On January 03, 2024, the Supreme Court (SC) of India was hearing the DBS Bank Limited Singapore vs. Ruchi Soya Industries Limited case. The main issue under consideration was “Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016, (IBC) as amended in 2019, entitles the dissenting financial creditor to be paid the minimum value of its security interest?” The two-judge bench Justice Sanjiv Khanna and Justice SVN Bhatti referred the issue to a larger bench after disagreeing with the reasoning of a coordinate bench in the India Resurgence ARC Private Limited vs. Amit Metaliks Limited & Another case.
The SC opined “the provisions of Section 30(2)(b)(ii) by law provide 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.” Further, the bench said that the provision was enacted to protect the minority autonomy of creditors. It added, “It should not be read down to nullify the minimum entitlement.” Moreover, the top court also illustrated that “The ‘amount’ to be paid to the dissenting financial creditor should be in accordance with Section 53(1) in the event of liquidation of the corporate debtor. In other words, in our opinion, the dissenting financial creditor is entitled to a minimum value in monetary terms equivalent to the value of the security interest.”
The SC in 2021 the India Resurgence ARC Private Limited case held that “It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bring about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors.” While pronouncing judgment in the current case, Justice Khanna stated, “We wish to clarify that Section 53(1) is referred to in Section 30(2)(b)(ii) with the purpose and objective that the dissenting creditor is not denied the amount which is payable to it being equal to the amount of value of the security interest. The entire Section 53 is not applicable.”
After hearing the arguments from both sides, the case was referred to a larger bench and was directed to be placed before the Chief Justice of India for appropriate orders.
(With input from news agency language)
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