TaxTMI 
TaxTMI 
2019 (4) TMI 2171
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....ther 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 responsi....
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....with interest and other charges. However, attempt is being made to classify the debt as an 'Operational Debt' and not a 'Financial Debt' despite the pure financial nature of the payments. 11. It was submitted that Bill of Exchange is an independent contract under the provision of Negotiable Instruments Act, 1881 (NI Act). As per Section 32 and 37 of the NI Act, upon acceptance of Bill of Exchange, the acceptor i.e. Corporate Debtor becomes the Principal Debtor of the amount due under the Bill of Exchange. Under the law, unless agreed to the contrary, the drawer would continue to remain liable. 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. MANU/SC/0667/1992 : (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 compe....
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....ing the Appellant bank, under a Bill of Exchange, the transferee Appellant bank will also remain as an 'Operational Creditor', and cannot become a 'Financial Creditor'. 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. 20. Section 3 (37) of I&B Code provides that the words and expressions used but not defined in the Code have the same meaning as defined in other Acts as mentioned therein and reads as follows:- "3. In this Code, unless the context otherwise requires,- ....x .....x......x.... (37) w....
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.... The Seller shall send a request to the Bank in the Bank's standard form attached as Appendix A (the "Request"), together with the Discount Documents (as defined below) attached to the Request. The purchase of any bill of exchange shall be at the sole and absolute discretion of the Bank. 1. The Underlying Security Underlying Security: Drawer: Drawee/Acceptor: Payee: 2. The Transaction Limit: Settlement Date: Purchase Price: Discount Interest, Commissions and Charges: Discount Documents: Bills of exchange. Seller Ruchi Soya Industries Ltd To the order of the Bank. Subject to the Bank's sole and absolute discretion to revise the Limit. After receipt by the Bank of notification of acceptance by the Drawce of the Underlying Security (as advised by a collecting bank via an authenticated SWIFT message). Face value of Underlying Security less Discount Interest. As from time to time agreed between the Bank and the Seller. Underlying Security and related shipping documents in form and substance that are acceptable to the Bank, together with Seller's instruction to the Bank. Page 1 of 5 Mr....
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....uilding. Singapore 048695 (the "Company"); and (2) COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B. A. (RABOBANK NEDERLAND), SINGAPORE BRANCH having an office at 77 Robinson Road #09-00 SIA Building, Singapore 068896 (the "Bank"). NOW THIS DEED WITNESSES as follows: In this Deed, except so far as the context otherwise requires: the Act Charged Property Contract Rights Credit Balances this Deed means the Conveyancing and Law of Property Act, Chapter 61: means the property, assets and rights for the time being comprised in or subject to the charges and pledges contained in this Deed; and reference to the Charged Property include references to any part of it; means all and any rights of the Company under any Goods Sale Agreement, including without limitation, all rights to delivery of any quantity of Goods under any Goods Sale Agreement, and all rights to any sum or sums of money (whether in the nature of debt, purchase price, damages liquidated or unliquidated, or otherwise) under any Goods Sale Agreement, and all and any such sums when paid; and also all and any rights or interest of the Company in or to....