Appeal allowed, respondent not financial creditor, Corporate Debtor freed, Resolution Pro fee to be determined

The appeal was allowed, setting aside the orders appointing the Interim Resolution Professional and declaring a moratorium. The respondent was found not to qualify as a "financial creditor," leading to the abatement of the application under Sections 433 and 434. The Corporate Debtor was released from legal constraints and allowed to function through its Board of Directors. The Adjudicating Authority was directed to determine the Resolution Professional's fee to be paid by the Corporate Debtor for the period of service.

---

---

Issues Involved:
1. Validity of treating a winding-up application under Sections 433 and 434 of the Companies Act, 1956 as an application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Determination of whether the respondent qualifies as a "Financial Creditor" under the Insolvency and Bankruptcy Code, 2016.
3. Legality of the orders passed by the Adjudicating Authority appointing the Interim Resolution Professional and declaring a moratorium.

Issue-wise Detailed Analysis:

1. Validity of treating a winding-up application under Sections 433 and 434 of the Companies Act, 1956 as an application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appellant contested the orders dated 4th September, 2017 and 18th September, 2017 passed by the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, which treated the winding-up application under Sections 433 and 434 of the Companies Act, 1956 as an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Tribunal admitted the application, passed a moratorium order, and appointed an Interim Resolution Professional. The Tribunal referenced the Central Government notification dated 7th December, 2016, which mandated the transfer of pending winding-up proceedings from High Courts to the Tribunal, to be treated as applications under Sections 7, 8, or 9 of the I&B Code.

2. Determination of whether the respondent qualifies as a "Financial Creditor" under the Insolvency and Bankruptcy Code, 2016:
The appellant argued that the respondent, M/s. Visa Drugs & Pharmaceuticals Pvt. Ltd., was a shareholder and did not qualify as a "Financial Creditor" under Section 5(7) read with Section 5(8) of the I&B Code. The appellant pointed out that the balance-sheet of M/s. Swan Aluminiums Pvt. Ltd. listed the respondent as an unsecured loan/advance without interest, which does not meet the definition of "financial debt" under Section 5(8) of the I&B Code. The Tribunal examined the definition of "Financial Creditor" and "financial debt," which requires the debt to be disbursed against the consideration for the time value of money. The Tribunal found no evidence that the loan was disbursed against the consideration for the time value of money or that it was borrowed against the payment of interest. Hence, the respondent did not qualify as a "financial creditor."

3. Legality of the orders passed by the Adjudicating Authority appointing the Interim Resolution Professional and declaring a moratorium:
The Tribunal concluded that the Adjudicating Authority failed to notice that the respondent did not qualify as a "financial creditor." Consequently, the orders dated 4th September and 18th September, 2017, appointing the Interim Resolution Professional, declaring a moratorium, freezing accounts, and all subsequent actions taken by the Resolution Professional were declared illegal and set aside. The application under Sections 433 and 434 was deemed abated, and the Corporate Debtor was released from all legal rigours, allowing it to function independently through its Board of Directors. The Tribunal directed the Adjudicating Authority to fix the fee of the Resolution Professional, which the Corporate Debtor was to pay for the period he functioned.

Conclusion:
The appeal was allowed, setting aside the impugned orders and actions taken by the Resolution Professional. The Corporate Debtor was permitted to resume operations independently, and the proceedings under Sections 433 and 434 were closed. No order as to costs was made.

---