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2022 (2) TMI 1079 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - landowner intending to share profits emanating from the agreed venture, by way of an MoU - Financial Creditors or Operational Creditors? - sole Member of the CoC does not fall within the ambit of definition of Financial Creditor or not - HELD THAT - In the instant case, on mutual Agreement, the Corporate Debtor and other parties decided to transfer 25% of the land to the Appellant herein on a price decided jointly. As per Clause 4 of the MoU, the Appellant shall fund the cost of construction to the Corporate Debtor /developer, till the sample flat is ready. It was correlatively decided that both parties have rights to book flats with mutual consent . Clause 6 stipulates that whatever income is earned from the sale of flats, the Appellant is entitled to 25% of the Net Profit . The MoU entered into is an Agreement of reciprocal rights and obligations. Both parties being Joint Development Partners who entered into a consortium of sorts for developing the subject land and for any breach of terms of the contract, Section 7 Application filed under the Code would not be maintainable as the amount cannot be construed as Financial Debt as there is no sum(s) i.e., owed, assigned or transferred to in compliance of the provisions of Section 5(8) of the Code - Keeping in view the peculiar facts of the attendant case on hand, wherein an Application under Section 12-A, the Corporate Debtor has settled the claims of the Operational Creditor and the sole Member of the CoC is the Appellant herein, whom we, for all the aforenoted reasons, are of the considered view is not a Financial Creditor , we do not find any illegality or infirmity in the Impugned Order, whereby the Adjudicating Authority has sought to close the CIRP proceedings against the Corporate Debtor . This Tribunal also took into consideration the observation by the Adjudicating Authority, that subsequent to the Public Announcement, not a single claimant had come forward to file their claims. This Tribunal is not inclined to interfere with the well-reasoned Order of the Adjudicating Authority and hence the Appeal fails and is dismissed.
Issues Involved:
1. Whether a landowner intending to share profits from an agreed venture via an MoU falls within the definition of 'Financial Creditor' under Section 5 of the Insolvency and Bankruptcy Code (IBC). 2. Whether the Adjudicating Authority can close CIRP proceedings if the Corporate Debtor settles with the Operational Creditor and the sole member of the CoC does not qualify as a 'Financial Creditor' under the Code. Issue-wise Detailed Analysis: 1. Definition of 'Financial Creditor': The main issue was whether a landowner intending to share profits from an agreed venture via an MoU falls within the definition of 'Financial Creditor' under Section 5 of the IBC. The Tribunal examined the nature of the relationship between the appellant and the Corporate Debtor, emphasizing the terms of the MoU dated 26/05/2014. The MoU indicated that the appellant was entitled to 25% of the net profit from the project and held a 25% ownership share in the project 'Coconut'. The Tribunal noted that the amount given by the appellant was for financing the project, in which the appellant was a partner and involved in profit sharing, thus constituting a significant part of the ownership share. The Tribunal concluded that the appellant's investment in the land could not be construed as 'Financial Debt' under Section 5(8) of the Code, as it was not a sum owed, assigned, or transferred in compliance with the provisions of Section 5(8). Therefore, the status of the appellant as a 'Financial Creditor' was not upheld. 2. Closure of CIRP Proceedings: The Tribunal considered whether the Adjudicating Authority could close CIRP proceedings if the Corporate Debtor settled with the Operational Creditor and the sole member of the CoC did not qualify as a 'Financial Creditor'. The Tribunal observed that the Corporate Debtor had settled the claims of the Operational Creditor under Section 12-A of the Code, and the sole member of the CoC was the appellant, who was not a 'Financial Creditor'. The Tribunal also noted that no other claimants had come forward following the public announcement. Consequently, the Tribunal found no illegality or infirmity in the Adjudicating Authority's decision to close the CIRP proceedings against the Corporate Debtor. Conclusion: The Tribunal upheld the Adjudicating Authority's decision, concluding that the appellant did not qualify as a 'Financial Creditor' under the IBC and that the closure of CIRP proceedings was justified given the settlement with the Operational Creditor and the absence of other claimants. The appeal was dismissed, and no costs were imposed. The Tribunal also noted that there were no adverse observations against the third respondent (IRP) warranting any action.
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