IBC

Insolvency and Banking Code, 2016 - The IRP after collation of Claims and formation of ‘Committee of Creditors’ was not entitled to suo-moto review or change the status of a creditor from  Financial to Operational Creditor - Updating list and review are different acts -   If Resolution Professional was aggrieved, he should have moved the  Adjudicating Authority - The aggrieved person can challenge either  constitution of ‘Committee of Creditors’ or for any grievance against rejection,  incorrect acceptance or categorisation of creditors before the Adjudicating  Authority -  But the Resolution Professional cannot arbitrarily on its own  overturn earlier decision, to change the status of a creditor from Financial Creditor to Operational Creditor. [Para 26]

 

 

Insolvency and Banking Code, 2016, Section 5(7),  5(20) -  ‘Committee of Creditors’ had no role in deciding the status of a creditor either as ‘Financial’ or ‘Operational’ Creditor and such a decision of ‘Committee of Creditors’ can never be treated as an exercise under its Commercial wisdom -  It is a matter of applying the law of I&B Code, and if such factor is left to CoC, there would be a serious conflict of interest - Whether a person or entity is “Financial Creditor” as defined in Section 5(7) or Operational Creditor as defined in Section 5(20) is a matter of applying the law to facts -  It cannot be a matter of voting, and choice as discretion is not relevant -  During the CIRP, the IRP collates the Claim, and after that, the ‘Committee of Creditors’ is formed under Section 18 of the Code - After the formation of the ‘Committee of Creditors’, only the aggrieved person can agitate the same and that too, only before the Adjudicating Authority -  Committee of Creditors was not empowered to adjudicate the issue that has cropped up in the present case, i.e. wheter X is a ‘Financial’ or ‘Operational’ Creditor -  Such adjudication is beyond the scope of consideration of the Committee of Creditors. [Para 35, 42]

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