Code and does not violatethe rights given to the secured creditor –Thus v. MR. DINKARVENKATASUBRAMANIAN

MR. DINKARVENKATASUBRAMANIAN ABCDEFGH814SUPREME COURT REPORTS[2023] 6 S.C.R.directors passed Board Resolutions whereby the board of directors paidsecurity towards shares. That thereafter one another Security TrusteeAgreement was executed between the appellant no.1 and Brassco foran amount of Rs.200,00,00,000/-. That thereafter the Corporate Debtor, WLD, BRASSCO and Vistra executed an amended and re-instatedpledge agreement on 05.07.2016 and the Corporate Debtor pledged66.77% of its shareholding in JMT Auto Limited to secure the term loanfacilities availed by WLD and Brassco from KKR and L&T. Thatthereafter an application under Section 7 of the Insolvency & BankruptcyCode, 2016 (hereinafter referred to as ‘IBC/Code’) was admitted againstthe Corporate Debtor/AAL on 24.07.2017. The respondent herein - Mr.Dinkar T. Venkatasubramanian was appointed as the interim resolutionprofessional which came to be later confirmed as the resolutionprofessional.2.3 That on 02.11.2017 the appellant no.1 filed its claim as a securedcreditor of the Corporate Debtor and submitted Form C claiming a principalamount of INR 500 crores.

However, the claim by the appellants –secured creditors was rejected by the Resolution Professional in 2017,which order was not challenged by the appellants. Resolution Professionalreceived two resolution plans from only 2 resolution applicants beingLiberty House Group Pvt. Ltd. (LHG) and Deccan Value Investors(DVI). DVI withdrew its Resolution Plan so the revised plan by M/sLHG was considered by the Committee of Creditors (CoC) whichapproved the plan on 02.04.2018 with majority voting shares of 94.20%.The Resolution plan submitted by the LHG was approved by the Adjudicating Authority vide order dated 25.07.2018. However, thereafteras the LHG did not fulfil its commitment the Adjudicating Authority passedan order directing reconsideration of the CoC for consideration of DVI’splan. Thereafter further proceedings were initiated before the NCLATby the CoC etc. (which are not relevant for the issue involved in thepresent appeal).2.4 That thereafter the appellants filed another application under Section 60(5) of the IBC being I.A. No.62/2020 claiming the right on thebasis of the pledged shares.

This Court passed an order dated 08.06.2020directing the Adjudicating Authority to decide the resolution plan and allpending applications and pass appropriate orders within 15 days. TheResolution Professional filed I.A. No.225 of 2020 before the AdjudicatingAuthority on 12.06.2020 seeking approval of the resolution plan. The ABCDEFGH815Adjudicating Authority dismissed the application filed by the appellantsbeing I.A. No.62 of 2020. The order passed by the Adjudicating Authoritydated 09.07.2020 passed in I.A. No.62 of 2020 was the subject matter ofappeal before the NCLAT. By the impugned judgment and order theNCLAT has dismissed the said appeal by observing that the appellantno.1’s claim in purported capacity of ‘Secured Financial Creditor’ hasbeen rejected way back in the year 2017 and the decision in this regardhas not been called in question and therefore it is not open for the appellantsto raise the same issue in 2020 by filing I.A. No.62 of 2020.

The NCLAThas also observed that the appellants have not lent any money to the Corporate Debtor and the Corporate Debtor did not owe any financialdebt to the appellants except the pledge of shares was to be executed. Therefore, the NCLT observed that the appellants not having advancedany money to the Corporate Debtor as a financial debt would not becoming within the purview of financial creditor of the Corporate Debtor. Making above observations, the NCLAT has dismissed the appeal.2.5 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the NCLAT dismissing the appeal and confirmingthe appeal passed by the Revenue dismissing I.A.No.62 of 2020, theoriginal applicants – M/s Vistra and others have preferred the presentappeal.

MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH816SUPREME COURT REPORTS[2023] 6 S.C.R.3.3 It is submitted that it is a case of continuous cause of action asresolution professional, CoC, Resolution Applicant and the AdjudicatingAuthority are all required to consider the correct categorization of theclaimants.3.4 It is submitted that in the present case, the corporate insolvencyresolution process (“CIRP”) commenced on 24.07.2017 and the presentresolution plan (which as per the Adjudicating Authority’s order dated09.07.2020) was submitted for voting by the CoC from 07.02.2020 to11.02.2020; which was only approved by the Adjudicating Authority on09.07.2020 i.e., almost 3 years since the start of the CIRP. The Appellantshad already challenged the non-inclusion of the Appellants as a financialsecured creditor in the CoC on 11.02.2020, which was 5 months beforethe resolution plan was approved by the Adjudicating Authority.

Therefore, the question of delay on the part of the Appellants does not arise andneither can delay be agitated by the Respondents since the CIRP processunder the supervision of the Resolution Professional and CoC itself carriedon for 3 years, which 3 years is well beyond the timeline of 330 days asset out under the IBC. Therefore, the CoC and Resolution Professionalcannot justify their delay on one hand and then seek to erode the rights ofthe Appellants by relying on delay.3.5 On merits learned counsel appearing on behalf of the appellantshave vehemently submitted that the decisions of this Court in the case of Anuj Jain Interim Resolution Professional for Jaypee InfratechLimited vs. Axis Bank Limited etc. etc.1 and Phoenix ARC PrivateLimited vs. Ketulbhai Ramubhai Patel,2 are distinguishable and shallnot be applicable to the facts of the case on hand.3.6 It is submitted that there is creditor-debtor relationship betweenthe appellants and the Amtek Auto Limited.

It is submitted that WLDand Brassco took loans from the appellant nos.2 and 3 through appellantno.1 for the end use and ultimate benefit of the Corporate Debtor. Inorder to establish a direct debtor-creditor relationship, reliance is placedon the Board Resolution of Amtek Auto dated 13.06.2016; no objectioncertificate requested by Amtek Auto on 23.12.2015; no objection certificaterequested by Amtek Auto on 26.03.2016 from IDBI; No objectioncertificate issued by IDBI Bank to Vistra ITCL etc. It is submitted thatfrom the aforesaid it is clear that Amtek obtained monies from Appellant1 (2020) 8 SCC 401.2 (2021) 2 SCC 799. ABCDEFGH817Nos.2 & 3 when it was in financial distress, which fact the banks wereaware of since the reason for obtaining these loans was to ‘standardize’Amtek’s loan account with the banks.3.7 It is vehemently submitted that the pledge of shares constitutedas financial debt under the IBC is defined as Security Interest under Section 3(31) of the IBC.

A secured creditor may only have an interest inrealising the value of its security and, therefore, will not have stake orinterest in Corporate Debtor’s revival or equitable liquidation, while afinancial creditor, apart from looking for safeguards of its own interests, will also be simultaneously interested in the revival and growth of the Corporate Debtor. Therefore, a person only having a security interest inthe assets of the Corporate Debtor, even if falling in the description of‘secured creditor’ by virtue of collateral security extended by the Corporate Debtor, would nevertheless stand outside the sect of the‘financial creditors’, and consequently outside the CoC as well. Theaforesaid decision is also based upon the meaning assigned to the term‘financial debt’ under Section 5(8) of the Code, which, in the context ofthe present decision, need not be elaborated.5.2 In Phoenix ARC (supra), the Corporate Debtor, namelyDoshion Veolia Water Solutions Private Limited (Doshion Veolia), hadpledged 40,160 shares of Gondwana Engineers Limited as a security toL&T Infrastructure Finance Company Limited (L&T).

A deed ofundertaking was also executed by Doshion Veolia in favour of L&T.However, the main and principal transaction was between L&T, whichhad advanced financial facility, to and with Doshion Limited of Rs.40crores, pursuant to which specific agreements were executed. For clarity,3 For short, Code.4 The mortgage by JIL in favour of creditors of JAL were, in fact, set aside in terms of Section 43 of the Code, albeit this Court had opined on the legal issue on the assumptioneven if the mortgage was valid.5 For short, CIRP. ABCDEFGH819we may state that L&T had subsequently assigned the debt to PhoenixARC (P) Ltd., who were the appellants before this Court.5.3 A three judges’ bench of this Court in Phoenix ARC (supra)observed that the pledge agreement was in respect of 40,160 shares of Doshion Veolia, which were pledged to L&T as security, therebyrestricting the liability of Doshion Veolia, albeit, this cannot constitute‘financial debt’ as defined in Section 5(8) of the Code and, therefore, theappellant would not be a financial creditor of the corporate debtor.5.4 Phoenix ARC (supra) also refers to Chapter VIII of the IndianContract Act, 1872 which deals with the definition of ‘indemnity’ and‘guarantee’ under Sections 124 and 126 therein.

It was observed: “25. As is clear from the definition a “contract of guarantee” is acontract to perform the promise, or discharge the liability, of athird person in case of his default. The present is not a case wherethe corporate debtor has entered into a contract to perform thepromise, or discharge the liability of borrower in case of his default. The pledge agreement is limited to pledge 40,160 shares as security. The corporate debtor has never promised to discharge the liabilityof the borrower. The facility agreement under which the borrowerwas bound by the terms and conditions and containing his obligationto repay the loan security for performance are all contained in thefacility agreement. A contract of guarantee contains a guarantee“to perform the promise or discharge the liability of third person incase of his default”. Thus, key words in Section 126 are contract“to perform the promise”, or “discharge the liability”, of a thirdperson.

Both the expressions “perform the promise” or “dischargethe liability” relate to “a third person”.Reference is made to the expression ‘pledge’ as defined in Section172 of the Contract Act and it has been held: “26. …..The pledge agreement dated 10-1-2012 does not containany contract that the corporate debtor has contracted to performthe promise, or discharge the liability of the third person…….30. The words “guarantee” and “indemnity” as occurring in Section5(8)(i) has not been defined in the Code. Section 3 clause (37) ofthe Code provides that words and expressions used but not definedin the Code but defined in the Contract Act, 1872 shall have themeanings respectively assigned to them.” M/S VISTRA ITCL (INDIA) LTD v. MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH820SUPREME COURT REPORTS[2023] 6 S.C.R.5.5 The decision in Phoenix ARC (supra) has also relied uponand reproduced paragraphs 46-50.2 of the decision in Anuj Jain (supra)(referred to as Jaypee Infratech Interim Resolution Professional v.Axis Bank in the aforesaid judgment), and thereupon observes: “36.

This Court held that a person having only security interestover the assets of corporate debtor, even if falling within thedescription of “secured creditor” by virtue of collateral securityextended by the corporate debtor, would not be covered by thefinancial creditors as per definitions contained in clauses (7) and(8) of Section 5. What has been held by this Court as noted aboveis fully attracted in the present case where corporate debtor hasonly extended a security by pledging 40,160 shares of GEL. Theappellant at best will be secured debtor qua above security butshall not be a financial creditor within the meaning of Section 5clauses (7) and (8).37. Mr Vishwanathan tried to distinguish the judgment of this Courtin Jaypee Infratech Ltd. [Jaypee Infratech Ltd. Interim ResolutionProfessional v. Axis Bank Ltd., (2020) 8 SCC 401] by contendingthat the above judgment has been rendered in the specific factsscenario which does not apply to the present case at all.

ShriVishwanathan submits that in Jaypee Infratech Ltd. [JaypeeInfratech Ltd. Interim Resolution Professional v. Axis Bank Ltd.,(2020) 8 SCC 401] corporate debtor had created mortgage for theloan obtained by the parent Company and no benefit of such loanhas been received by the corporate debtor whereas in the presentcase corporate debtor has been the direct and real beneficiary ofthe loan advanced by assignor to the parent Company of thecorporate debtor.” 5.6 We have specifically quoted paragraph 37 in the decision of Phoenix ARC (supra) as the counsel for the appellant therein, had alsoargued before us to distinguish the decisions of Anuj Jain (supra) and Phoenix ARC (supra) from the instant case, on the ground that the Short Term Loan Facilities (STL Facilities) advanced by the AppellantNo. 1 - Vistra in the present case to the group companies of the CorporateDebtor – Amtek Auto Limited (Amtek) i.e., Brassco Engineering Limited(Brassco) and WLD Investments Private Limited (WLD) vide FacilityAgreement dated 30.06.2016 (Facility Agreement), was in fact for theend-use and benefit of the Corporate Debtor – Amtek.

The said reasoning ABCDEFGH821does not appeal to us for the reason that the liability to repay the STLFacilities advanced to Brassco and WLD is that of the said companies, and that not of the Corporate Debtor - Amtek, even if the latter was, asper the terms of the Facility Agreement, the ultimate beneficiary of theamount disbursed through the STL Facilities. The aforesaid decisionscannot be distinguished on the ground that the loans were not for the enduse and benefit of JIL or Doshion Veolia. The Corporate Debtor – Amtekwas not liable to repay the loans advanced by the predecessor-in-interestof the appellant -Vistra, in respect of which there were detailed andseparate agreements executed by the lenders with Brassco and WLD.

Provided that the Pledgor shall not be required topay to any Finance Party any amount in excess of theaggregate amount realized by the Trustee pursuant to anenforcement of the Security Interest over the PledgedShares in accordance with the terms of this PledgeAgreement.”(Emphasis supplied)6.1 Similarly, reliance has also been placed by the Corporate Debtor– Amtek on certain communications issued by the IDBI Bank, the leadM/S VISTRA ITCL (INDIA) LTD v. MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH822SUPREME COURT REPORTS[2023] 6 S.C.R.bank of the Joint Lenders Forum, which now constitutes the majority ofthe CoC of the corporate debtor – Amtek, permitting the pledge of sharesetc. We observe that these communications have to be read andunderstood in the context in which they were written. It was clear andunderstood by the financial creditors of the corporate debtor – Amtekthat the corporate debtor – Amtek is not to bear any additional financialliability by a security or charge of its assets for the STL Facilities, and theloans were being procured and taken by Brassco and WLD from the Appellant Nos.

2 and 3, namely, KKR India Financial Services Limitedand L&T Finance Limited. It was stipulated that the assets of the Corporate Debtor – Amtek would not be encumbered in anyway, andexcept for shares given as security, and the burden to repay/dischargethe loan was/is upon Brassco and WLD. IDBI Bank had only permittedthe corporate debtor – Amtek to pledge the shares in question, and to thisextent, they did not have any objection. However, there is another aspect of the matter.

1 –Vistra has security interest in the pledged shares. In order to examinethe nature of the said interest, we must first understand what constitutes‘pledge’ in law.7.1 The concept of ‘pledge’ has been elucidated by this Bench inPTC India Financial Services Limited v. Venkateswarlu Kari and Another,6 with reference to the provisions of contract of bailment andspecific provisions concerning the pledge, a subset of bailments, in thefollowing manner:6 (2022) 9 SCC 704. ABCDEFGH823“18. As per Section 151, a bailee is bound to take as much careof the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his goods of the same bulk, quality and value as the goods bailed. Section 152 states that abailee, in the absence of a special contract, will not be liable forany loss, destruction, or deterioration of the bailed goods if he actsin conformity with Section 151.

As per Section 153, a contract forbailment is voidable at the option of the bailor if the bailee doesany act with regard to the goods bailed, inconsistent with theconditions of the bailment. Section 154 lays down that the baileeshall be liable for damage arising from unauthorised use of thebailed goods. The bailee, with the consent of the bailor, can mixthe goods bailed with his own goods, in which event, the bailor andthe bailee will have interest in proportion to their respective sharesin the mixture. [ Section 155, Contract Act.] However, if the bailee, without the bailor’s consent, mixes the bailed goods with his own, and the goods can be separated or divided, the property in thegoods remain with the parties respectively. [ Section 156, ContractAct.] Further, the bailee is bound to bear the expense of separationor division of the goods, as well as any damage arising from themixture. Section 157 provides that when the goods are so mixedwithout the bailor’s consent and cannot be separated, the bailor isliable to be compensated, and the bailee is liable for the loss.19.

Under Section 160, the bailee has to return or deliver, as perthe bailor’s directions, the goods, without demand, as soon as thetime for which they were bailed has expired or the purpose forwhich they were bailed has been accomplished. Section 161 statesthat if there is a default by the bailee and the goods are not returned, delivered, or tendered at the proper time, the bailee is responsibleto the bailor for any loss, destruction, or deterioration of the goodsfrom that time. As per Section 163, in the absence of any contractto the contrary, the bailee is bound to deliver to the bailor, or inaccordance with his directions, any increase or profit that mayaccrue from the goods bailed.20. Section 172 of the Contract Act is reproduced as under: “172. ” Pledge”, “pawnor” and “pawnee” defined.—The bailmentof goods as security for payment of a debt or the performance ofM/S VISTRA ITCL (INDIA) LTD v.

MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH824SUPREME COURT REPORTS[2023] 6 S.C.R.the promise, is called a “pledge”. The bailor is in this case calledthe “pawnor”. The bailee is called the “pawnee”.” As per Section 172, creating a valid pledge requires delivery ofthe possession of goods by the pawnor to the pawnee by way ofsecurity upon the promise of repayment of a debt or the performanceof a promise, thereby, creating an estate that vests with the pawnee.22. As per Section 176, when a pawnor makes a default in paymentof debt or performance of a promise, the pawnee may bring a suitagainst the pawnor upon such debt or promise and retain the goodspledged as collateral security, or he may sell the goods pledgedupon giving the pawnor reasonable notice of the sale. If the pledgedgoods are sold, and the proceeds of such sale are less than theamount due in respect of the debt or promise, the pawnor is stillliable to pay the balance amount to the pawnee.

If the proceeds ofsuch sale exceed the amount due, the pawnee will be liable to paythe surplus to the pawnor.23. Section 177 gives statutory right to the pawnor, who is at defaultin payment of the debt or performance of the promise, to redeemthe pledged goods at any time before “actual sale” by the pawnee. However, in such cases, the pawnor must pay in addition theexpenses that have arisen from his default. Section 179 states thatthe limited interest that a pawnor has in the goods can be validlypledged.” 7.2 The law of pledge contemplates special rights for the pawneein the goods pledged, i.e., the right to possession of the security, and incase of default, the right to bring a suit against the pawnor, as well as theright to sell the goods after giving reasonable notice to the pawnor. Thegeneral rights or ownership rights in the property remain with the pawnor, and wholly reverts to him on discharge of the debt or performance of thepromise. In other words, the right to property vests in the pawnee only asfar as it is necessary to secure the debt. We need not refer to otherportions of the said judgment which relate to right of redemption till ‘actualsale’, etc.

Explanation 1.—For the removal of doubts, it is hereby clarifiedthat a distribution in accordance with the provisions of this clauseshall be fair and equitable to such creditors. Explanation 2.—For the purposes of this clause, it is herebydeclared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, theprovisions of this clause shall also apply to the corporate insolvencyresolution process of a corporate debtor—M/S VISTRA ITCL (INDIA) LTD v. MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH826SUPREME COURT REPORTS[2023] 6 S.C.R.(i) where a resolution plan has not been approved or rejected bythe Adjudicating Authority; (ii) where an appeal has been preferred under Section 61 or Section62 or such an appeal is not time barred under any provision of lawfor the time being in force; or(iii) where a legal proceeding has been initiated in any court againstthe decision of the Adjudicating Authority in respect of a resolutionplan; (c) provides for the management of the affairs of the corporatedebtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for thetime being in force; (f) conforms to such other requirements as may be specified bythe Board.

Explanation.—For the purposes of clause (e), if any approval ofshareholders is required under the Companies Act, 2013 (18 of2013) or any other law for the time being in force for theimplementation of actions under the resolution plan, such approvalshall be deemed to have been given and it shall not be a contraventionof that Act or law.” 8.1 The amendment introduced by Act No. 26 of 2019 ensuresthat the operational creditors under the resolution plan should be paid theamount equivalent to the amount which they would have been entitled to, in the event of liquidation of the Corporate Debtor under Section 53 ofthe Code. In other words, the amount payable under the resolution planto the operational creditors should not be less than the amount payable tothem under Section 53 of the Code, in the event of liquidation of the Corporate Debtor. The amended provision also provides that the financialcreditors who have not voted in favour of the resolution plan shall be paidnot less than the amount which would be paid to them in accordancewith sub-section (1) to Section 53 of the Code, in the event of liquidationof the corporate debtor.

Explanation (1) to clause (b) of the 30(2) of the Code, for the removal of doubts, states and clarifies that the distributionin accordance with this clause shall be fair and equitable to such creditors. ABCDEFGH8278.2 It is also the mandate of Section 31 of the Code7 that theadjudicating authority should be satisfied that the resolution plan, asapproved by the CoC under sub-section (4) of Section 30 meets with therequirement as referred to in sub-section (2) of Section 30. Only then, the adjudicating authority shall approve the resolution plan, which shallthen be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolutionplan.8.3 Section 30(2)(e) also requires the resolution professional toexamine each resolution plan received by him/her and confirm that itdoes not contravene any provisions of law for the time being in force.

Thus, the amended Section 30(2) read with Section 31 of the Code, enunciates the manner in which the interests of the creditors who are notincluded in the CoC i.e., the operational creditors and the financial creditorswho have not voted in favour of the resolution plan, must be protected inthe resolution plan by the resolution professional and the adjudicatingauthority.8.4 It is in this context that the Appellant No. 1 - Vistra submitsthat the resolution plan in question does not meet the requirements of the Code, as it extinguishes and vaporises the pledge created in favour of the Appellant No. 1 – Vistra, and thereby, Appellant No. 1 – Vistra, a securedcreditor, viz, the pledged shares, is left remediless and worse off than thedissenting financial creditors, or even the operational creditors.8.5 The difficulty which arises in the present case is that, in termsof the decision of this Court in Anuj Jain (supra) and Phoenix ARC(supra), Appellant No.

1 - Vistra is to be treated as a secured creditor, but would not fall under the category of financial creditors or operationalcreditors. Therefore, they would be denied the benefit of the amendments7 31. Approval of resolution plan.— (1) If the Adjudicating Authority is satisfied that theresolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shallby order approve the resolution plan which shall be binding on the corporate debtor andits employees, members, creditors, including the Central Government, any StateGovernment or any local authority to whom a debt in respect of the payment of duesarising under any law for the time being in force, such as authorities to whom statutorydues are owed, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval ofresolution plan under this sub-section, satisfy that the resolution plan has provisions forits effective implementation.M/S VISTRA ITCL (INDIA) LTD v.

MR. DINKARVENKATASUBRAMANIAN [M. R. SHAH, J.] ABCDEFGH828SUPREME COURT REPORTS[2023] 6 S.C.R.to Section 30(2) of the Code made vide Act No. 26 of 2019, or for thatmatter Act No. 26 of 2018. Consequently, a very odd and a peculiarsituation is created where a secured creditor is denied the benefit of thesecured interest i.e., the right to exercise the sale of the secured interest, yet not be treated as either a financial creditor or an operational creditor. In terms of Section 52 of the Code, a secured creditor in liquidationproceedings has the right to relinquish its security interest to the liquidationestate and receive proceeds from the sale of assets by the liquidator inthe manner specified under Section 53 of the Code. The second optiongiven to the secured creditor is to realise the security interest in themanner specified in aforesaid Section. Rule 21-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 20168 dealswith the presumption of security interest, which we need not elaboratefor the present decision.

If the secured creditor relinquishes the securityinterest, it is then entitled to priority in payment under clause (b) to sub-section (1) to Section 53 of the Code. The debts owed to the securedcreditor in such event, rank pari passu with the workmen’s dues for theperiod 24 months preceding the liquidation commencement date. As perSection 52(9) of the Code, where the proceeds on realisation of securedassets are not adequate to repay the debts due to the secured creditorswho have exercised the option to realise the security interest, the unpaiddues of such secured creditors are to be paid by the liquidator in terms ofclause (e) of sub-section (1) of Section 53 of the Code.

In the context of the present case, thesaid solution may not be viable as the resolution plan has already beenapproved by the CoC without Appellant No. 1 - Vistra being a member8 For short, Liquidation Process Regulations. ABCDEFGH829of the CoC. Therefore, we would opt for the second option. The secondoption is to treat the Appellant No. 1 – Vistra as a secured creditor interms of Section 52 read with Section 53 of the Code. In other words, we give the option to the successful resolution applicant – DVI (DeccanValue Investors) to treat the Appellant No.1 – Vistra as a secured creditor, who will be entitled to retain the security interest in the pledged shares, and in terms thereof, would be entitled to retain the security proceeds onthe sale of the said pledged shares under Section 52 of the Code readwith Rule 21-A of the Liquidation Process Regulations. The secondrecourse available, would be almost equivalent in monetary terms for the Appellant No.

1 - Vistra, who is treated it as a secured creditor and isheld entitled to all rights and obligations as applicable to a secured creditorunder Section 52 and 53 of the Code. This to our mind would be a fairand just solution to the legal conundrum and issue highlighted before us.9.1 We wish to clarify that the directions given by us would not bea ground for the successful resolution applicant – DVI to withdraw theresolution plan which has already been approved by the NCLAT and byus. The reason is simple. Any resolution plan must meet with therequirements/provisions of the Code and any provisions of law for thetime being in force. What we have directed and the option given by usensures that the resolution plan meets the mandate of the Code and doesnot violate the rights given to the secured creditor, who cannot be treatedas worse off/inferior in its claim and rights, viz, an operational creditor ora dissenting financial creditor.