Appeal on Operational Creditor Qualification and Settlement Terms under Insolvency and Bankruptcy Code

The appeal challenging the admission of an application under section 9 of the Insolvency and Bankruptcy Code, 2016, focused on the qualification of the respondent as an operational creditor. The settlement terms between the parties, with respondent No. 1 as the sole member of the committee of creditors, were acknowledged. The Tribunal allowed the parties to present the settlement terms to the interim resolution professional for CoC consideration, directing them to do so within two weeks. Subsequently, with the CoC scheduled to review the terms, the appeal was disposed of, granting the appellant the option to return if the settlement was not approved.

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Issues:
- Qualification of operational creditor under the Insolvency and Bankruptcy Code, 2016.

Analysis:
The judgment revolves around an appeal challenging an order passed by the Adjudicating Authority admitting an application under section 9 of the Insolvency and Bankruptcy Code, 2016. The primary issue raised in the appeal was whether the respondent qualified as an operational creditor as the debt in question did not fall within the purview of operational debt. The appellant argued that a settlement had been reached between the parties, with respondent No. 1 being the sole member of the committee of creditors (CoC), and urged that the settlement terms be presented to the interim resolution professional (IRP) for consideration by the CoC to seek an exit from the corporate insolvency resolution process (CIRP).

The respondent, represented by an advocate, acknowledged the settlement and the recording of settlement/consent terms. The IRP confirmed that respondent No. 1 was the sole creditor comprising the CoC, with seven financial creditors being related parties and thus not eligible for CoC membership. The Tribunal found no legal hindrance for the CoC to review the settlement terms if mutually acceptable to both parties. It directed the appellant and respondent No. 1 to approach the IRP with the settlement terms for formal submission to the CoC within two weeks.

The IRP informed the Tribunal about the scheduled CoC meeting for consideration of the settlement terms. Consequently, the Tribunal concluded that the appeal was no longer necessary for further deliberation. It disposed of the appeal, granting the appellant the liberty to return if the settlement was not approved by the CoC. In the event of approval, the Adjudicating Authority was tasked with closing the case and making provisions for CIRP costs, including the IRP's fees and expenses. The order was to be communicated to the Adjudicating Authority for information.

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