Authority: National Company Law Tribunal (NCLT), Jaipur Bench

Order Date: 22.06.2026

Case Overview

The petition was filed by Bank of Maharashtra (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Ashiana Ispat Limited (Corporate Debtor) for a default of ₹5,75,53,710.25. The debt arose from a Bill Discounting Facility of ₹6,00,00,000 sanctioned on 17.10.2023, which was utilized through the Trade Receivables Discounting System (TReDS) platform. The facility was used to finance invoices uploaded by MSME suppliers, SKN Steel India LLP and Shri Balaji Polymers Private Limited, which were accepted by the Corporate Debtor on the platform. The Bank disbursed ₹22,77,046 to SKN Steel and ₹5,27,60,214 to Shri Balaji Polymers. The Corporate Debtor acknowledged the debt via email on 08.11.2024 and a formal demand notice was issued on 12.11.2024 for ₹5,50,37,260, but payment was not made.

The core legal dispute was whether the debt, facilitated through reverse factoring on the TReDS platform, constituted a 'financial debt' under Section 5(8) of the IBC or an 'operational debt' under Section 5(21). The Bank argued it was a financial debt based on the sanction letter and the Corporate Debtor's repayment obligation. The Corporate Debtor contended that no funds were disbursed directly to it; payments were made to its suppliers for invoices related to the supply of goods. It argued the transaction's origin was in the purchase of goods, making it an operational debt that was merely assigned to the Bank, and thus a Section 7 petition was not maintainable.

The Tribunal examined the Master Agreement dated 29.07.2022 between the Corporate Debtor and TReDS Limited, which defined 'Reverse Factoring' as the acquisition of receivables initiated by the buyer (Corporate Debtor). Clauses 3.3 and 3.4 of this agreement placed the primary repayment obligation on the Corporate Debtor towards the financier (Bank), on a non-recourse basis against the sellers. The Tribunal concluded that while this created a direct payment obligation, the fundamental nature of the debt originated from the Corporate Debtor's operational dealings—the procurement of goods from its suppliers. The Bank financed the suppliers by acquiring the receivables; it did not disburse any funds to the Corporate Debtor against the consideration for the time value of money.

The Tribunal relied heavily on the precedent set by the National Company Law Appellate Tribunal (NCLAT) in Canbank Factors Ltd. v. Brijesh Singh Bhaduria & Ors. (2026) ibclaw.in 73, which involved an identical issue. The NCLAT in that case had held that transactions on the TReDS platform, where no disbursement is made to the corporate debtor, cannot be classified as a financial debt. The nature of the debt remains operational, arising from the supply of goods, and its assignment does not change this character.

Final Outcome

The NCLT held that the debt in question is an operational debt within the meaning of Section 5(21) of the IBC. Consequently, an application under Section 7 of the IBC, which is exclusively for the initiation of Corporate Insolvency Resolution Process (CIRP) based on a default of a financial debt, is not maintainable. Company Petition No. (IB)-73/7/JPR/2025 was dismissed.

Topics: Insolvency, TReDS Financing, Operational Debt