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TMI Blog2024 (1) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... uppliers. The present is not a case that any disbursement is made to the Corporate Debtor by the Financers. Liability to make payment to Financers arose to the Corporate Debtor as per Master Buyer Agreement 21.12.2018. The Corporate Debtor having failed to honour the commitment, a claim was filed by Assignee of Financer. Nature of transaction between the parties arose out of sale of goods and services - there are no financial transaction between the parties. In the case of M/S. ORATOR MARKETING PVT. LTD. VERSUS M/S. SAMTEX DESINZ PVT. LTD. [ 2021 (8) TMI 314 - SUPREME COURT] , it was held that Section 5 (8) does not expressly exclude an interest free loan. The above judgment of the Hon ble Supreme Court was on entirely different facts, where Lender had advanced a loan without any interest - The present is not a case of financing any loan, rather present is a case of transaction of M1 Platform, on which Platform, both Seller, Buyer and Financers are registered and transaction takes place for sale and purchase of goods and discounting of invoices, payments and recoveries of payment by Financers. The transaction emanates from sale and purchase of goods in the present case. No d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 against the Corporate Debtor. Shri Brijesh Singh Bhadauriya was appointed as Resolution Professional ( RP ). (vi) In response to the public announcement dated 30.11.2022, the Appellant submitted its claim in Form-C dated 13.12.2022. On receipt of the claim, the RP sought for further documents from the Appellant vide email dated 17.12.2022. The RP vide his email dated 21.12.2022 written to the Appellant, categorized the Appellant as Operational Creditor. The Appellant aggrieved by the categorization filed an IA No.1990 of 2023 before the Adjudicating Authority, praying for setting aside the email dated 21.12.2022 and to admit the claim of the Appellant as Financial Creditor. IA No.1990 of 2023 was opposed by the RP. (vii) The Adjudicating Authority after hearing both the parties, by the impugned order has rejected the Application, affirming the view of the RP that transactions between the Corporate Debtor and the supplier were for purchase of goods in normal course of business of the Corporate Debtor and therefore is an operational debt within the meaning of Section 5 (21) of the Code. It was held that by assignment and re-assignment of the debt in favour of the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledged its obligation towards the Financers pursuant to the above assignment of trade receivables through a Master Buyer Agreement dated December 21, 2018. The operational debt was assigned to the Financers by Sellers when they were paid through trade receivables on the M1 Platform. Therefore, under the arrangement between the parties, the Supplier has transferred its Trade Receivables to the Financers, and the Corporate Debtor has agreed to pay the amount to the Financers. By virtue of discounting the trade receivable of the Supplier, the Financers entered into the shoes of the Supplier and had become Operational Creditor. As the original liability arose in respect of operational debt, any further assignment of the said operational debt shall also be treated similarly. The debt owed to the Appellant by the Corporate Debtor does not qualify the requirements of financial debt within the meaning of Section 5(8) of the Code. It is submitted that the Corporate Debtor has not availed any services from the Financers in the nature of factoring or financing for financial debt. Section 5(8)(e) specifically excludes the receivables sold or discounted on a recourse basis within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Financier's Bank account and the Credit Amount would be credited to the Supplier's Bank account. NPCI will pull the Debit Amount from the Financer's Bank account and push the Credit Amount to be credited into the Supplier's Bank account and shall also push the Commission into the Bank account of the Company. The settlement of payment shall be made on T + 1 day or any other time period which may be approved by the RBI from time to time, with the date of acceptance of the Bid by the Supplier being referred to as T . Consequently, the Financier will then be entitled to receive the total amount underlying the Factoring Unit in accordance with this Agreement and the Procedural Guidelines from the Buyer on the Due Date unless the Factoring Units have been rediscounted by the Financier prior to the Due Date, in which case the ultimate Financier will be entitled to the amount underlying such Factoring Units on the Due Date. For the avoidance of doubt, it is hereby clarified that any discounting and/or rediscounting of any Factoring Units on the M1 Website shall be without any recourse to the Supplier except when there is any fraud, misconduct, breach of any represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Provided in the case where the Interest Amount and Commission is paid by the Buyer as per terms agreed with the Company, the Buyer shall, at the time of accepting the Bid placed by a Financier in respect of a Factoring Unit, make upfront payment of the applicable Interest Amount payable to the Financier and the applicable Commission payable to the Company through the payment settlement process adopted by the Company. In such a scenario NPCI will pull the applicable Interest Amount as well as the applicable Commission payable by the Buyer from the Buyer's Bank and push the applicable interest Amount into the respective Financier's Bank account and push the amounts towards the Commission to the Bank account of the Company. 12. After filing of the claim, RP on 21.12.2022 communicated to the Appellant following: Dear Sir, This is in pursuance to your claim submission of INR 7,05,91,531 in the CIRP matter of RCI Industries Technology Limited, please note that the break-up or calculation of the amount is not provided. Further, please also note that the RCI Industries Technologies Limited incurred operational debt in respect of different suppliers which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power) from the Buyer (Corporate Debtor) through the above-named Financers. Therefore, it is evident that the Corporate Debtor had availed the financial services from the financers by way of discounting/ re-discounting of the invoices payable by the Corporate Debtor, under the Factoring Regulation Act, 2011. Copy of the Master Buyer Agreement dated 21.12.2018 are annexed herewith and marked as Annexure A-7. 9. That it is submitted that it was under the aforesaid agreements that the supplier sold goods between 13.06.2019 to 27.06.2019 to the Corporate Debtor, against which certain invoices were raised by the Supplier against the Buyer. It is further submitted that at the behest of the Corporate Debtor, the said invoices were discounted by the Financers from time to time and thus, the Corporate Debtor was liable to make payment to the Financers along with interest and penal interest in case of any delay in such payment. Therefore, in effect, the Financers had extended trade finance facilities to the Corporate Debtor by making direct payments to the suppliers of the Corporate Debtor. However, it is a matter of no dispute that soon after availing such facilities from the finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction is covered by financial debt. Section 5, sub-section (8) provides as follows: 5(8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; Explanation. -For the purposes of this subclause, - (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that discounting shall be without any recourse basis. Thus, the discounting is clearly excluded from financial debt under Section 5, subsection (8) (e). The learned Counsel for the Appellant has submitted that Section 5, sub-section (8) (e) is not applicable and the provision applicable is Section 5 (8) (f). When Section 5, sub-section (8) (e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause. Hence, discounting of invoices cannot fall under Section 5, sub-section (8) (f). The learned Counsel for the RP has rightly relied on judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.572 of 2022 Minions Ventures Pvt. Ltd. and Ors. vs. TDT Copper Ltd. decided on 28.03.2023. The above was a case of discounting of invoices. The Appellant in the said case was also a financer, who discounted invoices and deposited the amount, which was transferred to the account of the Seller and Seller after receiving of the amount transferred its right to receive the amount under the invoice to the Financers. Section 7 Application filed by the Financer was rejected by the Adjudicating Authority, which order was confirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC. 3. M/s Sameer Sales Pvt. Ltd., hereinafter referred to as the original lender , advanced a term loan of Rs 1.60 crores to the corporate debtor for a period of two years, to enable the corporate debtor to meet its working capital requirement. The original lender has assigned the outstanding loan to the appellant. 4. According to the appellant the loan was due to be repaid by the corporate debtor in full within 1-2-2020. The appellant claims that the corporate debtor made some payments, but Rs 1.56 crores still remain outstanding. 20. Hon ble Supreme Court in the above context held that Adjudicating Authority NCLT overlooked the words if any . In paragraph 22, 29 and 31, following was laid down: 22. NCLT and NCLAT have overlooked the words if any which could not have been intended to be otiose. Financial debt means outstanding principal due in respect of a loan and would also include interest thereon, if any interest were payable thereon. If there is no interest payable on the loan, only the outstanding principal would qualify as a financial debt. Both NCLAT and NCLT have failed to notice clause (f) of Section 5(8), in terms whereof financial debt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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