IMPORTANT POINT
Financial debt – While deciding issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is real nature of transaction reflected in writing.

JUDGMENT :

ABHAY S. OKA, J.

1. These appeals take exception to the separate impugned judgments and orders dated 7th October 2021 and 29th October 2021 passed by the National Company Law Appellate Tribunal (for short ‘the NCLAT’). In Civil Appeal No. 1143 of 2022, the issue involved is whether the first respondent is a financial creditor within the meaning of Sub-Section (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016 (for short ‘the IBC’). The corporate debtor, in this case, is M/s. Mount Shivalik Industries Limited. The impugned judgment and order dated 7th October 2021 holds that the first respondent is a financial creditor. As far as Civil Appeal Nos. 6991-6994 of 2022 are concerned, the issue is whether the 1st to 4th respondents therein are financial creditors of the same corporate debtor-M/s. Mount Shivalik Industries Limited. The impugned judgment dated 29th October 2021 follows the impugned judgment in Civil Appeal No. 1143 of 2022.

FACTUAL ASPECTS

2. A brief reference to the factual aspects of Civil Appeal No. 1143 of 2022 must be made to understand the controversy. There were two agreements of 1st April 2014 and 1st April 2015 between the corporate debtor and the first respondent. The agreements were in the form of letters addressed by the corporate debtor to the first respondent. By the agreement/letter dated 1st April 2014, the corporate debtor appointed the first respondent as a ‘Sales Promoter’ to promote beer manufactured by the corporate debtor at Ranchi (Jharkhand) for twelve months. One of the conditions incorporated by the corporate debtor in the said letter/agreement was that the first respondent should deposit a minimum security of Rs. 53,15,000/- with the corporate debtor, which will carry interest @ 21% per annum. The letter provided that the corporate debtor will pay the interest on Rs. 7,85,850/- @ 21% per annum. The terms of the agreement/letter dated 1st April 2015 are identical. The only difference is that under the second agreement/letter, the corporate debtor was to pay the interest on Rs. 32,85,850/- @ 21% per annum.

3. The Oriental Bank of Commerce invoked the provisions of Section 7 of the IBC against the corporate debtor. The National Company Law Tribunal (for short ‘the NCLT’) admitted the application under Section 7 of the IBC by the order dated 12th June 2018. It imposed a moratorium under Section 14 of the IBC. The second respondent was appointed as the Interim Resolution Professional. Initially, the first respondent filed a claim with the second respondent as an operational creditor. The claim was withdrawn, and on 19th September 2018, the first respondent filed a claim with the second respondent as a financial creditor. By a communication dated 7th October 2018, the second respondent informed the first respondent that the first respondent’s claim was accepted partly as an operational debt and partly as a financial debt. After the first respondent submitted Form-B, the second respondent rejected the claim on the ground that the first respondent could not be considered a financial creditor. Therefore, an application was moved before the NCLT under Sub-Section (5) of Section 60 of the IBC by the first respondent seeking a direction to the second respondent to admit the first respondent’s claim as a financial creditor. During the pendency of the said application before the NCLT, the Committee of Creditors approved a resolution plan submitted by M/s. Kals Distilleries Pvt. Ltd. The second respondent applied to the NCLT to approve the resolution plan based on the approval. On 18th January 2021, the NCLT rejected the application made by the first respondent. Aggrieved by the said order, the first respondent preferred an appeal before the NCLAT. By the impugned judgment and order dated 7th October 2021, the NCLAT held that the first respondent was a financial creditor and not an operational creditor. The NCLT, on 13th October 2021 approved the resolution plan of M/s. Kals Distilleries