Tribunal recognizes M/s. PEC Ltd. as 'Financial Creditor' under Insolvency Code

The tribunal held that the appellant, M/s. PEC Ltd., qualified as a 'Financial Creditor' under the Insolvency and Bankruptcy Code, 2016, allowing their applications under Section 7 to proceed. It was determined that the applications should not have been treated as applications under Section 9. The tribunal directed the appellant to be recognized as a 'Financial Creditor' and included in the 'Committee of Creditors'. The appeals were allowed, maintaining the orders admitting the applications and imposing a moratorium, with modifications regarding the appellant's classification.

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Issues Involved:
1. Whether the appellant, M/s. PEC Ltd., is a 'Financial Creditor' under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Whether the applications filed under Section 7 can be treated as applications under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Issue-Wise Detailed Analysis:

1. Financial Creditor Status:
The appellant, M/s. PEC Ltd., a Government of India Enterprise, filed applications under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I & B Code) against the respondents, M/s. Sree Ramakrishna Alloys Limited and M/s. Sri Gangadhara Steels Limited, alleging defaults on financial debts. The agreements between the appellant and respondents involved the procurement of M.S. Billets, with the appellant providing financial assistance through an Irrevocable Letter of Credit (ILC). The agreements stipulated that the respondents would pay interest on the borrowed amounts, thus establishing the appellant as a 'Financial Creditor' under Section 5(7) and Section 5(8) of the I & B Code. The tribunal confirmed that the appellant disbursed amounts against the consideration for the time value of money, qualifying them as a 'Financial Creditor' eligible to file applications under Section 7.

2. Treatment of Applications Under Section 9:
The grievance of the appellant was that their applications under Section 7 were erroneously treated as applications under Section 9 by the Adjudicating Authority, depriving them of their rights as 'Financial Creditors' and excluding them from the 'Committee of Creditors'. The tribunal held that an application filed under Section 7 cannot be treated as an application under Section 9. The requirements for filing under Section 7 and Section 9 are distinct, including the necessity of issuing a demand notice under Section 8 for applications under Section 9, which is not required for Section 7 applications. The tribunal emphasized that the Adjudicating Authority has the jurisdiction to reject an application under Section 7 if the applicant is not a 'Financial Creditor', but it cannot convert it into a Section 9 application.

Judgment:
The tribunal concluded that the applications filed by the appellant under Section 7 were maintainable and should not have been treated as applications under Section 9. The orders admitting the applications and passing the moratorium were upheld, but the part of the orders treating the appellant as an 'Operational Creditor' was modified. The appellant, M/s. PEC Ltd., was directed to be treated as a 'Financial Creditor' and included in the 'Committee of Creditors' for both cases. The appeals were allowed with these observations and directions, with no order as to costs.

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