2021 (11) TMI 515 - AT - Insolvency and Bankruptcy

Maintainability of application - Financial Creditor or Operational Creditor of the Corporate Debtor- Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - Admittedly, the Adjudicating Authority vide order dated 18.01.2021 dismissed the Application I.A. No. 135/JPR/2019 of Sach Marketing Pvt. Ltd. and hold that the claim comes within the definition of Operational Debt and not the Financial Debt. The case of the Appellants is squarely covered by the decision in SACH MARKETING PVT. LTD. VERSUS RESOLUTION PROFESSIONAL OF MOUNT SHIVALIK INDUSTRIES LTD., MS. PRATIBHA KHANDELWAL 2021 (10) TMI 644 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH, NEW DELHI . These Appeals are allowed and it is held that the debt owed to the Appellants, is a Financial Debt as defined under Section 5(8) of the IBC.

Summary

Issues:
Appeal against order categorizing debt as Operational Debt instead of Financial Debt under Insolvency and Bankruptcy Code, 2016.

Analysis:
1. Background: The Appeals were filed against a common order passed by the Adjudicating Authority, categorizing the Applicants as Operational Creditors instead of Financial Creditors of the Corporate Debtor.

2. Factual Overview: The Corporate Debtor, Mount Shivalik Industries Ltd., was undergoing Corporate Insolvency Resolution Process (CIRP) with Ms. Pratibha Khandelwal appointed as the Resolution Professional (RP). The Appellants, including Sach Marketing Pvt. Ltd., claimed to be Financial Creditors, but the RP treated their claims as Operational Debt, leading to the Appeals.

3. Key Applications: The Appeals were filed under various IAs against the decision of the Adjudicating Authority, which dismissed the Applications and upheld the classification of the debt as Operational instead of Financial.

4. Previous Decision: Sach Marketing Pvt. Ltd. had filed a separate Appeal before the Appellate Tribunal, which was allowed, determining the debt as a Financial Debt. This decision was crucial in the current Appeals as well.

5. Arguments: The counsels for the Appellants contended that the decision in the previous Appeal supported their case, urging for the debt to be treated as Financial. The Respondent's counsel also acknowledged the alignment of the current case with the previous judgment.

6. Judicial Review: After considering the submissions, the Tribunal noted the previous decision's relevance, where the debt was classified as Financial based on the nature of the transaction and the Supreme Court's precedent.

7. Decision: The Tribunal allowed the Appeals, setting aside the impugned order and declaring the debt owed to the Appellants as a Financial Debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The importance of timely resolution, as emphasized by the Supreme Court, was also highlighted, urging expeditious handling of the matter by the Adjudicating Authority.

This comprehensive analysis covers the background, factual context, key applications, previous decisions, arguments presented, judicial review process, and the final decision rendered by the Appellate Tribunal in the Appeals related to the classification of debt as Operational or Financial under the Insolvency and Bankruptcy Code, 2016.