Small Industries Development Bank of India (SIDBI) Vs. Sumit Sharma and Anr. - Learned counsel for the appellant submits that ‘Amit Metaliks’ (supra) is under consideration by the Hon’ble Supreme Court in ‘DBS Bank Ltd. Singapore’ Vs. ‘Ruchi Soya Industries Ltd. & Anr.’ in [Civil Appeal No. 9133/2019]. In event, any judgment is delivered by the Hon’ble Supreme Court, it shall be always open for the appellant to take such remedy as available in the law.

NCLAT (2025.09.08) in Small Industries Development Bank of India (SIDBI) Vs. Sumit Sharma and Anr.  [(2025) ibclaw.in 714 NCLAT, Company Appeal (AT) (Insolvency) No. 1359 of 2025 & I.A. No. 5309 of 2025] held that;

• Learned counsel for the appellant submits that ‘Amit Metaliks’ (supra) is under consideration by the Hon’ble Supreme Court in ‘DBS Bank Ltd. Singapore’ Vs. ‘Ruchi Soya Industries Ltd. & Anr.’ in [Civil Appeal No. 9133/2019]. In event, any judgment is delivered by the Hon’ble Supreme Court, it shall be always open for the appellant to take such remedy as available in the law.

Excerpts of the order;

08.09.2025 : Heard counsel for the appellant as well as learned counsel appearing on behalf of the respondent No. 1.

# 2. This appeal has ben filed against an order dated 30.06.2025 passed by the adjudicating authority (National Company Law, Tribunal, Jaipur Bench) by which I.A. 637/JPR/2023 filed by the appellant has been rejected.

# 3. The appellant is a secured financial creditor who has 3.22% voting shares in the CoC, another financial creditor is Punjab National Bank (PNB) having 96.68% voting shares. The resolution plan came to be approved by the adjudicating authority on 12.03.2024 of the corporate debtor. The Committee of Creditors (CoC) has also vide resolution decided on distribution mechanism and CoC decided for distribution on the basis of vote shares of the creditors. Appellant filed an I.A.637/JPR/2023 praying for following reliefs:

• “i) Allow the present application 

• ii) Pass an order listing the present application along with CP (IB) No. 36/9/JPR/2022 pending before this Hon’ble Tribunal which is already scheduled to be listed on 06.12.2023

• iii) Pass an order thereby declaring the resolutions No. 5A and 5B contained in the minutes of the 8th CDC meeting (Adjourned) held on 20.11.2023 as non-est and not maintainable in the eyes of law 

• iv) Pass any such other or further order(s) which this Hon’ble Tribunal may deem fit in the interest of justice.”

# 4. The application came to be dismissed by the impugned order against which order this appeal has been filed.

# 5. Counsel for the appellant submits that appellant has successful security interest on the plant and machinery and hence the distribution ought to have been on the basis of the security interest of the appellant.

# 6. An application was filed three months before the approval of the resolution plan which was not decided and there is no consideration of the claim raised by the appellant.

# 7. Counsel for the RP submits that distribution mechanism was already decided by the CoC on the basis of vote shares and thereafter the plan was approved which has now been implemented fully and the adjudicating authority did not commit any error in rejecting the application.

# 8. We have considered the submissions of counsel for the parties and perused the records.

# 9. It is not disputed that CoC has already taken a position to adopt voting shares for the distribution of the debt between the creditors, although the said was objected by the appellant in the application but application remain pending and resolution plan also stood approved on 12.03.2024.

# 10. The judgment of this Tribunal in [Comp. App. (AT) (Ins.) No. 321/2024] in ‘State Bank of India’ Vs. IDBI Bank Limited & Anr.’ decided on 28.01.2025 also fully supports the proposition for distribution on the basis of pro-rata basis. In paragraphs 19 to 21 of the judgment, following has been laid down:

• “19. In view of the forgoing discussions and our conclusions, we are of the view that Adjudicating Authority has not committed any error in directing distribution of sale proceeds as per the admitted claim of the Financial Creditor pro-rata basis and the directions issued by the Adjudicating Authority is in accordance with law as declared by the Hon’ble Supreme Court in ‘Amit Metaliks Limited’ (Supra).

• 20. We, thus do not find any good ground to interfere with the Impugned Order. Both the Appeals are dismissed. The amount as per re-distribution in pursuance of the Impugned Order shall be made over to the Secured Creditors, including the IDBI Bank Ltd., along with the interest as directed on 29.02.2024. Both the Appeals are dismissed accordingly.

• 21. We make it clear that any distribution as directed by the Order of the Adjudicating Authority and affirmed in this Appeal shall always be subject to any Order passed by the Hon’ble Supreme Court and as per the law declared by the Hon’ble Supreme Court in Civil Appeal Diary No. 11060/2021.

• Parties shall bear their own costs.”

# 11. Admittedly, the appellant has vote shares of only 3.22 vote shares and the another creditor – PNB has 96.68% vote shares, the CoC having taken its decision by resolution regarding distribution which remains unaltered. We do not find any substance in the submission of the appellant that distribution should be on the basis of the security interest.

# 12. Judgment of the Hon’ble Supreme Court in ‘India Resurgence ARC Pvt. Ltd.’ Vs. ‘Amit Metaliks Ltd. & Anr.’ reported in [(2021) 19 SCC 672] has already laid down the proposition with respect to distribution which has to be as per the decision of the CoC.

# 13. Learned counsel for the appellant submits that ‘Amit Metaliks’ (supra) is under consideration by the Hon’ble Supreme Court in ‘DBS Bank Ltd. Singapore’ Vs. ‘Ruchi Soya Industries Ltd. & Anr.’ in [Civil Appeal No. 9133/2019]. In event, any judgment is delivered by the Hon’ble Supreme Court, it shall be always open for the appellant to take such remedy as available in the law.

We thus do not find any error in the order of the adjudicating authority. Appeal is dismissed.

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Distribution of funds under Resolution Plan & Liquidation Process - Whether the “Statutory Dues” can be classified as “Secured Creditor”.

  Distribution of funds under Resolution Plan & Liquidation Process.

1. Confusion prevails in distribution of funds under Resolution Plan & Liquidation Process, in absence of clear law laid down on the following questions.

1. Whether the concept of “Value of Security Interest” is inherent under section 30(2) & section 53(1).

2. Whether the “Statutory Dues” can be classified as “Secured Creditor” in accordance with the provisions of the concerned Taxation Law for the purpose of distribution of funds under section 53(1) waterfall.

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2. Case law on “Value of Security Interest”

i). SCI (2024.01.03) in DBS Bank Ltd. Singapore Vs. Ruchi Soya Industries Ltd. and Anr. [Civil Appeal No. 9133 of 2019 with Civil Appeal No. 787 of 2020 ] held that;

• Section 30(2) refers only to the sum of money and nothing else, that is, it does not permit the dissenting financial creditor to enforce the security and sell the same. This would be counterproductive and may nullify the resolution plan. 

• What the dissenting financial creditor is entitled to is the payment, which should not be less than the amount/value of the security interest held by them. 

• The security interest gets converted from the asset to the value of the asset, which is to be paid in the form of money.

• A dissenting financial creditor is entitled to not partake the proceeds in the resolution plan, unless a higher amount in congruence with its security interest is approved in the resolution plan. 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 dissenting financial creditor has to statutorily forgo and relinquish his security interest on the resolution plan being accepted, and his position is same and no different from that of a secured creditor who has voluntarily relinquished security and is to be paid under Section 53(1)(b)(ii) of the Code.

• 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 financial 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 made applicable.

• The dissenting financial creditor cannot object to the resolution plan, but can object to the distribution of the proceeds under the resolution plan, when the proceeds are less than what the dissenting financial creditor would be entitled to in terms of Section 53(1) if the corporate debtor had gone into liquidation. This is the statutory option or choice given by law to the dissenting financial creditor. The option/choice should be respected.

• In view of the aforesaid discussion, and as we are taking a different view and ratio from India Resurgence ARC Private Limited (supra) on interpretation of Section 30(2)(b)(ii) of the IBC, we feel that it would be appropriate and proper if the question framed at the beginning of this judgment is referred to a larger Bench.

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ii).  SCI (2021.05.13) in India Resurgence ARC Private Limited  Vs Amit Metaliks Limited & Anr. [Civil Appeal No. 1700 of 2021] held that;

• # 11. . . .Once it is found that all the mandatory requirements have been duly complied with and taken care of, the process of judicial review cannot be stretched to carry out quantitative analysis qua a particular creditor or any stakeholder, who may carry his own dissatisfaction.

• # 13.1. Thus, what amount is to be paid to different classes or subclasses of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest.

• 14.1. That a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him.

• It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him.

• It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him.

• # 15. 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.

• # 16. .  . . .We may profitably refer to the relevant observations in this regard by this Court in Essar Steel as follows:- “85. Indeed, if an "equality for all" approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow.”

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iii). NCLAT (2021.04.05) in Technology Development Board Vs.Anil Goel, Liquidator of Gujarat Oleo Chem Limited (GOCL) & Ors.  [Company Appeal (AT) (Insolvency) No.731 of 2020] held that;-

• Appellate Tribunal in “J M Financial asset Reconstruction Co. Ltd. vs. Finquest Financial Solutions Pvt. Ltd. & Ors.”, held that only the first charge holder i.e. the Secured Creditor being highest in the inter creditor ranking is entitled to enforce his right for the realization of its debt out the secured asset.

• While it is true that the relinquishment of security interest affects the order of distribution, it is equally true that the Secured Creditor does not lose its status of being a Secured Creditor though he has elected to forego his right of enforcing security interest. Whether the Secured Creditor holds first charge or second charge is material only if the Secured Creditor elects to realise its security interest. 

• The two sets of Secured Creditors, one relinquishing the security interest and the other realising its security interest are treated differently. A creative interpretation has to be given to the provisions to make them workable and stand in harmony. It is significant to note that Section 53 has been given overriding effect and the non-obstante clause contained in the very opening words of the Section leaves no room for doubt that the distribution mechanism provided thereunder applies in disregard of any provision to the contrary contained in any Central or State law in force. 

• Of course first charge holder will have priority in realising its security interest if it elects to realize its security interest and does not relinquish the same. However, once a Secured Creditor opts to relinquish its security interest, the distribution of assets would be governed by the provision engrafted in Section 53(1)(b)(ii) where under all Secured Creditors having relinquished security interest rank equally and in the waterfall mechanism are second only to the insolvency resolution process costs and the liquidation costs.

• We accordingly allow the appeal and set aside the impugned order. I.A. 514 of 2019 in CP(IB) No. 04/2017, is held to be maintainable and we allow the same with direction to the Liquidator to treat the Secured Creditors relinquishing the security interest as one class ranking equally for distribution of assets under Section 53(1)(b)(ii) of I&B Code and distribute the proceeds in accordance therewith.

[Link Synopsis]

Hon'ble Supreme Court (29.06.2021) in Kotak Mahindra Bank Limited Vs. Technology Development Board & Ors. (Civil Appeal Diary No(s). 11060/2021)(Arising out of impugned final judgment and order dated 05-04-2021 in CAAT(I) No. 731/2020 passed by the National Company Law Appellate Tribunal) stayed the order of the Appellate Authority;

O R D E R

Permission to file Appeal is granted.

Issue notice.

In the meantime, there shall be stay of the operation of the impugned judgment and Order passed by the National Company Law Appellate Tribunal.

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3. Case Law on “Statutory Dues” - “Secured Creditor”

iv). SCI (2023.10.31) in Sanjay Kumar Agarwal Vs. State Tax Officer (1) & Anr. [(2023) ibclaw.in 140 SC, Review Petition (Civil) No. 1620-1623 of 2023 in Civil Appeal No. 1661 of 2020  and Review Petition (Civil) No. 236 of 2023 in Civil Appeal No. 2568 of 2020 (Neutral Citation No. 2023 INSC 963)] dismissed the review petition to review the judgement  in Rainbow Papers Limited;

• Constitution Bench in Beghar Foundation vs Justice K.S. Puttaswamy (Retired) and Others7, held that even the change in law or subsequent decision/ judgment of co-ordinate Bench or larger Bench by itself cannot be regarded as a ground for review.

• It is well settled proposition of law that a co-ordinate Bench cannot comment upon the discretion exercised or judgment rendered by another co-ordinate Bench of the same strength. If a Bench does not accept as correct the decision on a question of law of another Bench of equal strength, the only proper course to adopt would be to refer the matter to the larger Bench, for authoritative decision, otherwise the law would be thrown into the state of uncertainty by reason of conflicting decisions.

• The rule of precedent is binding for the reason that there is a desire to secure uniformity and certainty in law. Thus, in judicial administration precedents which enunciate the rules of law form the foundation of the administration of justice under our system. Therefore, it has always been insisted that the decision of a coordinate Bench must be followed.

• That a co-ordinate Bench cannot comment upon the judgment rendered by another co-ordinate Bench of equal strength and that subsequent decision or a judgment of a co-ordinate Bench or larger Bench by itself cannot be regarded as a ground for review

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v).. Supreme Court (17.07.2023) In Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. & Ors.[Civil Appeal Nos. 7976 of 2019, (2023) ibclaw.in 81 SC] held that;

• # 46. The specific mention of other class of creditors whose dues are statutory, such as dues payable to workmen or employees, “the provident fund, the pension fund, the gratuity fund” under Section 36(4), which excludes these enumerated amounts from the liquidation, especially clarifies that not all dues owed under statute are treated as ‘government’ dues. In other words, dues payable to statutory corporations which do not fall within the description “amounts due to the central or state government” such as for instance amounts payable to corporations created by statutes which have distinct juristic entity but whose dues do not constitute government dues payable or those payable into the respective Consolidated Funds stand on a different footing. Such corporations may be operational creditors or financial creditors or secured creditors depending on the nature of the transactions entered into by them with the corporate debtor. On the other hand, dues payable or requiring to be credited to the Treasury, such as tax, tariffs, etc. which broadly fall within the ambit of Article 265 of the Constitution are ‘government dues’ and therefore covered by Section 53(1)(f) of the IBC.

• # 47. PVVNL undoubtedly has government participation. However, that does not render it a government or a part of the ‘State Government’. Its functions can be replicated by other entities, both private and public. The supply of electricity, the generation, transmission, and distribution of electricity has been liberalized in terms of the 2003 Act barring certain segments. Private entities are entitled to hold licenses. In this context, it has to be emphasized that private participation as distribution licensees is fairly widespread. For these reasons, it is held that in the present case, dues or amounts payable to PVVNL do not fall within the description of Section 53(1)(f) of the IBC.

• # 50. The Gujarat Value Added Tax Act, 2003 no doubt creates a charge in respect of amounts due and payable or arrears. It would be possible to hold [in the absence of a specific enumeration of government dues as in the present case, in Section 53(1)(e)] that the State is to be treated as a ‘secured creditor’. However, the separate and distinct treatment of amounts payable to secured creditor on the one hand, and dues payable to the government on the other clearly signifies Parliament’s intention to treat the latter differently – and in the present case, having lower priority. As noticed earlier, this intention is also evident from a reading of the preamble to the Act itself.

• # 51. According to the principles of statutory interpretation, when an enactment uses two different expressions, they cannot be construed as having the same meaning. It was held in Member, Board of Revenue v. Anthony Paul Benthall36 that:

• “When two words of different import are used in a statute, in two consecutive provisions, it would be difficult to maintain that they are used in the same sense…”

• This idea is reflected in a subsequent judgment in Brihan Mumbai Mahanagarpalika & Anr. v. Willington Sports Club & Ors.37

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vi)). SCI (06.09.2022) in State Tax Officer (1) Vs. Rainbow Papers Limited [Civil Appeal No.  1661 of 2020] held that;

• # 53. In other words, if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 of the IBC.

• # 54. In our considered view, the Committee of Creditors, which might include financial institutions and other financial creditors, cannot secure their own dues at the cost of statutory dues owed to any Government or Governmental Authority or for that matter, any other dues.

• # 55. In our considered view, the NCLAT clearly erred in its observation that Section 53 of the IBC over-rides Section 48 of the GVAT Act. Section 53 of the IBC begins with a non-obstante clause which reads :- “Not withstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority...........”

• # 56. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of the IBC. Under Section 53(1)(b)(ii), the debts owed to a secured creditor, which would include the State under the GVAT Act, are to rank equally with other specified debts including debts on account of workman’s dues for a period of 24 months preceding the liquidation commencement date.

• # 57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in the IBC does not exclude any Government or Governmental Authority.

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