2023 (2) TMI 1199 - AT - Insolvency and Bankruptcy

Tribunal Affirms Appellants as Financial Creditors under IBC, Supported by UPRERA Decree and Recovery Certificate

Vishal Chelani & Ors. Versus Debashis Nanda Resolution Professional Bulland Buildtech Pvt. Ltd.

The Tribunal dismissed the appeal, affirming the Resolution Professional's decision to classify the Appellants as Financial Creditors due to a UPRERA ... Appellant is Financial Creditor or not, for the purpose of filing an application claiming it in Form C instead of Form CA - Appellants had already obtained a decree from the UPRERA regarding refund of their amount. HELD THAT:- Hon’ble Supreme Court in the case of KOTAK MAHINDRA BANK LIMITED VERSUS A. BALAKRISHNAN & ANR. [2022 (6) TMI 13 - SUPREME COURT] held that once the Recovery Certificate has been issued, the party in possession of the Recovery Certificate is to be considered as a Financial Creditor. There are no merit in the present appeal and the same is hereby dismissed. Issues involved:1. Classification of claimants as Home Buyers or Financial Creditors.2. Interpretation of the decree obtained from the UPRERA regarding refund.3. Applicability of the Kotak Mahindra case decision on the present case.Issue 1: Classification of claimants as Home Buyers or Financial CreditorsThe case involved a dispute where the Appellants, who were Home Buyers in a project, filed a claim application in Form CA under the Insolvency & Bankruptcy Code, 2016 (IBC). The Resolution Professional (RP) rejected their claim, stating they should file as Financial Creditors in Form C due to a decree obtained from the UPRERA regarding a refund order. The Tribunal upheld the RP's decision, considering the Appellants as Financial Creditors based on the UPRERA decree. The Appellants argued that their status should remain as Home Buyers, citing a Supreme Court decision in a similar matter. However, the RP contended that obtaining a decree from UPRERA for a refund would classify them as Financial Creditors under the IBC.Issue 2: Interpretation of the decree obtained from the UPRERA regarding refundThe Tribunal examined the UPRERA decree obtained by the Appellants, which directed the Corporate Debtor to refund the amount invested for purchasing a flat. The RP considered this decree as grounds for treating the Appellants as Financial Creditors, leading to the rejection of their claim in Form CA. The Appellants expressed their interest in the flat's allotment rather than a refund, which was priced higher in the Resolution Plan. The Tribunal analyzed the implications of the UPRERA decree on the classification of the Appellants and whether it warranted their status as Financial Creditors or Home Buyers under the IBC.Issue 3: Applicability of the Kotak Mahindra case decision on the present caseBoth parties referred to the Kotak Mahindra case decision to support their arguments. The Appellants relied on a specific paragraph from the decision to maintain their classification as Home Buyers, emphasizing the non-exhaustive nature of the definition of 'financial debt.' Conversely, the RP cited another paragraph from the same decision, asserting that holding a Recovery Certificate would deem the holder as a Financial Creditor. The Tribunal considered these arguments and ultimately relied on the conclusion drawn in the Kotak Mahindra case decision to determine the Appellants' classification as Financial Creditors based on the Recovery Certificate issued by UPRERA.The Tribunal dismissed the appeal, upholding the RP's decision to treat the Appellants as Financial Creditors due to the UPRERA decree and the issuance of a Recovery Certificate. The judgment clarified the implications of obtaining such a decree on the classification of claimants under the IBC, emphasizing the importance of legal instruments like Recovery Certificates in determining creditor status.