2021 SCC Online SC 409) 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.
The Court noted that there are contradictions between finding of Supreme Court in India Resurgence ARC Pvt Ltd and findings of the Supreme Court in Committee of Creditors of Essar India Ltd and Jeypee Kensington.
In light of different opinion held from India Resurgence Ltd matter has been referred to a larger bench.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.
