Varun Gupta Vs ISINOX Pvt. Ltd. (NCLAT Delhi)
Conclusion: Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was not maintainable as the transaction constituted an ‘operational debt’ and not a financial debt, therefore, the same was not covered under Section 5(8)(e) but was governed by Section 5(20) and Section 21(5) of the Code.
Held: A petition under Section 7 of the Code was filed by Somesh A Naik & 44 others claiming an amount of 4,37,14,449/- out of which Rs. 2,34,17,965/- was the principal amount whereas rest of the amount was the interest. Case of the Financial Creditors was that the Corporate Debtor used to purchase goods (i.e. raw material) from Manohar Manak Alloys Pvt. Ltd. (Manohar Alloys). Manohar Alloys sold its unpaid invoices, which were to be paid at a future date, to KredX/Minion Ventures Pvt. Ltd. for facilitating quick recovery of funds. KredX was an online platform managed by Minion Ventures Ltd. which provided invoice discounting facilities. It facilitated invoice discounting and reverse invoice discounting. The parties agreed to list the invoices on the platform. Manohar Alloys i.e. the seller discounted the invoices of CD after the execution of the CoR agreement and deposited the amount in an escrow account maintained by KredX with Yes Bank. The Financial Creditors were lending money through Cred against the bills to various parties. The bills so assigned to the Financial Creditors and the amounts against such bills was disbursed. In the process of transactions, the Applicants stated to have paid a sum of Rs. 2,34,17,965/- on various dates. The CD was to repay the amount within 60 days from the date of disbursement. The Financial Creditors entered into an agreement for creation of rights (COR) amongst Manhar Alloys Pvt. Ltd. (the seller), the Financial Creditors, the Corporate Debtor (buyer) and Million Ventures Ltd. (Platform provider). The Financial Creditors claimed the said amounts as financial debt whereas the CD had alleged that it was an operational debt, therefore, the application was not maintainable. It was held that it would be suffice to note that a similar controversy has been decided by this Court earlier in the case of Minions Ventures Ltd. in which exactly the same issue was raised and this Court categorically held that the case would not be covered by Section 5(8)(e) rather it shall be covered by Section 5(20) and 21(5) of the Code and hence the application filed under Section 7 was not maintainable. However, at the same time, the financers were not left remediless as they were relegated to avail their remedy to file an appropriate application in accordance with law under Section 9 of the Code. Thus, in view of the law laid down in the case of Minions Ventures Ltd. the Respondents / alleged financers were relegated to their remedy to file an application under Section 9 of the Code.
