M/S. Sbi Global Factors Limited vs M/S. Aks Electricals & Electronics Pvt. ...

SBI Global Factors Ltd. ...Appellant(s)

Versus

AKS Electricals & Electronics Pvt. Ltd. ...Respondent(s) Present: For Appellant : Mr. Jitendra Kumar, Advocate.

For Respondents : Mr. Gautam Singhal, Advocate. ORDER

(Hybrid Mode) 07.08.2025: This appeal is filed against an impugned order dated

16.02.2023 whereby a petition under Section 7 of the IBC, 2016 filed by the

appellant herein was dismissed as under:

"Heard the submissions made by the Learned Counsel for the Section 7 applicant. From the papers placed before us, it transpires that SBI has floated an NBFC for dealing with/conducting factoring business activities under the Factoring Regulation Act, 2011. Section 6 of the said Act empowered RBI to give directions to factors. RBI has directed that subsidiaries and JVs of banks, including the existing ones would be regulated as NBFC-Factors vide Circular DNBS(PD)CC No. 297/Factor/22.10.91/2012-13 dated July 23,2012. Thereafter, Reserve Bank of India vide its circular dated 30.07.2015 titled "Provision of Factoring Services by Banks- Review" in Para 6 of the said circular stipulated the exposure norms for single and group borrower limits, wherein it is clearly stated that facilities extended by way of factoring services would be covered within the overall exposure ceiling.

It is also stipulated in the said circular in Para 6 that the exposure shall be reckoned as under:

2 1. (a) In case of factoring on with-recourse basis, the exposure would be reckoned on the assignor.

(b) In case of factoring on without-recourse basis, the exposure would be reckoned on the debtor, irrespective of credit risk cover/protection provided, except in cases of international factoring where the entire credit risk has been assumed by the import factor.

In the present matter, the assignor is M/ s PSR Metals Private Limited. Therefore, as per the exposure norms, the exposure would be reckoned on the said organisation but not against M/s AKS Electricals And Electronics Limited i.e. the respondents in the instant application.

The applicant herein is basically an NBFC doing the factoring business. The Factoring Agreement between the applicant and the assignor is 'ON RECOURSE BASIS'. Therefore, the applicant will be entitled to pursue/maintain Section 7 application in the case of assignor only and following the RBI circular it has to reckon the debt against the assignor only. The applicant does not have the jural relationship of 'Creditor' and 'Debtor' with the respondents herein, as there is no 'disbursal' of any amount to them by the applicant for 'time value of money'. This Adjudicating Authority is, therefore of the considered view that the instant application under Section 7 is not maintainable within the framework of Insolvency & Bankruptcy Code, 2016. In view of the above, we are not able to entertain this present application filed by SBI Global Factors Limited and the same stands dismissed."

2. It is the submission of Learned Counsel for the appellant para 6 of the

Circular dated 23.07.2012 of the RBI was wrongly relied upon by the Ld. NCLT

since it only relates to the credit limit(s).

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3. Further impugned order says since the factoring agreement between

the applicant and the assignor viz M/s PSR Metals Private Limited was 'ON

RECOURSE BASIS', hence the only alternative to the appellant was to file a

petition under Section 7 of the IBC, 2016 against the M/s PSR Metals Private

Limited. However, the Learned Counsel for the appellant has taken us to

clause 9 of the Global Account Receivables Management Agreement dated

09.05.2019, entered into between appellant as well as M/s PSR Metals Private

Limited of which clause 9 relates to Recourse and Credit Protection and it

read as under:

"9. RECOURSE AND CREDIT PROTECTION

9.1 SBIGFL shall have Recourse in respect of:

9.1.1 each Receivable which the Debtor shall be, or shall claim to be, unable to pay by reason of legal constraints or acts or orders of Government (unless otherwise specified in paragraph 9 of the Schedule);

9.1.2 each Receivable in respect of which the Debtor shall dispute liability for payment whether in whole or in part;

9.1.3 each Receivable in respect of which the Debtor shall assert any right of lien, retention, counterclaim or set-off claim discount, commission or allowance not previously Notified in writing by the Client to SBIGFL;

9.1.4 the non-payment of each [Approved] Receivable which has arisen as a consequence (whether direct or indirect) of the occurrence of any of the following events:

(i) a nuclear explosion or contamination (whatever its origin); or

(ii) a war (whether declared or not), between two or more of the following countries, namely France, the People's Republic of China, the Russian Federation, the United Kingdom and United States of America;

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9.1.5 (except where the Credit Protection Facility is indicated as applicable in paragraph 9 of the Schedule, in which case clause 9.3 shall apply) each Approved Receivable (not being a Receivable included in clauses 9.1.1, 9.1.2, 9.1.3 or 9.1.4) which remains unpaid in whole or in part after it has become due for payment by the Debtor;

9.1.6 each Receivable in respect of which the Client is unable to perfect title; all of which shall forthwith and automatically be deemed Unapproved Receivables whereupon SBIGFL shall be entitled to adjust the Supplier Account (and any other relevant account) to reflect the change.

9.2 SBIGFL will credit the Client with sums subsequently received by SBIGFL in respect of any Receivable in respect of which it has exercised its right of Recourse.

9.3. Where the Credit Protection facility is indicated as applicable in paragraph 9 of the Schedule then SBIGFL will accept the risk or risks therein specified (except in relation to taxes recoverable by the Client and the Client's Credit Risk Element) that an Approved Receivable will remain unpaid in whole or in part after it has become due for payment in the amount and upon such further terms as may be specified in paragraph 9 of the Schedule. The provisions of this clause shall not prevent SBIGFL having Recourse in respect of any taxes not recoverable by the Client, the Client's Credit Risk Element and any settlement, trade or retrospective discount taken or claimed in respect of any Approved Receivable which remains unpaid after expiry of the period referred to above nor in relation to any amount by which the unpaid element of such Receivable exceeds the relative Debtor's Credit Limit."

4. It is the submission of Learned Counsel for the appellant none of the

clauses are attracted in the case of the appellant and hence the observation

made by the Ld. NCLT that its petition was maintainable only against the

assignor is factually incorrect and that clause 9 was never interpretated or

gone into by the Ld. NCLT. He also referred to Deed of Assignment dated

Company Appeal (AT) (Insolvency) No. 664 of 2023 5

07.01.2020 wherein the debt of the Respondent has been assigned by M/s

PSR Metals Private Limited to the appellant herein. The reference is also made

to demand notice dated 11.06.2021 issued by the appellant to the Respondent

herein and payment schedule given by the Respondent thereby

acknowledging the debt qua the appellant, as given at page 148 of the Appeal

Paper Book, as under:

Company Appeal (AT) (Insolvency) No. 664 of 2023 6

5. The Learned Counsel for the appellant also referred to various post-

dated cheques issued by the Respondent in favor of the appellant herein and

thus submit the appellant had a cause for filing petition under Section 7 of

the IBC, 2016.

6. Since the impugned order does not discuss/interpret clause 9 of the

agreement dated 09.05.2019 and its effect as also the Assignment Deed dated

07.01.2020 and its effect; the aspect of admission of liability by the

Respondent to pay to the appellant herein, hence we set aside the impugned

order dated 16.02.2023 with a request to the Ld. NCLT to restore the petition

at its original number to be decided afresh after examining the provisions of

the Agreement, Assignment Deed, acknowledgment and correspondence on

record. The Respondent shall be at liberty to raise all its contentions before

the Ld. NCLT.

7. The appeal is disposed of in terms of the above. Pending application(s),

if any, are also disposed of.

[Justice Yogesh Khanna] Member (Judicial)

[Mr. Indevar Pandey] Member (Technical)

R.N./Manu.

Company Appeal (AT) (Insolvency) No. 664 of 2023