Tribunal rules respondent not 'Financial Creditor', closes proceedings. Corporate debtor free to operate.

The Tribunal set aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, ruling that the respondent did not qualify as a 'Financial Creditor'. As the respondent had been fully repaid, the proceedings were closed, and actions taken by the Interim Resolution Professional were deemed illegal. The corporate debtor was released from legal constraints, enabling independent operation through its Board of Directors. The appeal was allowed without costs.

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Issues:
Challenge to the admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on the definition of 'Financial Creditor' and 'assured return'.

Analysis:
The appeal was filed against an order admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appellant argued that the respondent did not qualify as a 'Financial Creditor' as per the Code. The dispute centered around an agreement for the sale of flats where the respondent was required to opt for an 'assured return' by informing the corporate debtor in writing within a specified timeframe. The appellant contended that the respondent failed to provide evidence of opting for the assured return within the stipulated period, thus challenging the respondent's classification as a financial creditor.

The appellant further contended that the total amount due to the respondent, a flat buyer, had already been repaid. The respondent acknowledged the repayment, and the terms of settlement were on record. However, the respondent failed to demonstrate compliance with the requirement of informing the corporate debtor in advance about the intention to continue with the booking/holding of the flat in question.

The Tribunal found that the respondent had not proven that they qualified as a 'Financial Creditor' of the corporate debtor. Consequently, the order of the Adjudicating Authority admitting the application under Section 7 was set aside. Given that the respondent had been fully paid, the Tribunal directed the Adjudicating Authority to close the proceedings. As a result, all actions taken by the Interim Resolution Professional, including the declaration of moratorium and freezing of accounts, were deemed illegal and set aside. The corporate debtor was released from the legal constraints and allowed to operate independently through its Board of Directors. The appeal was allowed without costs.

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