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India Resurgence ARC Private Limited v. M/S. Amit Metaliks Limited

Civil Appeal · 2021 INSC 296Decided 13 May 2021
Civil Appeal No. 1700 of 2021
Justice Vineet Saran · Justice Dinesh Maheshwari

Background

During the insolvency resolution of VSP Udyog Private Limited, the Committee of Creditors approved a resolution plan proposed by Amit Metaliks Limited. India Resurgence ARC Private Limited, a secured financial creditor holding a small voting share, disagreed with the amount it was offered under the plan and became a "dissenting financial creditor," arguing it should instead be entitled to the full value of the security interest it held, around Rs. 12 crore, rather than the roughly Rs. 2 crore offered. Both the National Company Law Tribunal and the National Company Law Appellate Tribunal rejected its challenge, leading to this appeal.

Decision Breakdown

The Supreme Court held that a dissenting secured financial creditor's entitlement under the Insolvency and Bankruptcy Code is capped by Section 30(2)(b): it is entitled only to a share proportionate to what is being offered to similarly placed financial creditors under the resolution plan, not the full value of its security interest. The Court reasoned that allowing dissenting creditors to claim full security value would create a perverse incentive for every secured creditor to dissent and push for liquidation rather than support resolution, defeating the Code's core purpose of rescuing viable businesses. Finding the appellant's claimed value of Rs. 12 crore "ill-conceived" against the correctly computed proportional entitlement of about Rs. 2.026 crore, the Court dismissed the appeal and upheld the resolution plan.

Lesson Learnt

Creditors who disagree with an approved insolvency resolution plan cannot demand the full value of their security interest: the law intentionally limits a dissenting creditor's payout to prevent the system from tilting toward liquidation over business rescue.

Official source (sci.gov.in)View Judgment (PDF)

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