The NCLT has ruled that financing through the TReDS platform does not equate to financial debt under the IBC, as it merely involves the assignment of trade receivables.
TReDS Financing Classification
The National Company Law Tribunal (NCLT) has held that financing provided via the Trade Receivables Discounting System (TReDS) platform does not constitute financial debt under the Insolvency and Bankruptcy Code (IBC). This ruling is significant as it clarifies the regulatory framework for trade receivables financing.
The Tribunal reasoned that the financial interactions facilitated by TReDS involve the assignment of trade receivables, rather than disbursing funds directly to the corporate debtor. As outlined in the ruling,
"TReDS facilitate the assignment of receivables without altering the debt's classification as operational debt."This helps maintain the distinction that operational debts, defined under the IBC, do not convert into financial debts merely by means of assignment.
This ruling serves practitioners and financial institutions in understanding the nature of debts associated with TReDS and developing strategies that comply with IBC requirements when structuring trade financing contracts.
Citations
- In re: TReDS Financing (2026) NCLT
