IMPORTANT POINT
A secured creditor cannot claim preference over another secured creditor at stage of distribution on the ground of a dissent or assent, otherwise distribution would be arbitrary and discriminative.

JUDGMENT :

SANJIV KHANNA, J.

The issue that arises for consideration in the present appeals is:

Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016¹[For short, “IBC” or “the Code”, as the case may be], as amended in 2019, entitles the dissenting financial creditor to be paid the minimum value of its security interest?

2. Appellant - DBS Bank Limited Singapore had extended financial debt of around USD 50,000,000 (fifty million dollars only) or Rs.243,00,00,000 (rupees two hundred forty three crore only) to M/s. Ruchi Soya Industries Limited²[For short, “Corporate Debtor”], the corporate debtor.

3. The financial debt was secured by: (i) a sole and exclusive first charge over certain immovable and fixed assets of the Corporate Debtor in Kandla, Gujarat; and (ii) sole and exclusive first charge over assets of the Corporate Debtor in Baran, Rajasthan; Guna, Madhya Pradesh; Dalauda, Madhya Pradesh; Gadarwara, Madhya Pradesh; and a commercial office space at Nariman Point, Mumbai.

4. On 15.12.2017, Corporate Insolvency Resolution Process³[For short, “CIRP”] was initiated against the Corporate Debtor under the provisions of the Code. The company petition seeking to initiate CIRP was admitted and a Resolution Professional⁴[For short, “RP”] was appointed.

5. The appellant had submitted its claim, which was admitted by the RP at Rs. 242,96,00,000 (rupees two hundred forty two crore ninety six lakh only).

6. On 20.03.2019, Patanjali Ayurvedic Limited submitted a resolution plan for Rs. 4134,00,00,000 (rupees four thousand one hundred thirty four crore only) against the aggregate claims of around Rs. 8398,00,00,000 (rupees eight thousand three hundred ninety eight crore only), representing approximately 49.22% of the total admitted claims of the financial creditors.

7. On 12.04.2019, by a communication, the appellant informed the Committee of Creditors⁵[For short, “CoC”] that the sole and exclusive nature of security held by the appellant by way of mortgage/hypothecation over immovable and fixed assets of the Corporate Debtor was of greater value compared to collaterals held by other creditors. Emphasising the specific treatment of the exclusive and superior security, the appellant requested the CoC to take into account the liquidation value of such security while considering the distribution of proceeds and to make such distribution in a “fair and equitable” manner.

8. In the 21st and 22nd CoC meetings held on 15.04.2019 and 23.04.2019 respectively, the appellant’s concern regarding treatment/proposed pay-out was noted. However, in the meeting held on 23.04.2019, the CoC approved pari passu distribution of the resolution plan proceeds.

9. On 30.04.2019, the resolution plan was approved by 96.95% of the CoC. The appellant had voted against the resolution plan, thereby becoming a dissenting financial creditor.

10. The resolution plan was filed for approval before the National Company Law Tribunal⁶[For short, “NCLT”], Mumbai. Separately, the appellant challenged the distribution mechanism of the resolution plan proceeds by way of an application before the NCLT, Mumbai.

11. On 24.07.2019, the NCLT granted provisional/conditional approval to the resolution plan. By the same order dated 24.07.2019, the NCLT dismissed the appellant’s application challenging the distribution mechanism of the resolution plan proceeds.

12. On 31.07.2019, the appellant challenged the dismissal of its application before the National Company Law Appellate Tribunal⁷[For short, “NCLAT”].

13. During pendency of the appeal, Section 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2019⁸[For short, “Amendment Act”], was notified by way of a gazette notification dated 16.08.2019. It amended Section 30(2)(b) of the Code. Amended Section 30(2)(b)(ii) of the Code provides that operational and dissenting financial creditors shall not be paid an amount lesser than the amount to be paid to creditors in the event of liquidation of the Corporate Debtor under Section 5