M/S VISTRA ITCL (INDIA) LTD & ORS. versus MR. DINKAR VENKATASUBRAMANIAN & ANR.

Citation: [2023] 6 S.C.R. 806 · Decided: 04-05-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 6 S.C.R.
   [2023] 6 S.C.R. 806
806
M/S VISTRA ITCL (INDIA) LTD & ORS.
v.
MR. DINKAR VENKATASUBRAMANIAN & ANR.
(Civil Appeal No.3606 of 2020)
MAY 04, 2023
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Insolvency and Bankruptcy Code, 2016: ss. 30, 52 and 53 –
Claim of the appellant as financial creditor of the corporate debtor
on basis of the pledged shares – Entitlement to – On facts, corporate
debtor approached the appellants to extend a short- term loan
facility to its group companies for the ultimate end use of the
corporate debtor – It was an understanding that the corporate
debtor would create first ranking exclusive security by way of
pledging shares held by the corporate debtor – Execution of Security
Trustee Agreements between the appellant no. 1 and the group
companies – Thereafter, an application u/s.7 admitted against the
corporate debtor and the respondent appointed as the resolution
professional – Appellant no. 1 filed its claim as a secured creditor
of the corporate debtor and submitted Form C claiming a principal
amount, however, the same was rejected by the resolution
professional – Appellants then filed application u/s. 60(5) claiming
the right based on pledged shares, which was rejected by the
Adjudicating Authority as well as the NCLAT – NCLAT held that the
appellants not having advanced any money to the corporate debtor
as a financial debt would not be coming within the purview of a
financial creditor of the corporate debtor – On appeal,
held:Appellant No. 1 has security interest in the pledged shares –
Appellant No. 1 is to be treated as a secured creditor, but would not
fall under the category of financial creditors or operational creditors
– Appellant No.1 is being denied the rights u/s. 52 as well as s. 53
in respect of the pledged shares whereas, the intent of the amended
s. 30(2) rw s. 31 is to protects the interests of other creditors who
are outside the purview of the CoC – Viable solution is to treat the
appellant no. 1 as secured creditor in terms of s. 52 rw s. 53 –
Option is given to the successful resolution applicant to treat the
appellant no.1 as a secured creditor, who would be entitled to retain
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the security interest in the pledged shares, and in terms thereof,
retain the security proceeds on the sale of the said pledged shares –
This option would meet the mandate of the Code and does not violate
the rights given to the secured creditor –Thus, appellant no.1 would
be treated as a secured creditor, and entitled to all rights and
obligations as applicable to a secured creditor in terms of ss. 52
and 53 and in accordance with the pledge agreement – Insolvency
and Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – r. 21A.
Disposing of the appeal, the Court
HELD: 1.1 The submission that the Amended and Restated
Pledge Agreement dated 5.07.2016 between the corporate debtor
and the IL&FS Trust Company Limited, the predecessor-in-
interest of the appellant no. 1 (Pledge Agreement) inter alia
provides that the Corporate Debtor is the guarantor of the entire
loan amount for which reliance was placed upon clause 2.12 of
the Pledge Agreement, is rejected, for the Pledge Agreement
specifically restricts and limits the liability of the Corporate
Debtor the extent of the pledged shares vide clause 2.1.1. [Para
6][821-C-D]
1.2 Certain communications issued by the IDBI Bank, the
lead bank of the Joint Lenders Forum, which now constitutes
the majority of the CoC of the corporate debtor permitting the
pledge of shares etc., have to be read and understood in the
context in which they were written. It was clear and understood
by the financial creditors of the corporate debtor that the corporate
debtor is not to bear any additional financial liability by a security
or charge of its assets for the STL Facilities, and the loans were
being procured and taken by Brassco and WLD from the Appellant
Nos. 2 and 3. It was stipulated that the assets of the Corporate
Debtor would not be encumbered in anyway, and except for shares
given as security, and the burden to repay/ discharge the loan
was/ is upon Brassco and WLD. IDBI Bank had only permitted
the corporate debtor to pledge the shares in question, and to
this extent, they did not have any objection. [Para 6.1][822-A-C]
1.3 Appellant No. 1 is a secured creditor to the extent of
the shares pledged to it by the Corporate Debtor. It holds the
M/S VISTRA ITCL (INDIA) LTD v. MR. DINKAR
VE

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