Tribunal reclassifies debts, denies time exclusion request

The Tribunal partially allowed the application by setting aside the decision to classify debts owed to Respondent Nos. 2 and 3 as financial debts. Instead, the debts were categorized as operational debts, leading to a reworking of the creditors' list in the Committee of Creditors. The request to exclude time from the Corporate Insolvency Resolution Process was denied, with no costs awarded.

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Issues Involved:
1. Classification of debts owed to Respondent Nos. 2 and 3.
2. Determination of whether the debts qualify as "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.
3. Reworking the list of creditors in the Committee of Creditors (CoC) and their voting percentages.
4. Exclusion of time period from the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Classification of Debts Owed to Respondent Nos. 2 and 3:
The primary issue was whether the debts owed to Respondent Nos. 2 and 3 should be classified as financial debts or operational debts. The Applicant argued that the debts should be classified as operational debts, while the Interim Resolution Professional (IRP) classified them as financial debts. The Tribunal noted that the debts arose from Forward Purchase Agreements (FPAs) and deeds of guarantee executed by the Corporate Debtor.

2. Determination of Whether the Debts Qualify as "Financial Debt":
The Tribunal examined the definition of "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. According to Section 5(8), a financial debt is a debt disbursed against the consideration for the time value of money and includes various financial transactions. The Tribunal emphasized that for a debt to qualify as a financial debt, it must have been disbursed against the consideration for the time value of money and have the commercial effect of borrowing.

The Tribunal analyzed the FPAs and deeds of guarantee:
- The agreement between Respondent No. 2 and Pragat Akshay Urja Limited (a subsidiary of the Corporate Debtor) involved the supply of goods for a fixed price over five years. The Corporate Debtor executed a deed of guarantee to secure payment in case of default.
- Similarly, the Corporate Debtor entered into an FPA with Respondent No. 3 for the supply of products, with a guarantee provided by the Corporate Debtor.

The Tribunal concluded that the FPAs were essentially forward contracts for the supply of specified goods and did not involve the raising of any debt by the buyers/purchasers. The transactions were simple agreements of sale and purchase, not financial transactions with the consideration for the time value of money. Therefore, the debts owed to Respondent Nos. 2 and 3 did not qualify as financial debts under Section 5(8)(f) of the Code.

3. Reworking the List of Creditors in the CoC and Their Voting Percentages:
Given that the debts owed to Respondent Nos. 2 and 3 were classified as operational debts, the Tribunal ordered that Respondent Nos. 2 and 3 should be regarded as Operational Creditors. Consequently, the list of creditors in the CoC needed to be redrawn, and their voting percentages reworked to reflect this classification.

4. Exclusion of Time Period from the CIRP:
The Applicant sought the exclusion of the time period from the CIRP from the day of appointment of the IRP until the conclusion of the Application. However, the Tribunal denied this prayer, stating that the request for exclusion of time was not made under Section 12(2) of the Code.

Conclusion:
The Tribunal allowed the application in part, setting aside the decision of the IRP to admit the claims of Respondent Nos. 2 and 3 as financial creditors. The Tribunal ordered that Respondent Nos. 2 and 3 be classified as Operational Creditors, and the list of creditors in the CoC be redrawn accordingly. The prayer for exclusion of time from the CIRP was denied, and no costs were awarded.

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