NCLAT held that dissenting financial creditors are entitled to a pro-rata share of the enhanced resolution value and must be paid with priority in every installment disbursed under the Resolution Plan.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member), while adjudicating a batch of appeals and connected IAs, held that under Section 30(2)(b) of the IBC, a dissenting financial creditor is entitled to a pro-rata share of the resolution value—not merely the liquidation value—and must be paid in priority over assenting creditors in every installment disbursed under the Resolution Plan.
In the present matter, RBL Bank Limited challenged the order dated 20.12.2023 passed by the Adjudicating Authority in IA (IBC) No. 1188/2023, filed by the Successful Resolution Applicant (Respondent No.1) in CP(IB) No. 73/2020, Sical Logistics Limited vs. Mr. Sripatham Venkatasubramanian Ramkumar & Ors. The impugned order had directed the Appellant (RBL Bank), Respondent No.3 (Bank of Baroda), and other members of the Committee of Creditors (CoC) to (i) release original title documents of the Corporate Debtor’s assets, including two land parcels located in Madhavaram, Chennai, to Respondent No.1 for the purpose of asset sale as contemplated under the approved Resolution Plan, (ii) facilitate regulatory filings in relation to such sale, and (iii) execute definitive agreements as mandated in the Resolution Plan.
Subsequent proceedings before the NCLAT revealed that in a connected appeal, CA (AT)(CH)(Ins) No. 37/2024, RBL Bank had also challenged another order passed in IA (IBC) No.1329/(CHE)/2023 in the same CP(IB) No. 73/2020, wherein the Adjudicating Authority declined to restrain the Corporate Debtor from alienating secured assets. The Tribunal directed the erstwhile CoC to revise the distribution matrix as per Section 30(2) and Section 53(1) of the Insolvency and Bankruptcy Code, 2016, giving effect to priority payment to dissenting financial creditors. As both parties opted to argue CA (AT)(CH)(Ins) No. 36/2024 on merits, the connected appeal was not pursued separately.
The core question involved the determination of whether the payments to be made to RBL Bank were compliant with Section 30(2)(b) of the IBC and the terms laid down under Clause 1.2.9.1(b) of the Resolution Plan. During arguments, the Respondent offered to deposit Rs. 105 Crores within two weeks and Rs. 226 Crores by 11.07.2025, in accordance with the Resolution Plan’s timelines, and sought return of the original title documents upon such payments. The Bank of Baroda, representing the CoC, argued that the order passed in IA (IBC) No. 250/2023 had already fixed the rights and payment priorities of stakeholders, which could not now be altered. The Appellant, on the other hand, emphasized that its entitlement to Rs. 42.09 Crores was clearly stipulated in the Resolution Plan under both payment scenarios.
The Tribunal held that the Adjudicating Authority erred in limiting the dissenting creditor’s claim to the liquidation value under Section 30(2)(b). It held that where the resolution value exceeded the liquidation value, dissenting financial creditors were entitled to a proportionate share of the resolution value. Hence, RBL Bank was found entitled to receive Rs. 42.09 Crores, not Rs. 34.78 Crores. It was further clarified that dissenting creditors must receive priority in payment within each disbursement cycle, even if payments are structured in installments, thereby aligning with prior precedents.
In respect of IA No. 1188/2023, which sought directions to enforce aspects of the Resolution Plan such as release of title deeds, regulatory filings, and agreement execution, the Tribunal concurred with the Adjudicating Authority’s observations. It noted that the SRA was obligated to make deferred payments with interest at 8% p.a. and that the financial creditors, by approving the plan, had impliedly consented to asset sales for debt realization. Therefore, the Tribunal upheld the requirement for financial creditors to cooperate by releasing documents and assisting in regulatory compliance.
Accordingly, the NCLAT concluded that RBL Bank is entitled to Rs. 42.09 Crores and reaffirmed that dissenting financial creditors must be paid in priority, though proportionally, in each installment-based disbursement. The Tribunal directed the implementation of the Resolution Plan in consonance with these principles and upheld the directions issued by the Adjudicating Authority for facilitating the sale and execution of documents.
Mr. Krishna Srinivasan, Senior Advocate for Ms. Pavitra Venkateswaran, Advocate, represented the Appellant.
Mr. R. Sankaranarayanan, Senior Advocate for Mr. Aditya Reddy, Mr. Abhishek Swaroop, Mr. Palash Agarwal and Ms. Bhawana Sharma, Advocates, appeared for Respondent No. 1.
Mr. Pradeep Joy and Ms. Dharmya M. S, Advocates, appeared for Respondent No. 2.
Mr. Srinath Sridevan, Senior Advocate for Mr. Rama Subramaniam Raja, Advocate, appeared for Respondent No. 3.
Mr. N. Somasundar, Advocate, represented the Respondent No. 10.
Mr. H Arunachalam, Advocate, appeared for Respondent No. 21.
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