SECURED CREDITOR CANNOT CHALLENGE A RESOLUTION PLAN BASED ON SECURITY INTEREST - SC

An SC bench comprising Justices Vineet Saran and Dinesh Maheshwari held that under the Indian Bankruptcy Code, a secured creditor could not challenge a resolution plan because a higher security interest was held by it over the corporate debtor.

FACTS

The appellant was challenging the resolution plan for the insolvency of the corporate debtor- VSP Udyog Private Limited. The Appellant objected that the plan offered an amount of Rs 2.02 cr, whereas the appellants' claim over the corporate debtor was INR 13.38 cr. The RP did not bother to consider the valuation of the security held by the appellant, which admittedly had a valuation of more than INR 12 crores.

The Appellant approached the Apex court after getting rejected by the National Company Law Appellate Tribunal.

The Appellant argued before the SC that the Committee of Creditors could not have approved the RP; they were required to take into account the priority and value of the security interest of a secured creditor as per the amended Section 30(4) of the Code.

OBSERVATIONS

While dismissing the appeal, the Court observed that Section 30 (4) only amplified the considerations for the CoC while exercising its commercial wisdom to make an informed decision regarding the viability and feasibility of the RP, with the fairness of distribution amongst similarly situated creditors. The business decision taken in exercise of the commercial wisdom of CoC does not call for intervention unless creditors belonging to a class being similarly situated are denied just and equal treatment.

Author: Papiha Ghoshal