Are dissenting financial creditors under IBC to be paid minimum value of security interest? Supreme Court refers issue to larger bench

The Supreme Court on Wednesday referred to a larger bench the question of whether a dissenting financial creditor during a corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC) is to be paid the minimum value of its security interest [DBS Bank Limited Singapore vs Ruchi Soya Industries Limited and anr]..A bench of Justices Sanjiv Khanna and SVN Bhatti framed the following question of law to be considered by the larger bench:"Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016, as amended in 2019, entitles the dissenting financial creditor to be paid the minimum value of its security interest?"This was after the bench disagreed with the reasoning of a coordinate bench in the India Resurgence ARC Private Limited case.The Court today said that the provision was enacted to protect the minority autonomy of creditors and should not be read down to nullify the minimum entitlement. "Section 30(2)(b)(ii) forfends the dissenting financial creditor from settling for a lower amount payable under the resolution plan ... A financial creditor can dissent if the resolution plan is discriminatory or against a provision of law. However, a dissenting financial creditor cannot take advantage of Section 30(2)(b)(ii). A secured creditor cannot claim preference over another secured creditor at the stage of distribution on the ground of a dissent or assent, otherwise the distribution would be arbitrary and discriminative."The Court explained that a dissenting financial creditor can choose not to participate in the resolution process unless a higher amount in congruence with its security interests is approved of. "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 ... the dissenting financial creditor is entitled to a minimum value in monetary terms equivalent to the value of the security interest.".In India Resurgence, the top court had held that a dissenting secured creditor cannot suggest higher amounts to be paid to it towards the value of security interests."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," the Court had observed in India Resurgence. .In view of the divergence in opinion, the matter was directed to be placed before the Chief Justice of India for appropriate orders. The case arose out of insolvency proceedings of Ruchi Soya Industries Limited (corporate debtor) where DBS Bank Limited Singapore was a financial creditor..Advocates Anindita Roy Chowdhury, Vatsala Rai, Raghav Chadda, Bharat Makkar, Sushrut Garg, and Anannya Ghosh appeared for DBS Bank.Senior Advocate Krishnan Venugopal with advocates Nakul Sachdeva, Aakarshan Sahay, Sagar Arora, Abhinandan Sharma, Krishnan Agarwal, Faisal Sherwani, and Gaurav Varma, briefed by a team from Cyril Amarchand Mangaldas, appeared for Ruchi Soya..[Read Judgment]