# In the matter of New Steel Trading Pvt. Ltd.

> NCLT judgment dated 2024-01-11. Citation: TCN-2024-NCLT-03168. The Applicants, operational creditors of the Corporate Debtor, filed an application seeking to…

- **Court:** NCLT
- **Order date:** 11 Jan 2024
- **Citation:** TCN-2024-NCLT-03168
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/new-steel-trading-pvt-ltd-abcf4a8c

## Summary

### Background

The Applicants, operational creditors of the Corporate Debtor, filed an application seeking to convert their debt from operational debt to financial debt under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. They also sought directions for a forensic audit of the corporate debtor, directions regarding extortionate credit transactions, and orders related to malicious intention of proceedings and wrongful trading. The applicants claimed that the credit facility provided to the Corporate Debtor through purchases had a commercial effect of borrowing and should be classified as financial debt. They also alleged that the insolvency proceeding was initiated in conspiracy with the Corporate Debtor.

## Facts

M/s Shah Scrap Corporation, M/s. U. S. Enterprises, and M/s Shah Enterprises (the Applicants) supplied scrap materials to New Steel Trading Private Limited (the Corporate Debtor). The value of the supplied materials was Rs. 39,06,27,368/-, Rs. 35,10,65,060/-, and Rs. 42,89,01,749/- respectively. The Corporate Debtor defaulted in paying amounts of Rs. 9,67,13,409/-, Rs. 2,38,00,425/-, and Rs.1,93,11,341/- respectively to the Applicants. When the Corporate Debtor was admitted into CIRP, the Applicants filed their claims as operational creditors. The Resolution Professional admitted claims aggregating to Rs. 13,98,25,175/- as operational debts. The Applicants filed an application seeking to convert their debt from operational debt to financial debt, arguing that the

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## Issues and analysis

### Issue 1: Whether the debt of the Applicants can be categorized as financial debt under Section 5(8) of the …

**Ratio:** The definition of 'financial debt' under Section 5(8) of the I&B Code requires the

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**Reasoning:** The Tribunal reasoned that the transaction between the Applicants and the Corporate

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**Interpretation:** The interpretation of Section 5(8) and 5(21) of the I&B Code distinguishes

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**Application:** In this case, the Applicants supplied scrap materials to the Corporate Debtor.

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## Parties

- **Judges:** LAKSHMI G…; Charanjeet Singh…
- **Appellants:** M/s. Shah Scrap…
- **Respondents:** M/s. New Steel…
- **Advocates:** Akshay P…; Aniket…; +1 more

## Timeline

- **2021-12-16 — Admission in…**: The Corporate Debtor, New Steel Trading Private Limited, was admitted into Corporate…
- **2022-02-22 — Submission of…**: The Applicants herein had submitted their claims to the Resolution Professional on…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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