Canbank Factors Limited vs Brijesh Singh Bhaduria & Ors

[Arising out of the Order dated 13.02.2025, passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi Bench) in C.P (IB) No. 2688(ND)/2019)]

IN THE MATTER OF: M/s. Canbank Factors Limited (CIN: U85110KA1991PLC011960) TReDS Business Unit: No. 67/1 2nd Floor, Kankapura Main Road Near Lalbagh West Gate, Basavnagudi, Bangalore - 560004 ...Appellant

Versus

1. Brijesh Singh Bhaduria Resolution Professional, M/S. RCI Industries & Technologies Limited No. C-II/08, Mangal Apartments, Vasundhara Enclave, Delhi - 110096 ...Respondent No.1

2. M/s. RCI Industries & Technologies ...Respondent No.2 Limited No. 421, 4th Pearls Omaxe Tower, Netaji Subhash Place, Pitampura, Delhi - 110034

3. JTL Industries Limited Successful Resolution Professional SCP 18-19, Sector - 28C, Chandigarh - 160002 ...Respondent No.3

Present: For Appellant : Ms. Radhika Gupta, Mr. Saket Verma, Advocates

For Respondent : Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Palak Kalra, Mr. Rajat Gupta, Advocates for RP/R1 Mr. Swapnil Gupta, Advocate for R3/ SRA JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The Appellant M/s Canbank Factors Limited has filed an Appeal under

Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred

to as "the Code") against the impugned order dated 13.02.2025 which was

passed by the National Company Law Tribunal, New Delhi in I.A. No. 2208/2023

in C.P. (IB) No. 2688(ND)/2019, dismissing the IA. The Appellant prays to set

aside the impugned order dated 13.02.2025.

2. The prayer in the I.A. No. 2208/2023 in C.P(IB) No. 2688(ND)/2019 before

NCLT was follows:

"IA-2208/2023

This application has been filed seeking the following prayers: -

a. Declare and set aside the decision of the Resolution Professional whereby the claim of the Applicant as a financial creditor of the Corporate Debtor has been rejected by the Resolution Professional;

b. Direct the Resolution Professional to accept the claim of the Applicant as a Financial creditor of the Corporate Debtor to the extent of the amount of debt of ₹6,35,51,473/- to the Canbank Factors Facility submitted vide its Form C dated 17.12.2022; and

c. pass such other orders and directions that may be deemed appropriate in the interest of justice and the facts and circumstances of the present case."

3. While dismissing the IA, the Adjudicating Authority had returned the

following findings:

Company Appeal (AT) (Insolvency) No. 742 of 2025 2 of 25 "Mr. Abhishek Anand, Ld. Counsel appearing on behalf of the Respondent- Resolution Professional submitted that the issue involved in this application is covered by the order dated 10.11.2023 passed by this Adjudicating Authority in IA - 1990/2023 in the matter of "M/s. Mudraksh Investfin Private Limited Vs. Mr. Brijesh singh Bhadauriya", which has been upheld by the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 1671 of 2023, vide order dated 05.01.2024.

Mr. Vijay Kumar, Ld. Counsel appearing on behalf of the Applicant submitted that the facts of the present case are distinguishable from the facts of the case decided vide order dated 10.11.2023 in IA-1990/2023 which has been upheld by the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 1671 of 2023, vide order dated 05.01.2024 and the Applicant ought to be treated as Financial Creditor.

He also made an alternative submission that the Applicant be treated as the Operational Creditor and be given liberty to file its claim in the category of the Operational Creditor.

Mr. Abhishek Anand, Ld. Counsel on the contrary submitted that the CoC has already approved the resolution plan on 17.08.2024 and therefore, such a prayer cannot be allowed at this stage.

IA-2208/2023 is accordingly, dismissed in the light of the order dated 10.11.2023 in IA-1990/2023."

4. The Appellant claims that it is a subsidiary of Canara Bank, registered

as a "Non-Banking Financial Company" under Section 45IA of the Reserve

Bank of India Act, 1934. The Appellant claims to have provided Trade

Receivables discounting/factoring facilities to the Respondent Company -

M/s RCI Industries & Technologies Limited. This was done through Mynd

Solutions Private Limited (M1 Exchange). The Appellant had entered into a

Master Buyer Agreement (MBA) with M1 Exchange. As per this factoring

Company Appeal (AT) (Insolvency) No. 742 of 2025 3 of 25 facilities, the Appellant factored 8 invoices for Respondent No.2 Company

with a total value of ₹3,97,32,433/-. Thereafter, Respondent No. 2 - M/s RCI

Industries & Technologies Limited failed to make the payment of

₹3,97,32,433/- on the due date and the Appellant issued a letter dated

06.09.2019 calling upon the Respondent to pay the outstanding amount.

Later, the Appellant issued a demand notice dated 19.09.2019 under Section

25(1) of the Payment & Settlement System Act, 2007 seeking recovery of

dues. The Respondent No. 2 claimed that it is in a financial crisis and is

unable to clear the liability and sought time of 6 months to regularize the

payment.

5. On a different conspectus on an application of Standard Chartered

Bank Singapore (Ltd.) under Section 9 of the Code, CIR proceedings were

initiated against Respondent No. 2 - M/s. RC Industries & Technologies

Limited on 25.11.2022. In the CIR proceedings, the Appellant had filed its

claim for ₹6,35,51,472.63 in Form C alongwith the proof of claim with the

RP/R1. Respondent No.1/RP vide email dated 18.12.2022 did not admit the

claim of the Appellant as a Financial Creditor and had been advising them

to do so in different form as an Operational Creditor and not as a Financial

Creditor.

6. Subsequently on April 2023, the Appellant filed an Application under

Section 60(5) of the Code before the Adjudicating Authority seeking to set

aside the decision of the Respondent No.1 and directing the Respondent No.1

Company Appeal (AT) (Insolvency) No. 742 of 2025 4 of 25 to accept the claim of the Appellant as a Financial Creditor. Vide order dated

13.02.2025 the Adjudicating Authority had dismissed the application.

7. In his Appeal, the Appellant again claims that they are a Financial

Creditor of the Respondent No.2 - M/s RCI Industries & Technologies Limited

under Section 5(8) of the Code. They contend to have filed its claim before

the Resolution Professional on 17.12.2022, which was within time. The

Appellant had filed its claim as a Financial Creditor in Form 'C', but RP had

advised to file the claim as an Operational Creditor. Appellant further claims

that Respondent No.1 - RP cannot overlook the claim just because the claim

was filed in the form not specified in the CIRP Regulation. Appellant claims

that it had filed the claim as per Regulation 8 of the IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 and the claim

was submitted based on their own understanding of their claim as a

Financial Creditor and accordingly it had filed Form 'C' before the

Respondent No. 1 - RP. Appellant also claims that once the claim is

submitted with proof, the RP has to verify the claim and include the name of

the Appellant in the list of the Creditors along with the amount claim.

8. Appellant places reliance on the judgment of Hon'ble Supreme Court

in the matter of Greater Noida Industrial Development Authority Vs.

Prabhjit Singh Soni and Anr. (2024) 6 SCC 767, wherein it was ruled that

the Form in which a claim is to be submitted is directory and not mandatory.

Company Appeal (AT) (Insolvency) No. 742 of 2025 5 of 25

9. Appellant also claims that at the stage of filing the application before

the Adjudicating Authority, the resolution plan had not been approved by the

CoC. Therefore, the arguments of Respondent No.1 - RP that the Resolution

Plans stand approved during the pendency of the Application should not

affect the inclusion of the claim. In view of the above, Appellant contends

that the impugned order dated 13.02.2025 by the Adjudicating Authority is

illegal, arbitrary and contrary to law and therefore should be set aside.

10. Respondent No.2 - RP in his reply reminds us that the Appellant is

engaged in the business of factoring, which involves the purchase of trade

receivables from suppliers. Under such transactions, the Appellant as the

"Factor", acquires invoices raised by suppliers on their respective buyers

and, upon request, advances payments to the suppliers against those

invoices. The Appellant then undertakes to recover the corresponding

amounts directly from the buyers, thereby facilitating liquidity for the

suppliers while assuming the collection risk.

11. Furthermore, Mynd Solutions Private Limited operates a Trade

Receivables Discounting System (hereinafter referred to as "TReDS") platform

under the brand name "M1" which facilitates the discounting and re-

discounting of trade receivables payable by buyers to suppliers, through

financiers registered on the platform. The Corporate Debtor entered into a

Master Buyer Agreement dated 21.12.2018 with Mynd Solutions Private

Limited to participate in the said platform. The Appellant, in its capacity as

Company Appeal (AT) (Insolvency) No. 742 of 2025 6 of 25 a financier, also entered into a Master Financer Agreement with Mynd

Solutions Private Limited for participation on the M1 platform. In furtherance

of the aforesaid agreements, the Corporate Debtor participated in the Trade

Receivables E-Discounting/Factoring Facility on the M1 Platform during the

months of May and June 2019, in respect of receivables raised by its

suppliers. In the course of this process, the Appellant submitted bids for the

invoices uploaded by the Corporate Debtor on the M1 Platform. These bids

were duly accepted, thereby signifying its commitment to make payment to

the Appellant on the respective due dates, in lieu of the payments originally

payable to its suppliers for goods supplied to the Corporate Debtor. In this

process the Appellant purchased the operational debts of the Corporate

Debtor i.e., Buyer and released payments to the suppliers of the Corporate

Debtor. Having received goods from these suppliers, the Corporate Debtor

became liable to discharge the corresponding operational dues in respect of

the invoices factored by the Appellant, in accordance with the terms of the

Master Buyer Agreement dated 21.12.2018. The Appellant has averred in the

Application and in the present Appeal that the Corporate Debtor was

obligated to make payment on the respective due dates specified against each

factoring unit. It is further submitted that the NACH mandate registered with

the Corporate Debtor's bank failed to process due to insufficient funds in the

Corporate Debtor's account. Consequently, the electronic fund transfer

initiated by the Corporate Debtor could not be executed for want of adequate

balance to honour the transfer instruction. It is brought to our notice that

Company Appeal (AT) (Insolvency) No. 742 of 2025 7 of 25 the Appellant, by way of an email dated 01.12.2022, addressed the

Respondent - RP and asserted its status as a Financial Creditor of the

Corporate Debtor. In the said communication, the Appellant expressed its

intention to submit a claim in such capacity and requested the Respondent

to provide details regarding the procedure for submission of claims. The

Appellant further sought appropriate guidance to ensure that its claim could

be filed within the prescribed timeline. Subsequently, the Appellant, vide

email dated 17.12.2022, submitted its claim in the CIRP of the Corporate

Debtor before the Respondent - RP. Although the Appellant was an

Operational Creditor of the Corporate Debtor, but the claim was submitted

in Form C, indicating the Appellant's asserted status as a Financial Creditor.

12. Respondent No.2 in its capacity as the Resolution Professional of the

Corporate Debtor, sent an email dated 18.12.2022 in response to the

Appellant's email dated 17.12.2022, and informed the Appellant that the

Corporate Debtor had incurred operational debt towards various suppliers,

and such debts had been assigned to the Appellant through the TReDS

platform. It was further clarified that, pursuant to the assignment, the

amounts payable under the relevant invoices stood assigned to the

Appellant; however, the underlying nature of the debt remained operational,

as it originated from the supply of goods or services to the Corporate Debtor.

The Respondent further emphasized that the mere assignment of an

operational debt does not alter its character into a financial debt.

Accordingly, the Appellant was advised to submit its claim in the capacity of

Company Appeal (AT) (Insolvency) No. 742 of 2025 8 of 25 an Operational Creditor, using Form B as prescribed under the CIRP

Regulations, 2016.

13. The Appellant issued multiple communications to the Respondent, to

treat its claim filed in Form C' should be admitted as a financial debt in the

CIRP of the Corporate Debtor, despite the Appellant's clear knowledge that

the underlying transactions remained operational in nature. The very basis

of the Appellant's claim lies in the discounting of trade receivables owed by

the Corporate Debtor to its suppliers for goods received in the ordinary

course of business transactions that squarely fall within the ambit of

operational debt under the Code.

14. Thereafter, the Appellant filed the Application bearing I.A. No. 2208 of

2023 on 19.04.2023 before the Ld. Adjudicating Authority in the Company

Petition against the Corporate Debtor under Section 60(5) of the Code inter

alia seeking reliefs as noted by us herein earlier.

15. In the meanwhile, the Respondent had convened the 22nd CoC meeting

qua the Corporate Debtor on 05.06.2024, wherein the CoC members

approved the Resolution Plan submitted by M/s JTL Industries Limited with

98.05% votes in favour, which is more than the requisite threshold of 66%.

Consequently, the Respondent No.2 - RP filed an application under Section

30 of the Code inter alia seeking approval of the Resolution Plan as approved

by the CoC qua the Corporate Debtor. It is pertinent to mention here that

the same is pending adjudication before the Ld. Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 742 of 2025 9 of 25

16. SRA - M/s JTL Industries Limited, which is Respondent No.3 brings to

our notice that the Resolution Plan has already been approved by the CoC

with the requisite majority in its 22nd CoC meeting held on 05.06.2024. The

application under Section 30 of the Code for approval of the Resolution Plan

is currently pending adjudication. In view of the binding decisions of the

Hon'ble Supreme Court and this Hon'ble Appellate Tribunal, no claim

whether fresh or reclassified can be entertained at this belated stage, after

the Resolution Plan has been approved by the CoC and is pending before the

Adjudicating Authority. SRA canvasses arguments similar to that of RP and

contends that the Appellant, M/s Canbank Factors Limited, is engaged in

the business of factoring, which involves the purchase of trade receivables

from suppliers. Under such arrangements, the Appellant, acting as the

'Factor', acquires invoices raised by suppliers on their respective buyers and

advances payments to such suppliers against those invoices. The Appellant

then assumes the responsibility of recovering the corresponding amounts

directly from the buyers, thereby providing liquidity to suppliers while

undertaking the collection risk associated with such receivables. The core

dispute revolves around the characterization of the debt while the Appellant

claims status as a 'Financial Creditor' under Section 5(8) of the Code and the

Respondents maintain that the underlying transaction represents an

operational debt under Section 5(21) of the Code, being essentially an

assignment of trade receivables arising from supply of goods. It is claimed by

SRA that Section 5 (8) of the Code does not expressly exclude an interest free

Company Appeal (AT) (Insolvency) No. 742 of 2025 10 of 25 loan. That the present is a case of transaction, wherein, 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. In the present case, no disbursement was made to the Corporate

Debtor, hence, the transactions cannot be held to be a 'financial debt".

17. Successful Resolution Applicant has submitted its plan in accordance

with the timelines stipulated by the Respondent No. I herein. Time is of the

essence under the Code as observed by the Hon'ble Supreme Court in the

judgment titled as "Ebix Singapore (P) Ltd. V. Educomp Solutions

Limited, (2022) 2 SCC 401". It is further contended that the Hon'ble

Supreme Court in the matter of "Mobilox Innovations (P) Ltd. V. Kirusa

Software Pvt. Ltd., (2018) 1 SCC 353" observed that the timelines are

sacrosanct under the Code as it is in the best interest of all the stakeholders

of the process that the resolution or liquidation of the company happens in

a time bound manner and is not protracted.

18. SRA further brings to our notice that this Appellate Tribunal in the

matter of "Peccon Developers Pvt. Ltd. vs. Bimal Agarwal RP (CA (AT)

(Ins) No. 756 of 2021)" has clarified that if the claims filed at belated stage

are entertained, it will not only be unfair to the other creditors who could not

file their claim with the RP because of the delay but would also dilute the

purpose of publication of Form-A. CIRP is a time bound process and if the

Company Appeal (AT) (Insolvency) No. 742 of 2025 11 of 25 Adjudicating Authority sets the clock back, it would certainly go against main

objective of the Code.

19. Respondent No. 3 - SRA further contends that the debt in question is

an operational debt coming within the meaning of Section 5(21) of the Code,

having arisen from the Corporate Debtor's procurement of goods from its

suppliers during the ordinary course of business operations. The mere

subsequent assignment of these trade receivables to the Appellant does not

change the fundamental nature of the debt from operational to financial. This

Appellate Tribunal has settled the legal proposition in the matter of

"Mudraksh Investfin Pvt. Ltd. V. Brijesh Singh Bhadauriya, Resolution

Professional of RCI Industries and Technologies Ltd., CA (AT) Ins. No.

1671 of 2023), wherein it was held that the participation in invoice

discounting arrangements through electronic platforms does not alter the

intrinsic character of operational debts. The Appellant's attempt to re-

characterize what is patently an operational debt as a financial debt

constitutes a fundamental misapprehension of both statutory provisions and

binding judicial precedent.

20. Further, it is a matter of record that the Appellant's counsel before the

Adjudicating Authority made a submission that the Applicant/ Appellant

herein be treated as the "Operational Creditor" and be given liberty to file its

claim in the category of the "Operational Creditor".

Company Appeal (AT) (Insolvency) No. 742 of 2025 12 of 25

21. The Respondent No. 3 - SRA filed its resolution plan with the

Resolution Professional which was approved by the Committee of Creditors

in its 22nd meeting convened on 05.06.2024. The resolution plan of the

Answering Respondent / Successful Resolution Applicant was approved by

98.05% votes in favour which is more than requisite threshold of 66%.

22. The Respondent / Successful Resolution Applicant has proposed the

payment of the unpaid CIRP cost in priority to all other debts of the Corporate

Debtor under the approved resolution plan compliance of Section 30(2) (a) of

the Code. Further, the approved resolution plan does not contravene any of

the provisions of the law for the time being in force.

23. Respondent No. 3 - SRA further contends that the Hon'ble Supreme

Court in the case of "Arcellor Mittal India Pvt Ltd V. Satish Kumar Gupta,

Civil Appeal No. 9402-940155 of 2018", has held that the only reasonable

construction of the Code is the balance to be maintained between timely

completion of the CIRP and the Corporate Debtor, otherwise being put into

liquidation and if there is a Resolution Applicant who can continue to run

the Corporate Debtor as a going concern, every effort must be made to try

and see that this is made possible. In facts and circumstances of the case

the Respondent No. 1/ Resolution Professional has examined the resolution

plan and has certified the resolution plan as being compliant with the

provisions of the Code and CIRP Regulations, 2016.

Company Appeal (AT) (Insolvency) No. 742 of 2025 13 of 25

24. Furthermore, despite the Respondent No. 1's/ Resolution

Professional's explicit direction to file the claim as an "Operational Creditor"

in Form B, as is evident from the contents of the present appeal, the

Appellant is deliberately trying to mislead this Appellate Tribunal by filing

the frivolous appeal. The Appellant's conduct not only violates the

established framework under the Code but also demonstrates an attempt to

subvert the orderly resolution mechanism by claiming an elevated creditor

status to which it is not legally entitled under the factual matrix of the case.

25. The present Appeal represents a flagrant abuse of the judicial process,

wherein the Appellant, having exhausted its remedies before the

Adjudicating Authority without success, now attempts to re-agitate the very

same issues before this Appellate Tribunal without demonstrating any new

substantive grounds or legal infirmities in the Impugned Order. Such

conduct warrants stern judicial disapproval to preserve the integrity of the

Corporate Insolvency Resolution Process and deter frivolous litigation that

obstructs timely resolution. The Appeal merits summary rejection with

exemplary costs to uphold the authority of the adjudicatory process under

the Code. In light of the above, any such attempt by the Respondent No.

1/Resolution Professional to suo motu reverse or reconsider his position

would be null and void, being in breach of both the statutory framework and

settled principles of law. In the present case, the application filed for seeking

approval of the resolution plan approved by the CoC in its 22nd CoC meeting

of the Corporate Debtor ie. Respondent No. 2 is pending final adjudicating

Company Appeal (AT) (Insolvency) No. 742 of 2025 14 of 25 before the Adjudicating Authority and the present appeal is nothing but a

futile attempt to push Corporate Debtor into the Liquidation and to mislead

this Hon'ble Appellate Tribunal.

26. In another judgment of this Appellate Tribunal in CA (AT) (Insolvency)

No. 572 of 2022, it was held that:

"....

13. The Agreement (COR) was entered into between the Seller, Financier and the Corporate Debtor (As customer). As per the agreement, the Seller had agreed for discounting of invoice of the customer (CD) for the creation of the right and interest in the invoice receivables in favour of the Financier (Appellant). Upon execution of agreement of COR, the Appellant as a Financier discounted the invoice and deposited the amounts into an escrow/nodal account maintained by KredX with an escrow/nodal agent, namely, Yes Bank Limited who further transferred the said amount to the account of the Seller and on receiving, the Seller transferred its right to receive the money under the invoices in favour of the Financiers/Appellants. In this transaction, the money was never disbursed much less for the time value as a financial debt to the Corporate Debtor and by virtue of discounting the invoice of the Seller of an amount of Rs.3,42,03,903/- for amount of Rs. 1,75,23,133/- the Financiers/Appellants entered into shoes of the Seller and had become Operational Creditors in terms of Section 5(20) as well as 21(5) and Section 5(7) and 5(8)(e) of the Code is not at all applicable."

Appraisal

27. We have heard Counsels of both sides and also perused materials

placed on record.

28. The main issue for our consideration is whether the claim of

₹6,35,51,472.63 by the Appellant is to be considered as a financial debt

Company Appeal (AT) (Insolvency) No. 742 of 2025 15 of 25 instead of operational debt in a situation wherein the Appellant had provided

factoring services to the Corporate Debtor.

29. Briefly speaking, we note that Appellant, M/s Canbank Factors

Limited, is engaged in the business of factoring, which involves the purchase

of trade receivables from suppliers. Under such arrangements, the Appellant,

acting as the 'Factor', acquires invoices raised by suppliers on their

respective buyers and advances payments to such suppliers against those

invoices. The Appellant then assumes the responsibility of recovering the

corresponding amounts directly from the buyers, thereby providing liquidity

to suppliers while undertaking the collection risk associated with such

receivables. The core dispute revolves around the characterization of the debt

while the Appellant claims status as a 'Financial Creditor' under Section 5(8)

of the Code and the Respondents maintain that the underlying transaction

represents an operational debt under Section 5(21) of the Code, being

essentially an assignment of trade receivables arising from supply of goods.

30. We observe that the debt claimed by the Appellant arises out of the

discounting of trade receivables originally payable by the Corporate Debtor

to its suppliers for goods received in the ordinary course of business. Under

the TReDS platform operated by Mynd Solutions Private Limited under the

brand name "M1," the Appellant, acting as a Factor, purchased such

receivables by paying the suppliers upfront, thereby stepping into their

shoes for the limited purpose of recovery of dues from the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 742 of 2025 16 of 25 The Appellant and the Corporate Debtor had executed a Master Financer

Agreement and a Master Buyer Agreement respectively with Mynd Solutions

Pvt. Ltd., to enable participation on the M1 platform. In terms of the

mechanism adopted, the suppliers of the Corporate Debtor uploaded

invoices for goods supplied to the Corporate Debtor. The Appellant placed

bids on these invoices, and upon acceptance by the Corporate Debtor,

payments were made to the suppliers by the Appellant. The Corporate

Debtor, in turn, was obligated to repay the Appellant the amounts that were

originally due to the suppliers. The entire basis of the Appellant's claim

stems from trade payables owed by the Corporate Debtor to its suppliers

debts that are squarely operational in nature as per the definition under

Section 5(21) of the Code. The mere assignment of such operational debts

to a third party, including a financial institution or factor, does not convert

the nature of the debt into a financial debt. As defined under Section 5(8) of

the Code, a "financial debt" involves disbursement against the consideration

for the time value of money, such as loans, debentures, bonds, etc. In the

present case, the transaction in question does not involve any loan or

disbursement made to the Corporate Debtor, nor does it involve any element

of consideration for the time value of money between the Appellant and the

Corporate Debtor. The Appellant merely stepped into finance the suppliers,

and any recovery from the Corporate Debtor was in lieu of its operational

dues payable to said suppliers. The debt that arose in the above-mentioned

transactions between the Corporate Debtor and the Supplier are for the

Company Appeal (AT) (Insolvency) No. 742 of 2025 17 of 25 purchase of goods in the normal course of business of the Corporate Debtor,

and therefore according to the definition of the Operational Debt given under

Section 5(21) of the Code, the debt is Operational in nature. The relevant

portion of Section 5 of the Code is reproduced herein below:

"Section 5 - In this Part, unless the context otherwise requires - (20) "Operational Creditor" means a person to whom an Operational Debt is owed and includes any person to whom such debt has been legally assigned or transferred.

(21) "Operational Debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central government, any State Government or any local authority."

31. The definition of Operational Creditor includes any person to whom

such Operational Debt has been legally assigned or transferred which in this

case is an admitted position by the Applicant that the Trade Receivables were

assigned/transferred from the Supplier of the Corporate Debtor to the

Applicant. Therefore, the debt owed by the Corporate Debtor is an

Operational Debt within the meaning of Section 5 (21) of the Code.

32. Furthermore, Master Buyer Agreement dated 21.12.2018 executed

between the Corporate Debtor and Mynd Solutions Pvt. Ltd. merely

facilitated this arrangement by acknowledging the Corporate Debtor's

obligation to repay the assigned receivables to the financer i.e., the Appellant

upon the due date. The relevant extract of Clause 7.3 of the agreement is

reproduced herein below:

Company Appeal (AT) (Insolvency) No. 742 of 2025 18 of 25 "The Buyer agrees to pay all the monies underlying a discounted Factoring Unit to the relevant Financer on the due date, along with any expenses or interest amount arising up to the date of payment of the monies to the Financers."

Thus, it is evident from the above that the Corporate Debtor acknowledged

its obligation to make payment in respect of goods received from its suppliers

and, following the discounting arrangement, to the Appellant. At no point

was any amount disbursed by the Appellant to the Corporate Debtor, nor

was there any consideration for the time value of money core requirement

under Section 5(8) of the Code to constitute a "financial debt." The nature of

a debt under the Code is determined by the substance of the underlying

transaction and not by the identity of the party asserting the claim. In this

case, the transaction remains squarely within the realm of an operational

liability, despite the assignment. The Appellant merely stepped into the shoes

of the suppliers and thereby acquired the right to recover an operational

debt, not a financial one.

33. We also observe that the issues raised by the Appellant in the present

matter are squarely covered and conclusively determined by this Appellate

Tribunal in Company Appeal (AT) (Insolvency) No. 1671 of 2023 in the matter

of Mudraksh Investfin Pvt. Ltd. vs. Brijesh Singh Bhadauriya, arising out

of order dated 10.11.2023 passed by the Adjudicating Authority in IA No.

1990/2023 in Company Petition. In this case, Mudraksh Investfin Pvt. Ltd.,

an RBI-registered NBFC engaged in factoring transactions through the

TReDS platform, had claimed that the amounts due to it pursuant to

Company Appeal (AT) (Insolvency) No. 742 of 2025 19 of 25 discounting of invoices raised by suppliers of the Corporate Debtor ought to

be treated as Financial Debt. The Mudraksh Investfin Pvt. Ltd therein had

advanced similar arguments as raised in the present case that by virtue of

assignment of receivables through TReDS, it stood in the position of a

financier to the Corporate Debtor and thus ought to be treated as a Financial

Creditor under Section 5(8) of the Code. This Appellate Tribunal, after

examining the substance of the transaction, the nature of the disbursal, and

the definition of Financial Debt, held categorically that the amounts paid by

the NBFC i.e., Mudraksh Investfin Pvt. Ltd. under the invoice

discounting/factoring arrangement were in the nature of Operational Debt.

This Tribunal had affirmed the order of the Adjudicating Authority and held

that the assignment of receivables does not alter the underlying character of

the debt, which originally arose from the supply of goods or services.

Therefore, the NBFC could only be classified as an Operational Creditor, not

a Financial Creditor. Following is the relevant extract of the same:

"21. 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 MI 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 disbursement was made to the Corporate Debtor, hence, the transactions cannot be held to be a financial debt. We do not find any error in

Company Appeal (AT) (Insolvency) No. 742 of 2025 20 of 25 the order of the Adjudicating Authority agreeing with the view of the RP that claim of the Appellant is only an 'operational debt'.

22. In view of the above, we do not find any ground to interfere with the impugned order. There is no merit in the Appeal. The Appeal is dismissed. No order as to costs."

34. The factual matrix in the present case is identical into the facts before

this Appellate Tribunal in the Mudraksh matter (supra). In both cases:

o The transaction involved discounting of invoices on the TReDS platform;

o The Appellant did not disburse any funds to the Corporate Debtor; o The Corporate Debtor was liable to pay amounts originally owed to suppliers; and o The claim was filed under Form C asserting the status of Financial Creditor, which was rejected by the Resolution Professional and further affirmed by the Ld. Adjudicating Authority.

35. We further note that instead of complying with the Resolution

Professional's direction to submit the claim in the correct form i.e., Form B,

the Appellant persisted with its erroneous position and, on 19.04.2023, filed

I.A. No. 2208 of 2023 before the Adjudicating Authority under Section 60(5)

of the Code seeking admission of its claim as a Financial Creditor.

36. Perusal of the records, indicate that this is a fit case wherein the claim

cannot be classified as financial debt. It is to be noted that RP had repeatedly

advised the Appellant to file the claim in an appropriate Form to be

considered as an operational debt. But the Appellant didn't do so and

continued to file its claim as financial debt.

Company Appeal (AT) (Insolvency) No. 742 of 2025 21 of 25

37. Appellant places reliance on the judgment of Hon'ble Supreme Court

in the matter of Greater Noida Industrial Development Authority Vs.

Prabhjit Singh Soni and Anr. (2024) 6 SCC 767, wherein it was ruled that

the Form in which a claim is to be submitted is directory and not mandatory

and what is important is the claim must be supported by proof. Therefore, if

a claim is submitted by an Operational Creditor, claiming itself as a Financial

Creditor, it would have to be accorded consideration in the category to which

it belongs provided is verifiable. The Appellant relies on the following

paragraphs of the above mentioned judgment:

"....

20. The use of the words "a person claiming to be an operational creditor"

in the opening part of Regulation 7, and the words "a person claiming to be a financial creditor" in Regulation 8, indicate that the category in which the claim is submitted is based on the own understanding of the claimant. Thus, there could be a situation where the claimant, in good faith, may place itself in a category to which it does not belong. However, what is important is, the claim so submitted must be with proof. As to what could form proof of the debt/ claim is delineated in sub-regulation (2) of Regulations 7 and 8 of the CIRP Regulations, 2016.

21. Once a claim is submitted with proof under any of the Regulations (i.e., Regulations 7, 8, 8-A, 9 and 9-A), the IRP or the RP, as the case may be, as per Regulation 13, has to verify the claim, as on the insolvency commencement date, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims, and update it in terms of Regulation 12A.

22. As it could be noticed from the CIRP Regulations, 2016, on submission of a claim with proof, the IRP or the RP, as the case may be, has to verify the

Company Appeal (AT) (Insolvency) No. 742 of 2025 22 of 25 claim and prepare a list of creditors containing names of creditors along with the amount claimed by them and security interest, if any, the logical conclusion derivable from the provisions analysed above would be that the Form in which a claim is to be submitted under the CIRP Regulations 2016 is directory and not mandatory. What is important is, the claim must be supported by proof.

xxx 54.1 The resolution plan disclosed that the appellant did not submit its claim, when the unrebutted case of the appellant had been that it had submitted its claim with proof on 30.01.2020 for a sum of Rs.43,40,31,951/- No doubt, the record indicates that the appellant was advised to submit its claim in Form B (meant for operational creditor) in place of Form C (meant of financial creditor). But, assuming the appellant did not heed the advice, once the claim was submitted with proof, it could not have been overlooked merely because it was in a different Form. As already discussed above, in our view the Form in which a claim is to be submitted is directory. What is necessary is that the claim must have support from proof. Here, the resolution plan fails not only in acknowledging the claim made but also in mentioning the correct figure of the amount due and payable. According to the resolution plan, the amount outstanding was Rs. 13,47,40,819/-whereas, according to the appellant, the amount due and for which claim was made was Rs. 43,40,31,951/- This omission or error, as the case may be, in our view, materially affected the resolution plan as it was a vital information on which there ought to have been application of mind. Withholding the information adversely affected the interest of the appellant because, firstly, it affected its right of being served notice of the meeting of the COC, available under Section 24 (3) (c) of the IBC to an operational creditor with aggregate dues of not less than ten percent of the debt and, secondly, in the proposed plan, outlay for the appellant got reduced, being a percentage of the dues payable. In our view, for the reasons above, the resolution plan stood vitiated. However, neither NCLT nor NCLAT addressed itself on the aforesaid aspects which render their orders vulnerable and amenable to judicial review."

Company Appeal (AT) (Insolvency) No. 742 of 2025 23 of 25

38. Appellant's reliance on the above judgment by the Appellant may not

be relevant as Greater Noida Industrial Development Authority (supra)

was pronounced on 12.02.2024 and by that time RP had already taken a

decision to reject the claim. Moreover, that judgment relates to secured

Operational Creditor and may not be strictly applicable in the facts of the

case. Presuming it is applicable and the claims are treated as Operational

Creditor, Resolution Plan provides 0.11% for Operational Creditor which

works out to be ₹6,500 only.

39. We observe that Resolution Plan has already been approved by the CoC

with the requisite majority in its 22nd CoC meeting held on 05.06.2024. The

application under Section 30 of the Code for approval of the Resolution Plan

is currently pending adjudication. We also observe that no claim whether

fresh or reclassified can be entertained at this belated stage, after the

Resolution Plan has been approved by the CoC and is pending before the

Adjudicating Authority.

Conclusions

40. The present is a case of transaction, wherein, 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. In the present case, no disbursement was made to the Corporate

Debtor, hence, the transactions cannot be held to be a 'financial debt". The

debt in question is an operational debt coming within the meaning of Section

5(21) of the Code, having arisen from the Corporate Debtor's procurement of

Company Appeal (AT) (Insolvency) No. 742 of 2025 24 of 25 goods from its suppliers during the ordinary course of business operations.

The mere subsequent assignment of these trade receivables to the Appellant

does not change the fundamental nature of the debt from operational to

financial.

41. In the facts and circumstances of the present case, we find that the

Adjudicating Authority has rightly dismissed the Appellant's claim under

Form C and correctly held that the nature of the debt in question is

operational. There exists no legal or factual basis for treating the Appellant

as a Financial Creditor in the present case. The Impugned Order, therefore

suffers from no infirmity and is in conformity with the statutory scheme

under the Code.

Orders

42. We accordingly dismiss the Appeal and confirm the order of the

Adjudicating Authority and all the related IAs are disposed of.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) New Delhi.

January 28, 2026.

Pawan

Company Appeal (AT) (Insolvency) No. 742 of 2025 25 of 25