# In the matter of Bharati Defence & Infrastructure Ltd.

> NCLT judgment dated 2023-11-21. Citation: TCN-2023-NCLT-00680. Union Bank of India filed an application (MA 3300/2019) under Section 42 of the Insolvency &…

- **Court:** NCLT
- **Order date:** 21 Nov 2023
- **Citation:** TCN-2023-NCLT-00680
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/bharati-defence-infrastructure-ltd-00f886f5

## Summary

### Background

Union Bank of India filed an application (MA 3300/2019) under Section 42 of the Insolvency & Bankruptcy Code, 2016, in the liquidation proceedings of Bharati Defence & Infrastructure Limited. Union Bank sought to set aside the Liquidator's order rejecting its claim as a financial creditor. The bank claimed it had provided a term loan to Great Offshore (International) Ltd. for constructing shipping vessels, with Bharati Defence acting as the shipbuilder. The Liquidator rejected the claim, stating it was for a refund of amounts paid for the supply of goods under a shipbuilding contract, making it an operational debt, not a financial debt.

## Facts

Union Bank of India (Applicant) filed MA 3300/2019 in the liquidation proceedings of Bharati Defence & Infrastructure Limited (Corporate Debtor). Union Bank sought to set aside the Liquidator's order rejecting its claim as a financial creditor. The claim arose from a term loan sanctioned to Great Offshore (International) Ltd. for constructing three shipping vessels. The loan was later amended for the construction of one vessel, with Bharati Defence acting as the shipbuilder. A pre-delivery security assignment was executed between Norwegian Shipping Limited (NSL) and the Applicant, assigning NSL's rights under the shipbuilding contract to the Applicant. The Corporate Debtor was notified of this assignment. The Applicant terminated the shipbuilding contract after the

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## Issues and analysis

### Issue 1: Whether the claim of Union Bank of India should be considered a financial debt or an operational …

**Ratio:** A debt which arises out of advance payment made to a corporate debtor for supply of goods

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**Reasoning:** The court reasoned that the money came to be paid to the Corporate Debtor for the

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**Interpretation:** The court interpreted that the relationship inter-se amongst the parties is not

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**Application:** The court applied the ratio to the facts of the case, finding that the claim of

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## Parties

- **Judges:** Prabhat…; V.G. B…
- **Appellants:** Union Bank of…
- **Respondents:** M/s Bharati…
- **Advocates:** Pulkit S…; Naman K…; +2 more

## Timeline

- **2011-06-23 — Facility Ag…**: Great Offshore (International) Ltd. was sanctioned a Term Loan for construction of three…
- **2011-10-21 — Shipbuilding…**: The construction of the vessel was to be carried out by the Corporate Debtor, as the ship…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 42 — Appeal against the decision of liquidator](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-42)

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