Factoring/Discounting Bills/Invoice/Receivable

Can Financers maintain the application under Section 7 of the IBC in invoice/ bill discounting cases – Varun Gupta Vs. ISINOX Pvt. Ltd. Through the IRP Mr. Manishkumar R. Patel and Ors. – NCLAT New Delhi

Hon’ble NCLAT referring Minions Ventures Pvt. Ltd. Vs. TDT Copper Ltd. (2023) ibclaw.in 209 NCLAT held that the case would not be covered by Section 5(8)(e) of IBC rather it shall be covered by Section 5(20) and 5(21) of the Code and hence the application filed under Section 7 is not maintainable.

Can Financers maintain the application under Section 7 of the IBC in invoice/ bill discounting cases – Varun Gupta Vs. ISINOX Pvt. Ltd. Through the IRP Mr. Manishkumar R. Patel and Ors. – NCLAT New Delhi Read Post »

For any debt to qualify as a Financial Debt, the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not is material – Metamorphosis Trading LLP Vs. Sankalp Engineering and Services Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that a plain reading of Sections 5(7) and 5(8) of the IBC shows that for any creditor to become financial creditor under Section 5(7) of IBC, there must be a financial debt and for any debt to qualify as a financial debt, that debt along with interest, if any, should have been disbursed against the consideration for the time value of money. Use of expression ‘if any’ as suffixed to the word ‘interest’ leaves no shadow of doubt that the component of interest is not a sine qua non for bringing the debt within the fold of financial debt. What is material however is that the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not.

For any debt to qualify as a Financial Debt, the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not is material – Metamorphosis Trading LLP Vs. Sankalp Engineering and Services Pvt. Ltd. – NCLAT New Delhi Read Post »

Invoice Discounters of Riva Perfumes LLP Vs. Riva Perfumes LLP – NCLAT New Delhi

Both the Appellant and the Seller are registered on the portal called “KredX” operated by one Minions Ventures Pvt. Ltd. Appellant has discounted the invoices which invoices were of the seller, against the receivables under the invoices. We have also looked into the Agreement for Transfer of Rights between the Seller and the Purchaser, who were referred as parties to the Agreement dated 19.04.2023 as well as another Agreement dated 27.04.2023 between the Seller and the Minions Ventures Pvt. Ltd. The transaction as reflected in the agreement is a transaction for sale and purchase of goods and invoice discounting which was invoice discounting regarding receivable under the invoice and at best the claim of the Appellant is Operational Debt for which Section 7 application was not maintainable.

Invoice Discounters of Riva Perfumes LLP Vs. Riva Perfumes LLP – NCLAT New Delhi Read Post »

Case of Discounting of Receivables under IBC – Invoice Discounters of Riva Perfumes LLP Represented by Minion Ventures Pvt. Ltd. Vs. Riva Perfumes LLP – NCLT Ahmedabad Bench

There is a tripartite agreement between each of the Financial Creditors (Purchaser of invoice receivables) herein, the said Minion ventures Pvt Ltd (Platform provider for routing the stated transactions) and the Corporate Debtor (Seller of Invoice Receivables). The financial creditors who have provided a discounted value to the Corporate Debtor, realise their returns on their loans when the customer pays the full value of the said invoice(s).
An application under Sec 7 of IBC 2016 has been filed by Invoice Discounters of Riva Perfumes LLP represented by Minion Ventures Pvt. Ltd.

Hon’ble Adjudicating Authority refers Minions Ventures Pvt. Ltd. Vs. TDT Copper Ltd. (2023) ibclaw.in 209 NCLAT and holds that the intention of the transaction is not for a financial debt but an investment, and it was made on a portal where the invoices are discounted by various investors, which is not maintainable under Section 7 of the IBC. Hence, the application is dismissed.

Case of Discounting of Receivables under IBC – Invoice Discounters of Riva Perfumes LLP Represented by Minion Ventures Pvt. Ltd. Vs. Riva Perfumes LLP – NCLT Ahmedabad Bench Read Post »

Trade receivables discounted on non-recourse basis and liability arose to Corporate Debtor to pay Financers, Financers stepped into the shoes of Suppliers | When Section (5)(8)(e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause such as Section 5(8)(f) – Mudraksh Investfin Pvt. Ltd. Vs. Brijesh Singh Bhaduriya, RP of RCI Industries and Technologies Ltd. – NCLAT New Delhi

Hon’ble NCLAT holds that:
(i) Supplier has sold goods to the Corporate Debtor against which invoices were raised by the Supplier against the Buyer. The said invoices were discounted by the Financer from time to time and Corporate Debtor was liable to make payment to the Financer along with interest. The Financers have made payment to the Suppliers. The Corporate Debtor could not make the payment to the Financers.
(ii) The original transaction between the parties were for the sale and purchase of goods.
(iii) Discounting was without any recourse basis. Thus, the discounting is clearly excluded from financial debt under Section 5, sub-section (8) (e).
(iv) When Section 5, sub-section (8) (e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause. Hence, discounting of invoices cannot fall under Section 5, sub-section (8) (f).
(v) 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.

Trade receivables discounted on non-recourse basis and liability arose to Corporate Debtor to pay Financers, Financers stepped into the shoes of Suppliers | When Section (5)(8)(e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause such as Section 5(8)(f) – Mudraksh Investfin Pvt. Ltd. Vs. Brijesh Singh Bhaduriya, RP of RCI Industries and Technologies Ltd. – NCLAT New Delhi Read Post »

The Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the IBC and the Financial Creditor was entitled to being recourse – Mr. Ritesh Kumar Agrawal, Suspended Director Arcons Infrastructure and Constructions Pvt. Ltd. Vs. M/s. India Factoring and Finance Solutions Pvt. Ltd. – NCLAT New Delhi

NCLAT observed that Clause 12.1 the Factoring Agreement which has been entered into between the parties on 05th July, 2018, itself indicates that India Factoring shall have the right of recourse against the client. The client as per Factoring Agreement is Arcons Infrastructures and Constructions Pvt. Ltd. The clause 12 as noted above in the definition of recourse clearly indicates that agreement between the parties was not any agreement which may be called as agreement of non recourse basis. Thus, the Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the Code and the Financial Creditor was entitled to being recourse. 

The Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the IBC and the Financial Creditor was entitled to being recourse – Mr. Ritesh Kumar Agrawal, Suspended Director Arcons Infrastructure and Constructions Pvt. Ltd. Vs. M/s. India Factoring and Finance Solutions Pvt. Ltd. – NCLAT New Delhi Read Post »

Discounting of invoice/receivables, Financial Debt or Operational Debt under IBC? – Minions Ventures Pvt. Ltd. Vs. TDT Copper Ltd. – NCLAT New Delhi

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.

Discounting of invoice/receivables, Financial Debt or Operational Debt under IBC? – Minions Ventures Pvt. Ltd. Vs. TDT Copper Ltd. – NCLAT New Delhi Read Post »

Factoring transactions on recourse basis only will fall within the mischief of Section 5(8)(e) of the IBC- M/s Canbank Factors Ltd. Vs. M/s. Shree Jaya Laboratories Pvt. Ltd. – NCLT Hyderabad Bench

The Adjudicating Authority held that in the background of the RBI Circular “Provision of Factoring Services by Banks — Review”, dated 30 July 2015, when we refer the definition of Financial Debt in section 5(8) of the Code, more particularly the clause (e) thereof, it becomes immediately clear that only the factoring transactions in respect of “receivables other than on non-recourse basis” are included therein. In other words, factoring transactions on recourse basis only will fall within the mischief of Section 5(8)(e) of the Code. The reason to restrict the mischief of Section 5(8)(e) to debt arising from discounting of bills otherwise than on non-recourse basis only fits perfectly into the concept of Financial Debt under the Code having the two intrinsic ingredients of ‘disbursal” of funds for “time value of money” which would obtain in the case of an Assignor only.

Factoring transactions on recourse basis only will fall within the mischief of Section 5(8)(e) of the IBC- M/s Canbank Factors Ltd. Vs. M/s. Shree Jaya Laboratories Pvt. Ltd. – NCLT Hyderabad Bench Read Post »

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