INDIA RESURGENCE ARC PVT. LTD. VS M/S AMIT METALIKS LTD. : CASE SUMMARY
The Supreme Court in India Resurgence Arc Pvt. Ltd. Vs M/s Amit Metaliks Ltd (2021 SCC online 409) held that dissenting Secured Creditor cannot suggest a higher amount to be paid to it with reference to the value of the security interest during Corporate Insolvency Resolution Process.
FACTS OF THE CASE
The appellant is assignee of the rights, title and interest carried by Religare Fivnest Ltd. It was secured Financial Creditor having 3.94 % voting share in Committee of Creditors. Substantial majority consisting of 95.35 % voting share approved the Resolution Plan. The Appellant was dissenting Financial Creditor. The Resolution Plan was approved by the NCLT.
The Appellant preferred an appeal before NCLAT, which was dismissed.
FINDINGS OF THE SUPREME COURT
The Supreme Court observed that it is beyond a shadow of doubt that the matter is essentially that of the commercial wisdom of Committee of Creditors and scope of judicial review remains limited within four corners of Section 30 (2) of the Insolvency and Bankruptcy Code, 2016 for the Adjudicating Authority and Section 30 (2) read with Section 61 (3) for the Appellate Authority.
The Supreme Court observed that Financial Proposal in the Resolution Plan forms the core decision of Committee of Creditors. Once it is found that all the mandatory requirements have been have been duly complied with, the judicial review cannot be stretched to do quantitative analysis qua a particular creditor or any stakeholder who may carry dissatisfaction.
The Supreme Court also refused to interfere on the newly amended clause (4) of the Section 30. The Supreme Court agreed with the observation that Clause (4) of Section 30 only amplified the consideration for the Committee of Creditor while exercising commercial wisdom so as to take informed decision in regard to viability and feasibility of the Resolution Plan with fairness in distribution amongst similarly situated creditors. No interference can be made unless a similarly situated class has been denied fair and equitable treatment.
The Court noted that proposal for payment to all secure creditors is equitable. Payment to the appellant is at par with other Secured Financial Creditors.
The Supreme Court observed that value of security interest neither carry any meaning or any substance. Dissenting Financial Creditors are only entitled to minimum amount as mentioned in Section 30 (2) (b).
The Supreme court observed as under :
“13.1 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 he security interest.”
The Supreme Court observed that in Jaypee Kensington Boulevard Apartments Welfare Association Vs NBCC (India ) Ltd (2002) 1 SCC 401 it was made clear that dissenting Financial Creditor would be receiving payment as per his entitlement and that entitlement could be satisfied allowing him to enforce security interest. Jaypee Kensington never laid down that dissenting Financial Creditor would be entitled to enforce the whole secured interest or to receive the entire value of security available with him.
The Supreme Court observed that if suggestions on behalf of the Appellant is accepted, result would be more liquidations rather than resolution of Corporate Debtors, with every secured Financial Creditor opting to stand on dissent. Such a result to would be defeating the very purpose envisaged by the Code and cannot be countenanced.
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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.