Canbank Factors Ltd vs RCI Industries – Appeal Notes

Case Overview

• Appeal under Section $61$ IBC against NCLT Delhi’s order dated $13.02.2025$ (IA-2208/2023 dismissed).
• Core dispute: Whether Canbank Factors Ltd. (CBFL) is a Financial Creditor of RCI Industries & Technologies Ltd. (RCI) in CIRP.
• CBFL financed RCI via reverse-factoring on M1-TReDS; RCI defaulted on $8$ invoices (total $\approx Rs\;3.97\;crore$).

Key Parties

• Appellant / Applicant: Canbank Factors Ltd. (NBFC-Factor, Canara Bank subsidiary).
• Respondent-1: Brijesh Singh Bhaduria (IRP/RP).
• Respondent-2: RCI Industries & Technologies Ltd. (Corporate Debtor).
• Original OC: Standard Chartered Bank (Section $9$ initiator).

Material Agreements & Instruments

• Master Buyer Agreement (RCI-M1) $21.12.2018$ – RCI uploads invoices; agrees to pay financier.
• NACH mandate $17.01.2019$ – RCI authorises automatic debit up to $Rs\;1\;cr$ per presentation.
• $8$ Factoring Units financed by CBFL via bids on M1.
• Deeds / Notices of Assignment – receivables automatically assigned to CBFL on bid-acceptance.

Default Snapshot (Apr–Jun $2019$ Invoices)

S.No  Invoices            Amount (Rs)   Due Date  Bounce Reason
1     R-21/19              3,39,191      22-08-19  Account frozen
2     BCP/0108/19        67,62,049      22-08-19  Insufficient funds
3     BCP/083/19         52,03,000      27-08-19  Insufficient funds
4     BCP/098/19         49,32,976      30-08-19  Insufficient funds
5     010619-02/19       59,67,024      30-08-19  Insufficient funds
6     BCP/0107/19        45,99,091      31-08-19  Insufficient funds
7     BCP/0109/19        68,16,978      02-09-19  Insufficient funds
8     115/19             51,12,124      05-09-19  Insufficient funds
Total  $\boxed{Rs\;3,97,32,433}$

Interest (to $30.11.2022$) $\approx Rs\;2.38\;crore$ → Total claim $Rs\;6.36\;crore$.

Procedural Chronology

• $25.11.2022$ – NCLT admits CIRP; RP issues claim notice $30.11.2022$.
• $17.12.2022$ – CBFL files Form-C as Financial Creditor.
• $18–31.12.2022$ – RP emails: insists CBFL is Operational Creditor; asks to file Form-B.
• CBFL reiterates FC status (mails $22.12, 29.12.22$; requests meeting $05.01.23$).
• IA-2208/2023 filed (Apr $2023$) under $60(5)$ IBC seeking classification as FC.
• NCLT dismissed IA $13.02.2025$ relying on earlier IA-1990/2023 order (Mudraksh case).
• CoC had approved Resolution Plan $17.08.2024$ (yet to be approved by NCLT).

Applicant’s Core Legal Contentions

• Reverse-factoring = $“financial debt”$ under Sec $5(8)(e)$ (receivables discounted).
• Form choice is directory; once claim + proof submitted, RP must verify & classify correctly.
• RP’s rejection solely on form/precedent illegal; claim verifiable, acknowledged by RCI (letter $15.11.2019$).
• Dismissal violates Reg $8$ and Supreme Court dictum: creditor’s self-classification not binding on RP.
• Rejection prejudices CBFL (excluded from CoC, voting & plan proceeds) despite timely claim.

Reliefs Sought before NCLAT

1. Set aside NCLT order $13.02.2025$ & IA-1990/2023 ratio as applied.

2. Declare CBFL a Financial Creditor; direct RP to admit claim $Rs\;6.35\;cr$.

3. Consequential inclusion in CoC / distribution under plan; stay plan approval till decision.

Strategic Points for Quick Recall

• Nature of transaction: Buyer-created Factoring Units → financing for time value of money.
• Legal hook: Sec $5(8)(e)$ + Reg $8$; assignment doesn’t change debt nature (unlike normal supplier factoring).
• Timeline: claim within $17$ days of public notice → RP’s non-admission; IA filed; NCLT dismissal pre-plan approval.
• CBFL evidence: Master Buyer Agreement, NACH, bounce memos, letters, Form-C.
• Relief revolves around re-classification, not quantum dispute.