2017 (11) TMI 1917 - AT - Insolvency and Bankruptcy

Appeal dismissed challenging rejection of application under Insolvency and Bankruptcy Code.

Engenious Engineering Pvt. Ltd. Versus Onaex Natura Pvt. Ltd.

The tribunal dismissed the appeal challenging the rejection of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, as the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - appellant is a ‘Financial Creditor’ or not - HELD THAT:- The appellant invested some amount with the respondent company and was allotted equity shares. In a petition under Sections 397 & 398 of the Companies Act, 1956, the then Company Law Board cancelled the allotment of share capital in favour of the appellant. On such cancellation, the amount is lying with the respondent company which has been shown as debt amount of ₹ 79,15,480/-. Though, the aforesaid fact has been disputed by the learned counsel for the respondent, but without going into the question as to what amount is lying with the respondent, there are nothing on the record to suggest that the appellant come within the meaning of ‘Financial Creditor’ under Section 5(8) read with Section 5(9) of the ‘I&B Code’. Even if it is accepted that the amount has been shown to be a debt in the records of the Company, does not mean that the appellant is a ‘Financial Creditor’. Appeal dismissed. Issues:Challenge to rejection of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 on grounds of not being a 'Financial Creditor'.Analysis:The judgment involves an appeal challenging the rejection of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 on the basis that the appellant was not considered a 'Financial Creditor'. The appellant had invested in the respondent company and was allotted equity shares, which were later cancelled by the Company Law Board in a petition under Sections 397 & 398 of the Companies Act, 1956. The amount invested by the appellant was shown as a debt of Rs. 79,15,480 with the respondent company. However, the tribunal found that merely showing the amount as a debt did not automatically classify the appellant as a 'Financial Creditor' under Section 5(8) and Section 5(9) of the Insolvency and Bankruptcy Code. Despite the dispute regarding the exact amount with the respondent, the tribunal ruled that the appellant did not fall within the definition of a 'Financial Creditor'.The tribunal dismissed the appeal, stating that there was no merit in the argument presented by the appellant. The judgment clarified that even if the amount invested was considered a debt in the company's records, it did not establish the appellant as a 'Financial Creditor'. The dismissal of the appeal was accompanied by a note that the impugned order by the Adjudicating Authority would not prevent the appellant from seeking appropriate relief from the relevant forum. Overall, the judgment focused on the interpretation of the term 'Financial Creditor' under the Insolvency and Bankruptcy Code and emphasized that the mere existence of a debt did not automatically confer the status of a 'Financial Creditor' on the appellant.