NATIONAL COMPANY LAW APPELLATE TRIBUNAL

PRINCIPAL BENCH, NEW DELHI

Company Appeal (AT) (Insolvency) No. 570 of 2022

IN THE MATTER OF:

1. Small Industries Development Bank of

India (SIDBI),
Specialized Asset Recovery Branch,
2nd Floor, Atma Ram House,
1 Tolstoy Marg, New Delhi – 110001 ...Appellant
Eamil: [email protected]

Versus

1. Vivek Raheja,
Resolution Professional, M/s. Gupta Exim (India)
Pvt. Ltd.,
JD-2C, 2nd Floor,
Pitampura, Delhi – 110034
Email: [email protected] …Respondent No. 1

2. Punjab National Bank,

E-Block, Harsha Bhawan,
1st Floor, Connaught Place,
New Delhi – 110001
Email: [email protected] …Respondent No. 2

3. Lotus Textiles,
Through Authorised Signatory Partner-Mr.
Vijayant Mittal
68D, DLF Industrial Area, Phase 1, Faridabad,
Haryana – 122301
…Respondent No. 3
Email: vm3457@gmailcom

For Appellant: Mr. N. P. S. Chawla and Ms. Kinjal Goyal, Advocates.

For Respondent: Mr. Krishnendu Datta, Sr. Advocate Mr. Anuj Pandey,
Mr. Pulkit Goyal, Advocates for R1.
Mr. V. Mittal, Mr. Rajat Sinha, Mr. Karan Gandhi, Ms.
Komal Karva, Advocates Mr. S.K. Sharma, Dvuti Ghai,
Advocates for R-2.
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JUDGEMENT
Ashok Bhushan, J:

1. This Appeal has been filed against the Order dated 17th March, 2022

passed by the National Company Law Tribunal, Chandigarh Bench,

Chandigarh (hereinafter referred to as “The Adjudicating Authority”)

challenging the Order dated 17th March, 2022 in I.A. No. 581 of 2021 in

CP(IB) No. 312/Chd/Hry/2018.

2. Brief facts of the case giving rise to this Appeal are:-

 Oriental Bank of Commerce had filed a Section 7 Application under

the Insolvency and Bankruptcy Code, 2016 (IBC in short) against the

Corporate Debtor – M/s. Gupta Exim (India) Pvt. Ltd. which was

admitted by the Adjudicating Authority vide Order dated 29th October,

2019. In the ‘Corporate Insolvency Resolution Process’ in 16th Meeting

of ‘Committee of Creditors’, Resolution Plans were discussed. Revised

Resolution Plans were submitted by the prospective Resolution

Applicants. Resolution Plan was put to e-Vote between 07th August,

2021 and 16th August, 2021 and by majority of 97.97%, the Resolution

Plan of ‘Lotus Textiles’ and Mr. Vijayant Mittal was approved.

Appellant sent an Objection dated 16th August, 2021 to the

distribution to the Appellant under the Resolution Plan.

 An I.A. No. 581 of 2021 was filed by the Appellant for direction to the

Resolution Professional to distribute the proceeds of the Resolution

Plan where following prayers were made:

“It is therefore, most respectfully prayed that:

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1. The present application may kindly be allowed

and the directions be issued to the Respondent No. 1

modify/clarify the distribution to dissenting members

as per the Resolution Plan and distribute the

proceeds of the resolution plan to Applicant SIDBI for

an amount of Rs. 5,64,97,893/- in priority in

accordance with provisions of IBC 2016 in the

interest of justice and equity.

2. Interim stay be granted on distribution of the

resolution plan amount by the Resolution Professional

to the CoC members till the present application is

decided.”

 The case of the Appellant in the Application was that as per security

interest of the Appellant, the Appellant is entitled to 6.93 % i.e. the

amount of Rs. 5,64,97,893/- and as per voting share as approved by

the CoC, the Appellant is entitled to 2.03% i.e. Rs. 1,65,47,078/-. The

case of the Appellant set up in the Application is that he is entitled for

his distribution of plan amount as per value of the security interest of

the Appellant. The Application was objected by the Resolution

Professional. The Adjudicating Authority by the Impugned Order dated

17th March, 2022 rejected the I.A. No. 581 of 2021 upholding the

decision of the CoC for distribution of proceeds of the Resolution Plan

as per the voting share. Appellant aggrieved by the said Order, has

come up in this Appeal.

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3. Shree N.P.S Chawla, Learned Counsel for the Appellant submits that

the Appellant has first charge on two properties of the Corporate Debtor. The

Liquidation Value of the securities exclusively charged to Appellant is Rs.

5.64 Crores which is equivalent to 6.93% of the Liquidation Value of the

assets of the Corporate Debtor. Voting share of the Appellant is 2.03% and

voting share of the Punjab National Bank is 97.7%. It is submitted that

distribution of proceeds of the Resolution Plan ought to have been in

accordance with the value of the security interest of the Appellant and not as

per the value of the voting share. It is submitted that the Committee of

Creditors committed error in approving the Resolution Plan which does not

provide for distribution to the Appellant as per Section 30(2)(b). The Plan

being not compliant to Section 30(2)(b) deserved not to be approved and

despite objection raised by the Appellant objecting to the distribution of the

Resolution Plan proceeds, the grievance has not been redressed either by the

Committee of Creditors or by the Adjudicating Authority. It is submitted that

the Adjudicating Authority committed error in rejecting the I.A. No. 581 of

2021. Learned Counsel for the Appellant submitted that Section 53(1)(b) of

the Code does not talk about priority inter se secured creditors and

subordination agreement provisions are required to be respected in the

Liquidation Waterfall under Section 53 of the Code. Learned Counsel for the

Appellant has placed reliance on report of the Insolvency Law Committee

March, 2018 as well as the Statement of Objects and Reasons of the

Insolvency and Bankruptcy Code (Amendment Bill), 2019. Learned Counsel

for the Appellant has also placed reliance on two judgements of the Hon’ble

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Supreme Court and judgements of this Tribunal which shall be referred to

while considering the submissions in detail.

4. Learned Sr. Counsel appearing for Respondent No. 1-Resolution

Professional refuting the submissions of Learned Counsel for the Appellant

submits that manner of distribution of the proceeds of the plan value is in

accordance with Section 30(2)(b) of the Code. The Appellant is entitled for

distribution as per value of the debt of the Appellant. There is no entitlement

to claim distribution on the basis of value of security interest of the

Appellant. The issue raised by the Appellant is fully covered by the

Judgement of the Hon’ble Supreme Court in “India Resurgence Arc Private

Limited Vs. M/s. Amit Metaliks Limited & Anr.” (Civil Appeal No. 1700 of

2021) decided on 13.05.2021 as well as two judgements of this Tribunal;

first in Company Appeal (AT) Ins. No. 665 of 2022 and second Judgement of

this Tribunal in “Indian Bank Vs. Charu Desai, Erstwhile Resolution

Professional & Chairman of Monitoring Committee of GB Global Ltd. &

Anr.” (Company Appeal (AT) Ins. No. 644 of 2021) decided on 06th May,

2022.

5. Learned Counsel appearing for Respondent No. 3-Successful

Resolution Applicant also opposing the submissions of Learned Counsel for

the Appellant contends that distribution of proceeds of the Resolution Plan

is in accordance with the debt value of the secured creditors as per Section

30(2)(b) of the Code. The Appellant is not entitled to claim distribution on

the basis of value of the security interest of Appellant. The commercial

wisdom/decision of the CoC approving the distribution in the Resolution

Plan cannot be allowed to be questioned by the dissenting financial creditor.

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6. We have considered the submissions of Learned Counsel for the

parties and have perused the record.

7. The only question which arises for consideration in the present Appeal

is as to whether the Appellant-dissenting Financial Creditor is entitled to

claim distribution of proceeds of the plan as per value of the security interest

of the Appellant or as per the debt of the Appellant (voting share).

8. The Appellant is one of the members of the CoC, the other member of

the CoC being Punjab National Bank, voting share of both the Appellant and

Punjab National Bank are as follows:

Name of CoC Member Voting Share (%)

Punjab National Bank 97.97
Small Industries 2.03
Development Bank of
India

9. Under the Resolution Plan, the Appellant was proposed to be paid

amount of Rs. 1,65,47,078/- as per voting share being 2.03 %. I.A. No.

581/2021 was filed by the Appellant claiming distribution as per security

interest i.e. Rs. 5,64,97,893/-. Learned Counsel for the Appellant submitted

that when a distribution by the Resolution Applicant is not in accordance

with Section 30(2)(b) of the Code, the same can be set aside by the

Adjudicating Authority as well as by this Appellate Tribunal which is well

within the jurisdiction of the Court. Learned Counsel for the Appellant in

support of his submission has placed reliance on the judgement of Hon’ble

Supreme Court in “Jaypee Kensington Boulevard Apartments Welfare

Association & Ors. Vs. NBCC (India) Ltd. & Ors.”, [(2021) 1 SCC 401].

Hon’ble Supreme Court in the above case has occasion to consider the

provisions of Section 30(2)(b) as well as the scope of judicial review. Learned

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Counsel for the Appellant placed reliance on paragraph 77, 77.1, 77.2, 77.3

which are to the following effect:

“77. In the scheme of IBC, where approval of

resolution plan is exclusively in the domain of the
commercial wisdom of CoC, the scope of judicial
review is correspondingly circumscribed by the
provisions contained in Section 31 as regards
approval of the Adjudicating Authority and in Section
32 read with Section 61 as regards the scope of
appeal against the order of approval.
77.1. Such limitations on judicial review have been
duly underscored by this Court in the decisions
above-referred, where it has been laid down in
explicit terms that the powers of the Adjudicating
Authority dealing with the resolution plan do not
extend to examine the correctness or otherwise of the
commercial wisdom exercised by the CoC. The limited
judicial review available to Adjudicating Authority lies
within the four corners of Section 30(2) of the Code,
which would essentially be to examine that the
resolution plan does not contravene any of the
provisions of law for the time being in force, it
conforms to such other requirements as may be
specified by the Board, and it provides for: (a)
payment of insolvency resolution process costs in
priority; (b) payment of debts of operational creditors;
(c) payment of debts of dissenting financial creditors;
(d) for management of affairs of corporate debtor after
approval of the resolution plan; and (e)
implementation and supervision of the resolution
plan.
77.2. The limitations on the scope of judicial review
are reinforced by the limited ground provided for an

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appeal against an order approving a resolution plan,

namely, if the plan is in contravention of the
provisions of any law for the time being in force; or
there has been material irregularity in exercise of the
powers by the resolution professional during the
corporate insolvency resolution period; or the debts
owed to the operational creditors have not been
provided for; or the insolvency resolution process
costs have not been provided for repayment in
priority; 171 or the resolution plan does not comply
with any other criteria specified by the Board.
77.3. The material propositions laid down in Essar
Steel (supra) on the extent of judicial review are that
the Adjudicating Authority would see if CoC has
taken into account the fact that the corporate debtor
needs to keep going as a going concern during the
insolvency resolution process; that it needs to
maximise the value of its assets; and that the
interests of all stakeholders including operational
creditors have been taken care of. And, if the
Adjudicating Authority would find on a given set of
facts that the requisite parameters have not been
kept in view, it may send the resolution plan back to
the Committee of Creditors for re-submission after
satisfying the parameters. Then, as observed in
Maharashtra Seamless Ltd. (supra), there is no scope
for the Adjudicating Authority or the Appellate
Authority to proceed on any equitable perception or to
assess the resolution plan on the basis of quantitative
analysis. Thus, the treatment of any debt or asset is
essentially required to be left to the collective
commercial wisdom of the financial creditors.”

Company Appeal (AT) (Insolvency) No. 570 of 2022

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10. The law as laid down by the Apex Court is very clear. If the plan does

not conform to Section 30(2)(b), the judicial review to the limited extent, i.e.

to the extent the plan is in violation of the statutory provision is permissible.

There cannot be any quarrel to the preposition of the law laid down by the

Apex Court in the above case. In a given set of facts, if requisite parameters

as laid down in Section 30(2) are not complied with, the Adjudicating

Authority does not lack jurisdiction to send the Resolution Plan back to the

Committee of Creditors for resubmission after satisfying the parameter. The

question to be considered in the present case is as to whether distribution

as approved by the CoC to the Appellant as per voting share of the Appellant

contravenes the Section 30(2)(b) as contended by Learned Counsel for the

Appellant.

11. Expression “debt” is defined in Section 3(11) in following words:

“(11) “debt” means a liability or obligation in respect

of a claim which is due from any person and includes
a financial debt and operational debt;”
12. In the CIRP Process, Appellant has filed claim which was admitted by

the Resolution Professional and as per the claim of the Appellant admitted,

the Appellant was allotted the voting share of 2.03 % in the CoC. Voting

Share is allotted to the members of CoC on basis of financial debt owed to

them. Section 21(3) is as follows:

“21(3). [Subject to sub-sections (6) and (6-A),

where] the corporate debtor owes financial debts to
two or more financial creditors as part of a
consortium or agreement, each such financial creditor
shall be part of the committee of creditors and their

Company Appeal (AT) (Insolvency) No. 570 of 2022

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voting share shall be determined on the basis of the

financial debts owed to them.”
13. Section 53(1) which is relevant in the present case is as follows:

“53. Distribution of assets. (1) Notwithstanding

anything to the contrary contained in any law enacted by
the Parliament or any State Legislature for the time being
in force, the proceeds from the sale of the liquidation
assets shall be distributed in the following order of priority
and within such period and in such manner as may be
specified, namely :—
(a) the insolvency resolution process costs and the
liquidation costs paid in full;
(b) the following debts which shall rank equally
between and among the following :—
(i) workmen’s dues for the period of twenty-four
months preceding the liquidation commencement
date; and
(ii) debts owed to a secured creditor in the event such
secured creditor has relinquished security in the
manner set out in section 52;
(c) wages and any unpaid dues owed to employees
other than workmen for the period of twelve months
preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and
among the following:—
(i) any amount due to the Central Government and the
State Government including the amount to be received
on account of the Consolidated Fund of India and the
Consolidated Fund of a State, if any, in respect of the
whole or any part of the period of two years
preceding the liquidation commencement date;
(ii) debts owed to a secured creditor for any amount
unpaid following the enforcement of security interest;
Company Appeal (AT) (Insolvency) No. 570 of 2022
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(f) any remaining debts and dues;

(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may
be.”
14. Section 53(1)(b)(ii) uses expression “debts owed to a secured creditor”

which is the basis for distribution in the order of priority as provided in

Section 53(1)(ii). The debt owed to a secured creditor is a debt which is

relatable to his claim as admitted in CIRP Process. The claim/debt of a

secured financial creditor which is admitted in CIRP Process of a secured

creditor is a fixed amount determined in CIRP process as reflected in

Information Memorandum prepared by the Resolution Professional. The debt

owed to a secured creditor is not the value of security of a secured creditor.

The value of security of secured creditor is not the debt owed to a secured

creditor in the CIRP Process. Section 53(1) does not contemplate distribution

as per value of security of a secured creditor. Submission of the Appellant

that he is entitled to distribution of the proceeds of the plan value as per

value of security possessed by him is not in accord with the legislative

scheme as delineated in Section 53(1) of the Code. The above issue has been

decided by this Appellate Tribunal in Company Appeal (AT) Ins. No. 665 of

2022 “Union Bank of India Vs. Resolution Professional of M/s Kudos

Chemie Ltd. & Ors.”. In the above case also, the Financial Creditor of the

Corporate Debtor has filed an Application seeking direction to distribute the

resolution plan amount as per value of the security of the Appellant. The

CoC has decided to distribute the amount as per amount accepted by the

Resolution Professional. The CoC decision was challenged before the

Adjudicating Authority who rejected the Application against which the

Company Appeal (AT) (Insolvency) No. 570 of 2022

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Appeal was filed. The view of the Adjudicating Authority for distribution of

plan amount as per voting share found approval by this Tribunal in

Paragraph 4 and 5 of the Judgement. This Tribunal laid down as under:

“4. The objection was raised by the Appellant Bank

and it wanted that distribution should be done as per
the Option-3. The CoC by majority having taken
decision to distribute the amount as per Option-1 by
97.61% vote, we see no reason to take a different
view from one which has been taken by the
Adjudicating Authority. The Adjudicating Authority in
paragraph 40 has made following observations:-
“40. Both these contentions of learned counsel
for the applicant are not tenable because the
distribution of the amount was made by the
Committee of Creditors resting on total dues of
voting share of individual creditors which is
neither whimsical nor arbitrary in any manner.
Although the applicant gave a dissenting vote for
approval of the Plan, based on the reason that
distribution of resolution fund was
discriminatory against it and despite the plea
that it was entitled to the equal share in regard
to the distribution of the resolution fund on the
value of the assets of the corporate debtor as
security. However, the committee of creditors,
deciding to go with option no.1 i.e. distribution of
plan amount as per claims admitted, has
approved the resolution plan by 97.61% votes.”
5. The decision of the CoC regarding the distribution
of amount is in its commercial wisdom which we
cannot question or be questioned by the Appellant.
The Adjudicating Authority has rightly referred the

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judgment of the Hon’ble Supreme Court in “India

Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks
Ltd. & Anr.- Civil Appeal No. 1700 of 2021”
where in paragraph 13.1, the Hon’ble Supreme Court
has held that what amount is to be paid to different
classes or sub-classes 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 the security
interest. Paragraph 13.1 of the judgment is as
follows:-
“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 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 the
security interest.””
15. The Judgment of the Hon’ble Supreme Court in Civil Appeal No.

1700/2021 “India Resurgence” (supra) was a case where Hon’ble Supreme

Court had occasion to consider where also the Financial Creditor has

objected to distribution contending that distribution should be as per value

of the security interest held by the financial creditor. Hon’ble Supreme Court

after referring to Section 30(2) and submission of the Appellant that

distribution ought to have been as per value of security interest expressly

rejected the submission. In paragraph 13, 13.1 and 14.2, following was laid

down:

Company Appeal (AT) (Insolvency) No. 570 of 2022

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“13. The repeated submissions on behalf of the

appellant with reference to the value of its security
interest neither carry any meaning nor any
substance. What the dissenting financial creditor is
entitled to is specified in the later part of sub-section
(2)(b) of Section 30 of the Code and the same has
been explained by this Court in Essar Steel as under:-
“128. When it comes to the validity of the
substitution of Section 30(2)(b) by Section 6 of the
Amending Act of 2019, it is clear that the
substituted Section 30(2)(b) gives operational
creditors something more than was given earlier as
it is the higher of the figures mentioned in sub-
clauses (i) and (ii) of sub-clause (b) that is now to be
paid as a minimum amount to operational creditors.
The same goes for the latter part of sub-clause (b)
which refers to dissentient financial creditors. Ms
Madhavi Divan is correct in her argument that
Section 30(2)(b) is in fact a beneficial provision in
favour of operational creditors and dissentient
financial creditors as they are now to be paid a
certain minimum amount, the minimum in the case
of operational creditors being the higher of the two
figures calculated under sub-clauses (i) and (ii) of
clause (b), and the minimum in the case of
dissentient financial creditor being a minimum
amount that was not earlier payable. As a matter
of fact, pre-amendment, secured financial creditors
may cram down unsecured financial creditors who
are dissentient, the majority vote of 66% voting to
give them nothing or next to nothing for their dues.
In the earlier regime it may have been possible to
have done this but after the amendment such

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financial creditors are now to be paid the minimum

amount mentioned in sub-section (2). Ms Madhavi
Divan is also correct in stating that the order of
priority of payment of creditors mentioned in
Section 53 is not engrafted in sub-section (2)(b) as
amended. Section 53 is only referred to in order
that a certain minimum figure be paid to different
classes of operational and financial creditors. It is
only for this purpose that Section 53(1) is to be
looked at as it is clear that it is the commercial
wisdom of the Committee of Creditors that is free to
determine what amounts be paid to different
classes and subclasses of creditors in accordance
with the provisions of the Code and the Regulations
made thereunder.”
(underlining supplied for emphasis)
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 the security
interest.
…………..
14.2. The extent of value receivable by the appellant
is distinctly given out in the resolution plan i.e., a sum
of INR 2.026 crores which is in the same proportion
and percentage as provided to the other secured
financial creditors with reference to their respective
admitted claims. Repeated reference on behalf of the
appellant to the value of security at about INR 12
crores is wholly inapt and is rather ill-conceived.”

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16. Learned Counsel for the Appellant sought to contend that two Judge

Bench of “India Resurgence” (supra) does not take into consideration law

laid down by the Hon’ble Supreme Court in three Judge Bench in “Jaypee

Kensington” (supra). The ratio of the Judgment of two Judge Bench in

“India Resurgence” is not in any manner at variance to the law laid down by

the three Judge Bench in “Jaypee Kensington”.

17. Learned Counsel for the Appellant has relied on report of the

Insolvency Law Committee March, 2018, especially paragraph 21 which

deals with “treatment of subordination agreements within the liquidation

waterfall”. The Committee was asked to clarify as to whether inter-creditor

agreements hold good for distribution of proceeds on liquidation under

section 53 in order to promote resolution over liquidation. The Committee

disregarded the suggestion. Paragraph 21.5 and 21.6 of the Committee

Report is referred to which states in following words”

“21.5Lastly, it was deliberated whether inter-creditor

agreements if not disregarded for the liquidation
waterfall in section 53 of the Code, may result in
secured creditors, especially those holding a first
charge to prefer liquidation over resolution. It was
suggested to the Committee to clarify whether inter-
creditor agreements hold good for distribution of
proceeds on liquidation under section 53 in order to
promote resolution over liquidation. The Committee,
as discussed in the context of the ICICI case above,
noted that it may not be prudent to take away a
valuable property right vested with creditors. The
Committee felt that generally all secured financial
creditors whether first charge or secondary charge
holders are sophisticated entities which grant loans

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after exercising due-diligence and are presumed to be

able to evaluate their interests and risks sufficiently.
Moreover, this may negatively impact the credit
market and discourage banks and other financial
creditors to grant big loans which are more often than
not granted against property or other valuable
collateral as they shall have no protection in case the
corporate debtor becomes insolvent. Accordingly, the
Committee disregarded this suggestion.
21.6To conclude, the Committee was of the opinion
that it is sufficiently clear from a plain reading of
section 53(1)(b) that it intended to rank workmen's
dues equally with debts owed to secured creditors
who have relinquished their security. Section 53(1)(b)
does not talk about priority inter-se secured creditors.
Thus, valid inter-creditor/subordination agreements
would continue to govern their relationship. Further
sub-section (2) of section 53 must also be interpreted
accordingly. For instance, applying section 53(2) in
the context of section 53(1)(b), any agreements
between workmen and secured creditors which
disrupts their pari passu rights will be disregarded by
the liquidator. However, agreements inter-se secured
creditors do not disturb the equal ranking sought to
be provided by section 53(1)(b) and therefore do not
fall within the ambit of section 53(2). The Committee
felt that there was no requirement for an
amendment to the Code required since a plain
reading of section 53 was sufficient to establish
that valid inter-creditor and subordination
provisions are required to be respected in the
liquidation waterfall under section 53 of the
Code.”

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18. The Committee ultimately did not suggest any amendment in Section

53 of the Code. The above report of the Insolvency Law Committee in no

manner support the submission of Learned Counsel for the Appellant that

distribution under Section 53(1) ought to be on basis of value of security of

financial creditor and not on basis of debt owed to secured creditor.

19. Learned Counsel for the Appellant has referred to the Statement of

Objects and Reasons of the Insolvency and Bankruptcy Code (Amendment

Bill) 2019 by which amendments were brought in Section 30(2)(b). The

Statement of Objects and Reasons noticing various difficulties to fill critical

gaps, amendments were brought. In paragraph 3 (e) of the Statement of

Objects and Reasons referring to amendment in Section 30(2) following is

stated:

“………
(e) to amend sub-section (2) of section 30 of the Code
to provide that–
(i) the operational creditors shall receive an amount
that is not less than the liquidation value of their debt
or the amount that would have been received if the
amount to be distributed under the resolution plan
had been distributed in accordance with the order of
priorities in section 53 of the Code, whichever is
higher;
(ii) the financial creditors who do not vote in favour of
the resolution plan shall receive an amount that is not
less than the liquidation value of their debt;
(iii) the provisions shall apply to the corporate
insolvency resolution process of a corporate debtor–
(A) where a resolution plan has not been approved or
rejected by the Adjudicating Authority; or

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(B) an appeal is preferred under section 61 or 62 or

such appeal is not time barred under any provision of
law for the time being in force; or
(C) where a legal proceeding has been initiated in any
court against the decision of the Adjudicating
Authority in respect of a resolution plan;
…………..”
20. When we look into above statement of objects and reasons, it is made

clear that financial creditors who do not vote in favour of the resolution plan

shall receive an amount that is not less than the liquidation value of their

debt. The above statement of objects and reasons also makes it clear that

the entitlement of dissenting financial creditor is to receive liquidation value

of their debt and not the distribution as per their security value as is sought

to be contended by the Learned Counsel for the Appellant before us. The

statement of objects and reasons by which amendments in Section 30(2)(b)

has been made, makes it clear that entitlement of dissenting financial

creditor is the liquidation value of their debt which also clearly negate the

submissions raised by the Learned Counsel for the Appellant before us.

21. Learned Counsel for the Appellant has also referred to Report of

Insolvency Law Committee (February, 2020) which report discussed Section

52, 53(1)(b)(ii). The Committee in paragraph 7.4 opined that provision does

not necessitate any further amendment to the provisions of the Code. What

was said by the Committee was that priority to secured creditors under

Section 53(1)(b)(ii) should be applicable only to the extent of the value of the

security interest that is relinquished by the secured creditor. The said

observation was for different purpose i.e. in reference to priority which with

respect to debt owed to secured creditor, in the event secured creditor

Company Appeal (AT) (Insolvency) No. 570 of 2022

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relinquishes the security in the manner set out in Section 52. The

Committee in its report nowhere even suggested that secured financial

creditor is entitled to distribution as per value of security. The conclusion of

the committee is that the priority under Section 53(1)(b)(ii) shall be only to

the extent of security interest of the secured creditor. The secured creditor

cannot claim priority under Section 53(1)(b)(ii) of the whole debt where only

part of the debt is secured, the above report of the Committee in no manner

helps the appellant to support the submission which is canvassed before us.

22. Learned Counsel for the Appellant has also referred to the Judgment

of Hon’ble Supreme Court in “ICICI Bank Vs. SIDCO Leathers Ltd. &

Ors.”, [(2006) 10 SCC 452] in which the Hon’ble Supreme Court has dealt

with Section 529 of the Companies Act, 1956. The above judgement was on

Section 529 of the Companies Act and does not support the submissions

which have been canvassed by the Learned Counsel for the Appellant in the

present case.

23. Learned Counsel for the Appellant has also referred to Judgement of

this Tribunal in Company Appeal (AT) Ins. No. 731 of 2020 in “Technology

Development Board Vs. Anil Goel & Ors.” decided on 05th April, 2021

which judgement has been stayed by the Hon’ble Supreme Court vide its

Order dated 29th June, 2021 in Civil Appeal Diary No. 11060/2021. Learned

Counsel for the Respondents have not placed reliance on the Judgement of

this Tribunal in Technology Development Board (supra).

24. The Judgement of this Tribunal in Company Appeal (AT) Ins. No. 547

of 2022 in “Oriental Bank of Commerce Vs. Anil Anchalia & Anr.”

decided on 26th May, 2022 also does not support the submission of Learned

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 -21-

Counsel for the Appellant. It was held that dissenting financial creditor is

entitled for distribution as per Section 53(1). The claim of the dissenting

Financial Creditor that he is entitled to receive the entire amount received

from property which was secured with the Financial Creditor was rejected

relying on the Judgment of the Hon’ble Supreme Court in “India

Resurgence” (supra).

25. In view of the foregoing discussion, we do not find any error in the

Order dated 17.03.2022 of the Adjudicating Authority rejecting I.A. No. 581

of 2021 filed by the Appellant. The decision of the Committee of Creditors

and the Adjudicating Authority deciding to distribute the proceeds of the

plan value as per voting share of the secured creditor in no manner

contravenes the provisions of Section 30(2)(b) of the Code. None of the

submissions raised by the Learned Counsel for the Appellant has any

substance. In result, the Appeal is dismissed.

[Justice Ashok Bhushan]

Chairperson

[Mr. Barun Mitra]

Member (Technical)

NEW DELHI
16th September, 2022
Basant

Company Appeal (AT) (Insolvency) No. 570 of 2022