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TMI Blog2017 (2) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of IBC we refrain from burdening the petitioner with cost. Before parting we make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy as we have refrained from entertaining the application at the initial stage itself when the Respondents have not entered appearance and are not present before us. Therefore the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of instant application. X X X X Extracts X X X X X X X X Extracts X X X X ..... er could not be regarded as a Financial Creditor'. We further opined that the money owed by the respondent cannot be regarded as Financial Debt' within the meaning of Section 5(7) and Section 7(8) of IBC. The operative paras of the judgment dated 23.01.2017 contained complete answer to the arguments that the petitioner is a Financial Creditor' and the respondent owes a Financial Debt' to the petitioner. The operative paras 9 to 16 read as under: "9. We have heard learned counsel at some length. We confronted learned counsel for the Applicants with a query as to how the Applicants would be covered by the expression Financial Creditor' and the expression 'Financial Debt' within the meaning of the term used in Section 7 and Section 5 (7) & (8) of the IBC. According to the learned counsel, the default in payment of the amount of "Assured Returns"payable by the Respondent would be sufficient to satisöl the requirement of Section 7 read with Section 5 (7) and (8) of the IBC. 10. In order to find out as to whether the Applicant answers the description of "Financial Creditor" and "Financial Debt" in terms of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub- section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. 11. From a bare perusal of Section 7 of the IBC, it is patent that the insolvency process can be triggered by a 'Financial Creditor" individually or jointly against a corporate debtor when default has occurred. The first question arises for consideration is as to who is a 'Financial Creditor'. In order to ascertain the meaning of that expression we have to examine its definition as provided by Section 5 which is applicable to Part Il. We have already extracted the provisions of Section 5 (7) and 5 (8) of the IBC which are relevant to the issue raised. Section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of a transaction. It is pertinent to point out that the concept 'Financial Debt' as envisaged under Section 5 (8) of the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the 'Rules' framed thereunder. It appears that in England there is no exclusive element of disbursement of debt laced with the consideration for the time value of money. However, forward sale or purchase agreement as contemplated by Section 5 (8)(f) may or may not be regarded as a financial transaction. A forward contract to sell product at the end of a specified period is not a financial contract. It is essentially a contract for sale of specified goods. It is true that some time financial transactions seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The difference between the two prices would imply the rate of return to the financer. (See Taxman's Law Relating to IBC, 2016 by Vinot Kothari & Sikha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 The aforesaid judgment should have ordinarily satisfied the petitioner. However, learned counsel for the petitioner has insisted that his alternative prayer to treat the petitioner as an operational creditor u/s 9 may also be considered. " 5. Under the present dispensation it is extremely doubtful if a petitioner could claim varied and different status simultaneously because it is unlikely for a 'Insolvency Professional' to make such recommendations particularly in view of the timeline contemplated by the IBC. The present petition has been posted before us on transfer from Hon'ble Delhi High Court. The compliance report has been filed claiming that the petitioners have status of 'Operational Creditor' and the respondent is an 'Operational Debtor'. In order to avoid any delay we are voicing our view on that issue as well. 6. In order to succeed as an Operational Creditor' the petitioner has to show that he is covered Section 5(20) which defines expression Operational Creditor' and also required to satisfy the requirements of Section 5(21) by showing that his claim is in respect of the provisions of goods or services including employmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst any resolution professional proposed under sub-section (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section. SECTION 5 (20) & (21) (20) "operational creditor" means a person to whom an operational debt is owed and includes any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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