NCLAT rejects DBS’s claim for bigger share of Ruchi Soya resolution proceeds

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Published: November 21, 2019 12:33:00 AM

The lender had sought a minimum of Rs 219 crore, or 90% of its Rs 243 crore exposure to Ruchi Soya against Rs 119 crore distributed to it by the committee of creditors (CoC).

The three-member NCLAT bench, headed by chairperson Justice SJ Mukhopadhaya, in its order on November 18, dismissed the appeal.The three-member NCLAT bench, headed by chairperson Justice SJ Mukhopadhaya, in its order on November 18, dismissed the appeal.

The National Company Law Appellate Tribunal (NCLAT) has turned down a plea of the Singapore-based DBS Bank, seeking a bigger share of proceeds from the Rs 4,350-crore resolution plan for Ruchi Soya. DBS claims sole charge on the fixed assets of the debt-ridden food and agri products company.

The lender had sought a minimum of Rs 219 crore, or 90% of its Rs 243 crore exposure to Ruchi Soya against Rs 119 crore distributed to it by the committee of creditors (CoC). The three-member NCLAT bench, headed by chairperson Justice SJ Mukhopadhaya, in its order on November 18, dismissed the appeal.

Objecting to the CoC’s decision on the pattern of distribution of the payout under the plan, DBS had requested the CoC to take into account the value of its security interests while considering the distributions; but the CoC went on approving the plan with 96.95% majority. Subsequently, the Mumbai bench of National Company Law Tribunal (NCLT) had on July 24 approved Patanjali’s resolution plan.

Implying a 51% haircut, Patanjali’s resolution plan envisaged Rs 4,134 crore payment to all the financial creditors, including DBS, against their admitted claim of Rs 8,398 crore.

DBS, a dissenting secured creditor, did not challenge the resolution plan before the appellate tribunal; its objection was limited to the pattern of distribution of the proceeds. Before the NCLAT, it argued that under the amended sub-section (2)(b)(ii) of section 30 of the Insolvency and Bankruptcy Code (IBC), it was entitled to a minimum amount as payable in the event of Ruchi Soya’s liquidation. The amount should be close to 90% of its exposure, it had said.

The NCLAT bench, in its order, however, dismissed the applicability of the amended section, saying, “as the appellant (DBS Bank) is not challenging the resolution plan; the question of applicability of amended section 30(2) does not arise.”

“However, no financial creditor including a secured creditor can dissent on the ground that if it dissents against the resolution plan, in spite of the plan being feasible and viable and in accordance with Section 30(2), just to get more amount than the other secured creditor. Such dissenting secured financial creditor cannot take advantage of amended Section 30(2)(b)(ii),” the NCLAT bench said.

A secured creditor, it said, cannot claim preference over other secured creditor at the stage of distribution out of the resolution plan on the ground of dissenting or assenting secured financial creditor, otherwise the distribution would be held to be arbitrary and discriminatory. “In view of the aforesaid finding, no interference is called for against the impugned order dated July 24, 2019. The appeal is dismissed,” the NCLAT said.

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