Treatment of Operational and Dissenting Creditors in Plans

A resolution plan is approved by a majority of financial creditors, but it binds everyone. Operational creditors have no vote at all, and financial creditors who vote against a plan can be outvoted. To prevent the majority from appropriating everything, the Code guarantees both groups a minimum payment, linked to what they would receive if the company were liquidated. This note explains how these minimums work, how they have changed, and how the Supreme Court has interpreted them.

1. Why Protection Is Needed

• Operational creditors. Suppliers, employees and government authorities are not members of the committee and cannot influence the terms of the plan; without protection, a plan could pay them nothing while financial creditors take the bulk of the proceeds.
• Dissenting financial creditors. A creditor holding less than 34 per cent of the voting share cannot block a plan; since it is being compelled to accept the plan, the law guarantees it a minimum linked to what liquidation would have given it.
• Dissenting creditor defined. Under the CIRP Regulations, a dissenting financial creditor is one who voted against the plan or abstained from voting.

2. The Minimum Payments, Section 30(2)(b)

Figure 1: Calculating the minimum

• Operational creditors. Since the 2019 amendment, the plan must pay operational creditors at least the higher of (i) the amount they would receive in liquidation under section 53, and (ii) the amount they would receive if the amount to be distributed under the plan were distributed in the order of priority in section 53(1)
• Dissenting financial creditors. Until 2026, the plan had to pay financial creditors who do not vote in favour of it at least the amount they would receive in liquidation under section 53(1)
• The 2026 change. According to published summaries of the IBC (Amendment) Act, 2026, a dissenting financial creditor is now entitled to at least the lower of its liquidation share and the amount it would receive if the plan's payout were distributed in the order of section 53(1); the change reduces the leverage of small dissenting creditors over the plan and should be checked against the amended text.
• Fair and equitable. Explanation 1 states that a distribution in accordance with clause (b) shall be fair and equitable to such creditors.
• Retrospective reach. Explanation 2 applies the amended clause to processes that were pending and to plans not yet finally approved, and to pending appeals and legal proceedings, when the amendment came into force in August 2019.
• Before 2019. The original clause guaranteed operational creditors only their liquidation value, which was often nil because secured creditors would take all assets in liquidation.

Figure 2: The two statutory minimums compared

3. Essar Steel, 2019

• Equality not required. The Supreme Court rejected the NCLAT's view that all creditors must be treated equally; financial and operational creditors, and secured and unsecured creditors, stand in different positions and may be treated differently.
• Fair treatment. The committee must consider the interests of operational creditors and treat creditors in the same class fairly, but beyond the statutory minimums the amount each class receives is for its commercial wisdom.
• The 2019 amendment. The Court upheld the amendments to sections 30(2)(b) and 30(4), finding that they protect operational creditors while recognising the priority of secured creditors (Topic 28)

4. Dissenting Financial Creditors

• Jaypee Kensington Boulevard Apartments Welfare Association v NBCC, 2021. The Supreme Court held that a dissenting financial creditor must receive its minimum entitlement in money and cannot be forced to accept payment in kind, such as land or units; the entitlement may also be satisfied by allowing it to enforce its security interest, to the extent of the value receivable and in its order of priority.
• India Resurgence ARC v Amit Metaliks, 2021. A dissenting secured creditor argued that it should receive more because of the value of its security; the Court held that section 30(2)(b) only fixes a minimum, does not require distribution in the order of section 53, and the 2019 amendment to section 30(4) permits but does not require the committee to account for the value of security; what each creditor receives above the minimum is a matter of commercial wisdom, provided creditors in the same class are not treated inequitably.
• DBS Bank v Ruchi Soya Industries, 2024. A bench of Sanjiv Khanna and S.V.N. Bhatti JJ took a different view: a dissenting secured creditor is entitled under section 30(2)(b)(ii) to an amount equal to the value of its security interest, as it would realise in liquidation, though it cannot demand more than that or enforce the security; because of the conflict with India Resurgence ARC, the question was referred to a larger bench.
• Pratap Technocrats v Monitoring Committee of Reliance Infratel, 2021. Once the statutory minimums are met, the NCLT and NCLAT have no residual equity jurisdiction to rework the distribution on grounds of fairness.

Figure 3: Leading cases

5. Particular Operational Creditors

• Government dues. Statutory dues are operational debts, protected only by the minimum in section 30(2)(b), and are extinguished if not provided for in an approved plan (Ghanashyam Mishra, 2021); the treatment of government dues secured by statutory charges is discussed in Topic 43.
• Workmen and employees. Their liquidation share is calculated by reference to their priority under section 53(1)(b) and (c), and their provident fund and gratuity are outside the estate (Topic 34)

6. Enforcement

• NCLT's examination. The resolution professional and the NCLT verify that the plan meets section 30(2)(b), using the liquidation value determined by the registered valuers (Topic 35)
• Appeal. Under section 61(3)(iii), an appeal lies against an approved plan if the debts owed to operational creditors have not been provided for in the manner specified.
• Low recoveries. Because liquidation values are often small, operational creditors frequently recover a small percentage of their claims, a point of continuing criticism of the Code.

7. Frequently Asked Questions

Can a resolution plan pay operational creditors nothing?

Only if both their liquidation share and their share of the plan amount under the section 53(1) order are nil. Otherwise the plan must pay them at least the higher of the two, under section 30(2)(b)(i).

Can a dissenting financial creditor be paid in shares of the new company?

Not for its minimum entitlement. In Jaypee Kensington (2021), the Supreme Court held that the amount due to a dissenting financial creditor must be paid in money, or satisfied by letting it enforce its security to that extent.

Does a secured creditor that votes against a plan get the full value of its security?

The law is unsettled. India Resurgence ARC (2021) held that it cannot demand more by reference to the value of its security, while DBS Bank v Ruchi Soya (2024) held that it is entitled to the value of its security as realisable in liquidation, and referred the conflict to a larger bench. The 2026 Amendment, by fixing the minimum at the lower of two amounts, also limits what a dissenter can insist upon.

8. Related Topics

• Topic 9: Operational Debt and Operational Creditors. Who they are.
• Topic 40: Section 30. Contents of a resolution plan.
• Topic 57: Section 53. The waterfall used for the calculation.