NCLT Jurisdiction to Adjudicate Claims of Dissenting CoC Members

A resolution plan approved by at least sixty-six percent of the Committee of Creditors by value under Section 30(4) of the Insolvency and Bankruptcy Code, 2016 binds every financial creditor, including those who voted against it, but the National Company Law Tribunal retains jurisdiction under Section 31 to verify that the plan meets the minimum payment guaranteed to dissenting financial creditors under Section 30(2)(b). That jurisdiction is limited to legal compliance; the Tribunal cannot re-open the commercial terms the Committee of Creditors has approved. This article explains what a dissenting financial creditor can raise before the Tribunal, what falls outside its power, and how the liquidation value floor is calculated.

The Statutory Protection for Dissenting Financial Creditors

Section 30(2)(b) of the IBC, as amended in 2019, requires every resolution plan to provide payment to financial creditors who do not vote in favour of the plan. That payment must not be less than the amount such creditors would receive had the corporate debtor been liquidated, calculated under the waterfall in Section 53. This is the liquidation value floor.

The 2019 Amendment inserted this protection following judicial concern that early resolution plans offered dissenting creditors zero or near-zero recovery. The floor does not guarantee the full outstanding claim; it guarantees at minimum what liquidation would yield.

Scope of NCLT Jurisdiction at the Section 31 Stage

Under Section 31 of the IBC, the NCLT must be satisfied that a resolution plan meets the requirements of Section 30(2) before granting approval. A dissenting financial creditor can raise, at the Section 31 hearing, that the plan does not meet the Section 30(2)(b) floor. The NCLT is obliged to examine and rule on such objections.

The Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [(2019) 8 SCC 703] drew a clear line. The NCLT cannot substitute its commercial judgment for that of the CoC, but it retains supervisory authority to verify legal compliance. Non-compliance with the Section 30(2)(b) floor is a legal defect, not a commercial call, and falls within NCLT jurisdiction.

What Can the NCLT Adjudicate Under Section 31?

The NCLT can verify that the plan meets the Section 30(2)(b) minimum for each dissenting financial creditor; examine whether votes at the CoC meeting were counted correctly; determine whether procedural requirements under the IBC and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 were followed; adjudicate classification disputes where a creditor claims incorrect categorisation; and consider whether the moratorium under Section 14 was correctly applied.

What Falls Outside NCLT Jurisdiction

The NCLT cannot redo the commercial evaluation of a resolution plan. It cannot order the resolution applicant to increase payouts beyond what the plan provides, unless the plan falls below the statutory floor. It cannot grant a dissenting creditor its full admitted claim value. The boundary between legal compliance review and commercial second-guessing is drawn and enforced firmly.

The Liquidation Value Calculation in Practice

The Section 30(2)(b) floor is tied to the creditor's entitlement under the Section 53 waterfall. In liquidation, secured creditors rank above unsecured creditors, and within secured creditors, priority depends on the nature of the security interest. A dissenting financial creditor's floor entitlement is therefore not uniform; it depends on its position in the priority order and the estimated realisable value of the corporate debtor's assets.

The resolution professional prepares a liquidation value estimate as part of the information memorandum. This estimate forms the reference point for calculating the Section 30(2)(b) floor. Disputes about its accuracy can also be raised before the NCLT, though the review standard is deferential.

When Must a Dissenting Creditor Raise Objections?

Objections by a dissenting financial creditor must be raised at the Section 31 stage, before the NCLT grants approval. There is no standalone application available for this purpose; objections are raised within the plan approval proceedings. A creditor that fails to appear or file objections at this stage may find later challenge procedurally difficult.

Post-approval, the available remedy is an appeal to the National Company Law Appellate Tribunal (NCLAT) under Section 61. Grounds are limited: patent illegality, procedural violation, or non-compliance with IBC requirements. A further appeal to the Supreme Court lies on questions of law under Section 62.

Classification Disputes Affecting CoC Membership

A creditor wrongly classified as an operational creditor rather than a financial creditor is excluded from the CoC entirely and loses the Section 30(2)(b) protection. Classification disputes are among the more consequential jurisdictional questions before the NCLT. They can be raised at any CIRP stage, and the NCLT has power to rectify incorrect classifications, affecting both CoC voting and plan entitlements.

Frequently Asked Questions

Can a dissenting CoC member block a resolution plan?

No. A resolution plan approved by 66% or more of the CoC by value binds all financial creditors, including those who voted against it. The minority cannot veto a plan.

What is the minimum entitlement for a dissenting financial creditor?

Under Section 30(2)(b) of the IBC, a dissenting financial creditor is entitled to at least the amount it would receive in liquidation, calculated according to the priority waterfall under Section 53. The floor does not guarantee recovery of the full outstanding debt.

Can the NCLT order higher payments to dissenting creditors?

No. The NCLT cannot rewrite the commercial terms of a resolution plan. It can only ensure that the plan meets the statutory minimum. If the plan already meets or exceeds the Section 30(2)(b) floor, there is no basis for the NCLT to order a higher payout.

When must a dissenting creditor raise objections to the plan?

Objections must be filed before the NCLT at the Section 31 approval hearing. A dissenting creditor should submit written objections and appear at the hearing to ensure its position is on record.

What if the resolution plan does not meet the Section 30(2)(b) floor?

The NCLT is required to withhold approval. A plan that does not provide dissenting financial creditors with at least their liquidation value entitlement is non-compliant with the IBC and cannot be approved.

Can a creditor dispute its classification before the NCLT?

Yes. A creditor wrongly classified, whether as operational when it should be financial or vice versa, can raise a classification dispute before the NCLT. Correct classification affects CoC membership, voting rights, and plan entitlements.

Does the Section 30(2)(b) floor apply to operational creditors?

No. The Section 30(2)(b) floor applies specifically to financial creditors who do not vote in favour of the plan. Operational creditors have separate treatment under the IBC, but the CoC composition and voting structure do not include them.

What is the Section 53 waterfall used to calculate liquidation value?

Section 53 of the Insolvency and Bankruptcy Code, 2016 sets the order of priority for distributing the proceeds of a corporate debtor's liquidation. Secured creditors who relinquish their security rank alongside workmen's dues at the top, followed by unsecured financial creditors, government dues, and finally equity holders. A dissenting financial creditor's liquidation value floor under Section 30(2)(b) is calculated according to where its claim falls in this order.

Can a dissenting creditor appeal an NCLT order approving a resolution plan?

Yes. A dissenting financial creditor can appeal the NCLT's approval order to the National Company Law Appellate Tribunal under Section 61 of the Insolvency and Bankruptcy Code, 2016, on limited grounds such as non-compliance with Section 30(2), material irregularity, or the plan being contrary to law. A further appeal on a question of law lies to the Supreme Court under Section 62.

Who prepares the liquidation value estimate the NCLT relies on?

The Resolution Professional engages two registered valuers, in line with the CIRP Regulations, to independently determine the fair value and liquidation value of the corporate debtor, and shares the liquidation value with Committee of Creditors members, including dissenting ones, on a confidential basis before the vote on the resolution plan.

Does dissenting at the CoC vote automatically make a creditor a dissenting financial creditor under Section 30(2)(b)?

Yes, for purposes of the statutory floor. Any financial creditor who does not vote in favour of the resolution plan, whether by voting against it or abstaining, is treated as a dissenting financial creditor entitled to the Section 30(2)(b) minimum, regardless of the specific reason for not supporting the plan.

Can the NCLT modify a resolution plan instead of approving or rejecting it?

No. The Supreme Court has held that the NCLT's role under Section 31 is confined to approving a compliant plan or rejecting a non-compliant one. It cannot modify the commercial terms of the plan itself; if the plan fails to meet the Section 30(2)(b) floor, the Committee of Creditors, not the Tribunal, must revise it.

What happens to a dissenting creditor's claim if the corporate debtor goes into liquidation instead?

If no resolution plan is approved and the corporate debtor proceeds to liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016, all financial creditors, dissenting or not, are paid according to the Section 53 waterfall based on actual liquidation proceeds, rather than the plan-based Section 30(2)(b) floor, which stops applying once the resolution process itself has failed.

Is the Section 30(2)(b) floor calculated per creditor or for the class as a whole?

The floor is assessed per dissenting financial creditor individually, based on that creditor's own priority and claim amount under the Section 53 waterfall, not as an aggregate figure for all dissenting creditors combined. Two creditors with different security or repayment priority can therefore end up with very different floor amounts even under the same resolution plan.

Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at Vikrant D. Shetty & Associates, Advocates & Solicitors. The firm advises financial creditors, operational creditors, and corporate debtors in proceedings before the National Company Law Tribunal (NCLT), Mumbai Bench, and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.

Related reading: 5 Mistakes Indian Banks and NBFCs Make That Lead to Overpaying for Arbitration Claims.

See also: Limits of Judicial Review of CoC Decisions Under the IBC.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.