The provisions of Section 30(2) (b)(ii) by law provides assurance to the dissenting creditors that they will receive as money the amount they would have received in the liquidation proceedings. This rule also applies to the operational creditors. This ensures that dissenting creditors receive the payment of the value of their security interest.”
In Case of DBS Bank Limited Singapore v. Ruchi Soya Industries Limited and Another [Civil Appeal no. 9133 of 2019] The facts of the case initiates when , DBS Bank Limited Singapore and Ruchi Soya Industries Limited are embroiled in a dispute concerning the payment of a dissenting financial creditor under the Insolvency and Bankruptcy Code (IBC), incorporating amendments introduced in 2019. The crux of the matter lies in DBS Bank’s claim that its security interest holds superior standing compared to other creditors, justifying its entitlement to the minimum value of its security interest. Despite DBS Bank’s assertion, the Committee of Creditors approved a resolution plan that did not acknowledge the bank’s argument, prompting DBS Bank to file appeals with the National Company Law Tribunal and Appellate Tribunal.
The court’s scrutiny delves into the intricacies of the resolution process governed by the IBC. The resolution professional’s assessment encompasses various facets, including payment priority, creditor disbursements, management plans, compliance with legal requirements, and other specifications outlined by the board. Recent amendments, applicable to ongoing proceedings, underscore the authority to implement changes at both the original and appellate stages. The court emphasizes that dissenting financial creditors must, under the IBC, receive at least the liquidation amount, aligning with the overarching objectives of balancing stakeholder interests, resolving insolvency, attracting investments, maximizing asset value, and enhancing credit availability. Legal provisions safeguard minority creditors’ autonomy by ensuring that dissenting financial creditors receive no less than the liquidation value. The court clarifies that payments to dissenting creditors should be in the form of money, preserving fairness in the distribution process. It underscores the importance of adherence to statutory requirements, preventing inequitable scenarios, and promoting insolvency resolution over liquidation. The judgment stresses the delicate balance between protecting dissenting financial creditors’ rights and maximizing asset value during the Corporate Insolvency Resolution Process (CIRP) period. The ruling rejects claims challenging the workability of the code and underscores dissenting financial creditors’ statutory right to object to the distribution of proceeds under a resolution plan, thereby safeguarding their entitlement in the insolvency resolution framework.
The matter be, Accordingly placed before the Hon’ble the chief Justice for appropriate orders.
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Written by- Komal Goswami
