State Bank of India's challenge to CoC resolution capping payments to dissenting financial creditors upheld; court-appointed valuation report accepted with minor adjustments
In a significant decision impacting insolvency resolution processes under the Insolvency and Bankruptcy Code (IBC), 2016, the National Company Law Tribunal (NCLT), Mumbai Bench, ruled on October 7, 2026, that dissenting secured financial creditors are entitled to receive a minimum payment equivalent to the liquidation value of their security interest. The ruling came in the matter of State Bank of India (SBI) versus CMA Harshad Deshpande, Resolution Professional of AA Estates Private Limited, and others.
The case arose from SBI's challenge to Resolution No. 7 passed at the 37th Committee of Creditors (CoC) meeting in December 2025, which capped the payment to dissenting financial creditors at the value of the approved resolution plan rather than ensuring the statutory minimum under Section 30(2)(b) of the IBC, which guarantees payment at least equal to the liquidation value of their security interest.
SBI, holding 21.37% voting rights and dissenting to the resolution plan of the consortium of Authum Investment & Infrastructure Limited and Cosmos Prime Projects Limited, argued that the CoC's resolution was contrary to the statutory provisions and Supreme Court precedents. The bank contended that the minimum payment floor for dissenting secured creditors cannot be diluted by the commercial wisdom of the CoC and must conform to the waterfall mechanism under Section 53 of the IBC.
The tribunal extensively examined the valuation reports submitted during the Corporate Insolvency Resolution Process (CIRP) of AA Estates Pvt. Ltd., which owns contractual development rights over four real estate projects. Multiple valuation reports were produced, including those by valuers appointed by the CoC, SBI, and finally, a court-appointed registered valuer, KKCA Valuers LLP, to resolve conflicting valuations. The court accepted the KKCA valuation report as compliant with International Valuation Standards and not fundamentally flawed, save for minor adjustments relating to height restrictions affecting some flats.
The tribunal also addressed SBI's objection to the quantum of performance security, which was calculated based on the cash component of the resolution plan and did not account for the estimated value of flats to be delivered to homebuyers. While the tribunal held that the performance security was in accordance with the Request for Resolution Plan (RFRP), it noted the need to protect homebuyers against contingent cash payout scenarios.
The judgment reaffirmed the principle established by the Supreme Court in DBS Bank Ltd. v. Ruchi Soya Industries Ltd. (2024), holding that dissenting secured creditors have an enforceable monetary floor equivalent to the liquidation value of their security interest. The NCLT clarified that the CoC cannot cap this entitlement by limiting payments to the resolution plan value. The tribunal also held that the amendments to Section 30(2) introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, do not apply retrospectively to resolution plans approved before May 26, 2026.
Regarding allegations of bias and irregularity against the Resolution Professional for appointing a second set of valuers, the tribunal found no adverse inference warranted, noting that the appointment of the court-appointed valuer addressed concerns arising from varying valuation reports.
The tribunal directed the Resolution Professional to determine the liquidation value payable to the dissenting secured financial creditor per the findings and to ensure that the approved resolution plan provides for such payment in cash. The matter remains pending for further consideration on clarifications related to the resolution plan.
This judgment reinforces the protections available to dissenting secured creditors in insolvency proceedings, emphasizing that commercial decisions of the CoC must comply with statutory safeguards and that valuation disputes should be resolved on expert grounds unless there is a fundamental flaw.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Dissenting secured financial creditor is entitled to minimum payment equivalent to liquidation value of its security interest and CoC cannot cap such entitlement to total resolution plan value - Court-appointed valuation report can be accepted unless shown to be fundamentally flawed, based on patent error or erroneous approach.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 30(2)(b), Section 30(4), Section 31(1), Section 53(1); Insolvency and Bankruptcy Code (Amendment) Act, 2026; CIRP Regulations Regulation 35; International Valuation Standards (IVS)
State Bank of India v. CMA Harshad Deshpande, (NCLT)(Mumbai) : Law Finder Doc Id # 2995395
