2019 (4) TMI 2171 - AT - IBC

Financial Creditors or not - whether on the basis of Deed of Exchange the Appellant can claim to be a Financial Creditor ? - HELD THAT - An Operational Creditor who has assigned or legally transferred any Operational Debt to a Financial Creditor the assignee or transferee shall be considered as an Operational Creditor to the extent of such assignment or legal transfer. In view of Section 3(37) the Appellant cannot derive any advantage of expressions used in Negotiable Instruments Act 1881. From the record also it is found that the Bill of Exchange relates to supply of goods and whatever finance given by the appellant is to Aavanti Industries Pte Ltd. Singapore and not to the Corporate Debtor . The Corporate Debtor has merely received the goods and therefore we hold that the Appellant is not a Financial Creditor but at best can claim to be an Operational Creditor as held by the Adjudicating Authority. Conclusion - The appellant is an Operational Creditor and not entitled to be classified as a Financial Creditor in the Corporate Insolvency Resolution Process. There is no merit in the appeal - appeal dismissed.

Summary

1. The core legal question in this case is whether the appellant, a bank, can be classified as a 'Financial Creditor' based on its claim arising from the discounting of Bills of Exchange in the Corporate Insolvency Resolution Process against 'Ruchi Soya Industries Ltd.'

2. The appellant argued that the discounting of Bills of Exchange falls within the definition of 'Financial Debt' under the Insolvency and Bankruptcy Code, 2016, emphasizing the financial nature of such transactions and the absence of responsibility for obligations under export/import contracts.

3. The Resolution Professional and the Adjudicating Authority classified the appellant as an 'Operational Creditor' due to the nature of the transaction and the transfer of rights from the original creditor, 'Aavanti Industries Pte. Ltd.'

4. The Court examined the provisions of the Insolvency and Bankruptcy Code, particularly defining 'Operational Debt' and 'Operational Creditor,' and concluded that the appellant, as a transferee of the operational debt, remains an 'Operational Creditor' and cannot be classified as a 'Financial Creditor.'

5. The Court also highlighted that the appellant's financing was directed towards 'Aavanti Industries Pte. Ltd.' and not the Corporate Debtor, leading to the determination that the appellant does not qualify as a 'Financial Creditor.'

6. The Court dismissed the appeal, affirming the decision that the appellant is an 'Operational Creditor' and not entitled to be classified as a 'Financial Creditor' in the Corporate Insolvency Resolution Process.