Financial creditor appeal dismissed due to res judicata and money laundering proceedings against appellant

NCLAT Chennai dismissed an appeal seeking recognition as financial creditor and inclusion in creditor list. The tribunal found the matter barred by res judicata, noting previous determination that appellant's status as financial creditor was disputed. NCLAT emphasized that once Committee of Creditors decided to remove the Resolution Professional, inclusion of disputed creditor was improper. Additionally, money laundering proceedings against appellant precluded committee membership. The tribunal applied clean slate theory from Essar Steel judgment, preventing resurrection of past claims to avoid uncertainty for resolution applicants. Previous adjudicating authority order directing claim revision was set aside without liberty to re-approach.

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Issues Involved:
1. Whether the appellant qualifies as a 'Financial Creditor'.
2. Whether the appeal is barred by the principle of Res Judicata.
3. Whether the Business Transfer Agreement (BTA) constitutes a 'Financial Debt'.

Summary:

1. Whether the appellant qualifies as a 'Financial Creditor':
The appellant filed an appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016, seeking to be declared a 'Financial Creditor' and included in the list of creditors of the Corporate Debtor. The Adjudicating Authority dismissed the application, noting that the NCLAT had previously observed a dispute regarding whether the appellant comes within the meaning of 'Financial Creditor'. The NCLAT had set aside the earlier order confirming the appellant's status as a Financial Creditor, indicating that the issue had not attained finality. The appellant argued that the status of being a Financial Creditor was not conclusively adjudicated, but the Adjudicating Authority concluded that the finding remained unchallenged and could not be revisited.

2. Whether the appeal is barred by the principle of Res Judicata:
The respondent contended that the appeal is barred by the principle of Res Judicata, as the issue had already been decided in a previous appeal (C.A. (AT) No. 633/2018) filed by ARCIL. The respondent cited the Supreme Court judgment in 'Satyadhyan Ghosal Vs. Deorajin Debi', emphasizing that once a matter is adjudicated, it cannot be re-litigated. The NCLAT had noted that there was a dispute regarding whether the appellant was a 'Financial Creditor' and concluded that the inclusion of the appellant as a Financial Creditor by the Resolution Professional was improper. The appellant did not challenge this finding, and thus, the principle of Res Judicata applied, preventing the re-argument of the issue.

3. Whether the Business Transfer Agreement (BTA) constitutes a 'Financial Debt':
The respondent argued that the BTA did not have the commercial effect of a borrowing and was intended for the transfer of a business division on a slump sale basis. The terms of the BTA did not indicate a borrowing with a time value of money, and therefore, it did not fall within the definition of 'Financial Debt'. The NCLAT's previous order had set aside the Adjudicating Authority's decision to revise the appellant's claim, and the appellant did not appeal this finding. Consequently, the appellant's claim could not be reargued at this stage.

Conclusion:
The NCLAT dismissed the appeal, concluding that the issue of whether the appellant is a 'Financial Creditor' had attained finality and could not be revisited. The appeal was barred by the principle of Res Judicata, and the BTA did not constitute a 'Financial Debt'. The NCLAT's previous order had set aside the Adjudicating Authority's decision to revise the appellant's claim without granting liberty to re-approach for adjudication. The appeal was dismissed with no order as to costs, and all connected pending interlocutory applications were closed.

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