Financiers Discounting Invoices Of The Corporate Debtor To Become Operational Creditors: NCLT Bengaluru Reiterates

Background Facts

BNH Infra Projects (India) Private Limited (“Corporate Debtor”) approached KredX, a platform for online bill discounting seeking to enter into an invoice discounting arrangement with respect to invoices raised by the Corporate Debtor against Tata Projects Limited. A Tripartite agreement dated 02.03.2019 was executed between the Corporate Debtor, Tata Projects Limited and KredX. The Corporate Debtor listed two invoices of an amount of Rs. 2 crores on the KredX platform for the purpose of discounting. 67 Financiers showed their interest in discounting the invoices (including the Petitioners) and separate Agreements of Transfer of Rights (“the Agreements”) were executed between the Financiers, the Corporate Debtor and KredX. The Petitioners (“Financial Creditors”) disbursed Rs. 88,59,356/- during June 2019 to the Corporate Debtor towards the invoices. The Financial Creditors were entitled to receive Rs. 91,72,726 from Tata Projects Limited as per the Agreements; however, Tata Projects Limited failed to pay the outstanding amount due under the invoices. Thus there was a material breach of the Agreements and the liability of restitution to the Petitioners fell upon the Corporate Debtor. Even the Corporate Debtor despite several reminders failed to pay the outstanding amount under the invoices.

It was contended by the Corporate Debtor that the amount claimed as due was fully paid and nothing was outstanding. Further the amount claimed does not fall within the ambit of Financial Debt. The invoices were raised by the Corporate Debtor towards the works executed for Tata Projects Limited. The invoices that were uploaded on KredX portal were raised towards an Operational Debt which was owed towards the Corporate Debtor. This Operational Debt was transferred to the Petitioners when they paid for the invoices on the web portal.

Findings of the Tribunal

It was observed by the Tribunal that upon discounting of the invoices, the amount of the Petitioners was deposited in escrow accounts maintained by KredX and this amount was disbursed to the Corporate Debtor in lieu of transfer of the right to receive the amount under the invoices in favour of the Petitioners. However, at no point of time was the amount disbursed as a loan to pay the debts of the Corporate Debtor. The Petitioners took the invoices at a discounted price and stepped into the shoes of the Corporate Debtor who was an Operational Creditor to Tata Projects Limited. Reliance was placed on the NCLAT judgment of Minions Ventures Pvt. Ltd Vs. TDT Copper Ltd, (2022) ibclaw.in 286 NCLT wherein it was held that by discounting the invoices of the seller, the Financiers enter into the shoes of the seller to become Operational Creditors.

With the aforesaid observations, the Tribunal dismissed the petition.

Case: Invoice Discounters of BNH Infra Projects (India) Private Limited vs BNH Infra Projects (India) Private Limited

Case No. C.P. (IB) No.95/BB/2021

Counsels for the Applicants; Adv. Arjun K Perikal

Counsel for the Respondent ;Adv. K.S Ponnappa

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