NCLAT (29.04.2019) in Cooperative Rabobank U. A. Singapore Branch VS. Mr. Shailendra Ajmera [Company Appeal (AT) (Insolvency) No. 261 of 2018] 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.
Facts of the Case - Being a holder of Bills of Exchange, the appellant claimed to be an FC, which was rejected by the RP as well as the AA. It submitted before the NCLAT that bill discounting is one of the modes of raising finance, a bill of exchange is an independent contract under the Negotiable Instruments Act, 1881, and time value of money is inherent in a bill. While dismissing appeal, the NCLAT noted that under section 5(20) of the Code, as OC is not a person to whom an operational debt is owed but also to whom such operational debt is assigned.
Excerpts of the order;
In the Corporate Insolvency Resolution Process against ‘Ruchi Soya Industries Ltd.’ (Corporate Debtor), the Appellant - ‘Cooperative Rabobank U. A. Singapore Branch’, one of the creditors, made claim before the Resolution Professional stating that the Corporate Debtor owed to pay USD 107,36,972.90, basing on the Bills of Exchanges, ordering this Corporate Debtor to pay to the Creditor for the goods supplied by another party in between, i.e. ‘Avanti Industries Pvt. Ltd.’. The Appellant claimed to be the ‘Financial Creditor’ which was rejected by the Resolution Professional. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench by order dated 14th May, 2018 also held that the Appellant is not a ‘Financial Creditor’ but an ‘Operational Creditor’.
# 2. The question arises for consideration in this appeal is whether on the basis of Deed of Exchange, the Appellant can claim to be a ‘Financial Creditor’?
# 3. The case of the Appellant is that it is an international bank, which is in the business of providing banking and financial services including financing export/ import transactions by discounting bills of exchange (BoEs). The sole consideration for the Appellant in discounting BoEs is the discount interest and commission earned by the Appellant based upon the maturity period of the BoEs i.e. based on the time value of money. Such discounting facilities are akin to lending of money for earning interest and are, therefore, purely financial in nature. The Appellant is neither made a party to the export/ import contracts nor is it responsible for any obligations whatsoever under the export/ import contracts.
# 6. According to the Appellant, it entered into a Master Sales and Purchase Agreement dated 22nd October 2013 (MSPA), wherein it was agreed that upon acceptance by the Corporate Debtor of certain BoEs, the Appellant would discount the BoEs and disburse the discounted proceeds to a third party supplier of the Corporate Debtor, Aavanti Industries Pvt. Ltd. (Aavanti). (Clause 1,2 of the MSPA).
# 7. It was further agreed under the MSPA that the Appellant will not have any recourse to Aavanti and would be able to claim the amounts due under the BoEs only from the Corporate Debtor. (Clause 4 (C) of the MSPA)
# 8. In accordance with the MSPA, the Corporate Debtor accepted the BoEs by signing on the BoEs and thereby, unconditionally agreed to pay the amounts due under the BoEs to the Appellant. (Sample BoE)
# 9. It is only upon the acceptance of the BoEs by the Corporate Debtor, that the Appellant disbursed the discounted proceeds to Aavanti. Accordingly, an aggregate amount of USD 107,376,972.90 (excluding interest and other charges) was payable by the Corporate Debtor to the Appellant under the BoEs. Subsequently, on the maturity of the said BoEs, the BoEs were presented for payment to the Corporate Debtor and were dishonoured due to non-payment
# 11. ……… However, in the present case, the Bill of Exchanges were discounted without recourse to the Drawer i.e. ‘Avanti Industries Pvt. Ltd.’. Reliance has been placed on the decision of Hon’ble Supreme Court in “American Express Bank Ltd. Vs. Calcutta Steel Co. (1993) 2 SCC 199”.
# 12. It was further submitted that discounting of Bill of Exchange falls within the definition of ‘Financial Debt’ as defined under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (for short ‘I&B Code’) and the ‘time value’ means the compensation or the price paid for the length of time for which the money has been disbursed. Reliance has also been placed on decision of this Appellate Tribunal in “Dr. B.S.V. Lakshmi Vs. Geometrix Laser Solutions Pvt. Ltd., decided on 13th March, 2017”, against which the appeal was dismissed by the Hon’ble Supreme Court.
# 18. The aforesaid proposition of law is also evident from Sub-section (5) of Section 21 of the I&B Code, which reads as follows:-
“21(5). Where an operational creditor 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.”
# 19. Therefore, it is clear 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.
# 24. From the record we find 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 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.
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