2021 (7) TMI 754 - AT - Insolvency and Bankruptcy

CIRP process - financial creditor or operational creditor - inclusion/exclusion of appellant form CoC - Initially was treated as Financial Creditor but later on was treated as Operational Creditor - grievance of the Appellant is that the Appellant had been excluded from CoC on that day and was not allowed to participate - HELD THAT - In the present matter, the Appellant was earlier treated as Financial Creditor for the dues claimed by Appellant but later on the Appellant has been treated as Operational Creditor. Order dated 25.11.2019 of the Adjudicating Authority directed the Resolution Professional to consider if debt of Appellant is a Financial Debt and place it before CoC. He did this in 6th CoC Meeting. On the face of it the Lease Deed does not appear to be Financial Lease. As the Resolution Plan is stated to be already approved, when it appears that the Appellant is not a Financial Creditor, we do not wish to go into the technicalities of the manner in which it was excluded from the CoC. The grievance appears to be because orders with regard to excluding UCO Bank was not passed. The Respondent No. 1 does not appear to have filed any appeal against the impugned order in that regard and thus we would not give much indulgence to Respondent No. 1. The appeal is dismissed.

Summary

Issues:
1. Treatment of Greater Noida Industrial Development Authority as a financial claimant.
2. Exclusion of Greater Noida Industrial Development Authority from the Committee of Creditors (CoC).
3. Classification of the lease agreement between the Appellant and the Corporate Debtor as a financial lease.

Analysis:

1. Treatment of Greater Noida Industrial Development Authority as a financial claimant:
The appeal was filed by Greater Noida Industrial Development Authority against an order that held it cannot be treated as having a financial claim. The Appellant claimed to have leased land to the Corporate Debtor and submitted a claim as a Financial Creditor. However, the Resolution Professional later excluded the Appellant from the CoC, treating its claim as an operational debt. The Adjudicating Authority upheld this decision, categorizing the claim as operational debt, not financial debt. The Lease Deed was analyzed to determine the nature of the claim, with reference to Indian Accounting Standards.

2. Exclusion of Greater Noida Industrial Development Authority from the Committee of Creditors (CoC):
The Appellant was excluded from the CoC, leading to the filing of an application to quash the decision taken in a CoC meeting. The Appellant argued that its exclusion caused prejudice as it was a CoC member. The Respondent No. 1 supported the Appellant's claim that the impugned order was passed without proper hearing. The Adjudicating Authority directed the Resolution Professional to consider the nature of the Appellant's debt and place it before the CoC. Despite objections, the Resolution Plan was approved, and the Appellant was treated as an Operational Creditor.

3. Classification of the lease agreement as a financial lease:
The Lease Deed between the Appellant and the Corporate Debtor was scrutinized to determine if it constituted a financial lease. The Appellant argued that the lease transferred risks and rewards incidental to ownership, categorizing it as a financial lease. However, the Adjudicating Authority, based on Indian Accounting Standards and previous judgments, concluded that the Lease Deed did not constitute a financial lease. The Appellant's claim was reclassified as operational debt, and the appeal was dismissed.

In conclusion, the judgment addressed the issues of the Appellant's claim classification, exclusion from the CoC, and the nature of the lease agreement. The decision was based on the interpretation of the Lease Deed, Indian Accounting Standards, and previous legal precedents, ultimately dismissing the appeal.