Case: ANUJ JAIN INTERIM RESOLUTION PROFESSIONAL FOR JAYPEE INFRATECH LIMITED Vs. AXIS BANK LIMITED ETC

surety for giving guarantee as provided under Section 127 of the Contract Act. When the creditor abstained from enforcing the claim against the principal debtor because of such promise to create mortgage by the defendant, such forbearance was held to be sufficient and valid consideration. It is difficult to stretch the ratio of the said decision so as to be applied to the issue at hand concerning the definition of financial debt under Section 5(8) of the Code, which conspicuously omits mortgage; and which requires disbursement against the consideration for the time value of money as the lead elements. As said, the respondent- lenders of JAL, while holding the mortgages in their hands, as said to have been executed by the corporate debtor JIL, may be carrying a security interest and may be the creditors who may claim to be falling within the terminology secured creditors, yet cannot become financial creditors of the corporate debtor JIL who is not owing any financial debt to them. The decision in Smt. Kusum does not make out a case in favour of the respondents, the lenders of JAL. 52. Another decision forming the mainstay of the respondents had been that in the case of Rajkumari Kaushalya Devi (supra). The relevant background aspects of the said case had been that the appellant had executed two usufructuary mortgages with respect to the two properties situated in Feroozepore city in favour of the respondent while also taking the same property on lease on the very same date in 1946. On default in effecting payments by the appellant, the respondents filed an application under Section 13 of the Displaced Persons (Debts Adjustment) Act 70 of 1951 seeking recovery of the principal amount together with arrears of rental. While omitting other aspects which may not be relevant, noticeable it is for the present purpose that one of the points for consideration in the case had been as to whether the liability created under the said mortgage was a debt within the meaning of Section 2(6) of the Act 70 of 1951. It was contended on behalf of the appellant that such liability under the mortgage was not a pecuniary liability and, therefore, Section 2(6) did not apply to a mortgage debt. 52.1. The argument aforesaid was rejected by this Court after taking note of the definition of debt as occurring in the said enactment. The principal part of the said definition, relevant for the present purpose read as under:- Debt means any pecuniary liability, whether payable presently or in future, or under a decree or order of civil or revenue court or otherwise, or whether ascertained or to be ascertained, which — *** *** *** 52.2. This Court, inter alia, observed, with reference to the definition aforesaid as occurring in Act 70 of 1951 and the definition of mortgage as occurring in the Transfer of Property Act, as under: 3….The main contention of the appellant in this connection is that a mortgage debt is not a pecuniary liability and therefore does not fall within the definition of debt at all. We are of opinion that there is no force in this contention. The words pecuniary liability will cover any liability which is of a monetary nature. Now the definition of a mortgage in Section 58 of the Transfer of Property Act 4 of 1882, shows that though it is the transfer of an interest in specific immovable property, the purpose of the transfer is to secure the payment of money advanced or to be advanced by way of loan or to secure an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. The money advanced by way of loan, for example, which is secured by a mortgage, obviously creates a pecuniary liability. It is true that a mortgage in addition to creating the pecuniary liability also transfers interest in the specific immovable property to secure that liability; none the less the loan or debt to secure which the mortgage is created will remain a pecuniary liability of the person creating the mortgage. Therefore a mortgage debt would create a pecuniary liability upon the mortgagor and would be covered by the definition of the word debt in Section 2(6)…. 52.3. The proposition aforesaid, being related with the definition of debt as occurring in the said enactment (Act 70 of 1951), cannot have a direct application in the present case. In any event, the said decision cannot be taken as an authority governing the transaction where there is no direct debt of the mortgagor himself. 53. The other citations, on various terminologies related with mercantile law and mortgage transactions, do not advance the cause of the respondents because of distinct and rather peculiar requirements of Section 5(8) of the Code. Of course, the decision of NCLAT in SREI Infrastructure Finance Limited (supra) stands disapproved for what we have held hereinabove. Equally, the other submissions about the contents of the documents in question as also the entitlement of respondent-lenders to invoke the security or to take up the proceedings under SARFAESI Act etc. do not, in any event, make the transactions in question financial debts within the meaning of Section 5(8) of the Code. Such submissions have only been noted to be rejected. Summation on second issue 54. For what has been discussed hereinabove, on the issue as to whether lenders of JAL could be treated as financial creditors, we hold that such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any financial debt within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the financial creditors of the corporate debtor JIL. Conclusion

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]consequences of offending preferential transaction are, obviously, drastic and practically operate towards annulling the effect of such transaction. Looking to the contents, context and consequences, we are at one with the contentions urged on behalf of the respondents with reference to the decisions in Devinder Singh (supra) and other cited cases, that these provisions need to be strictly construed. However, even if we proceed on strict construction of Section 43 of the Code, the underlying principles and the object cannot be lost sight of. In other words, the construction has to be such that leads towards achieving the object of these provisions19.3. On a conspectus of the principles so enunciated, it is clear that although the word deemed is employed for different purposes in different contexts but one of its principal purpose, in essence, is to deem what may or may not be in reality, thereby requiring the subject-matter to be treated as if real. Applying the principles to the provision at hand i.e., Section 43 of the Code, it could reasonably be concluded that any transaction that answers to the descriptions contained in sub-sections (4) and (2) is presumed to be a preferential transaction at a relevant time, even though it may not be so in reality. In other words, since sub-sections (4) and (2) are deeming provisions, upon existence of the ingredients stated therein, the legal fiction would come into play; and such transaction entered into by a corporate debtor would be regarded as preferential transaction with the attendant consequences as per Section 44 of the Code, irrespective whether the transaction was in fact intended or even anticipated to be so19.4. Even when the above-stated indicting parts of Section 43 as occurring in sub-sections (4) and (2) are satisfied and the corporate debtor is deemed to have given preference at a relevant time to a related party or unrelated party, as the case may be, such deemed preference may yet not be an offending preference, if it falls into any or both of the exclusions provided by sub-section (3) i.e., having been entered into during the ordinary course of business of the corporate debtor ortransferee or resulting in acquisition of new value for the corporate debtor19.5. Thus, the net concentrate of Section 43 is that if a transaction entered into by a corporate debtor is not falling in either of the exceptions provided by sub-section (3) and satisfies the three-fold requirements of sub-sections (4) and (2), it would be deemed to be a preference during a relevant time, whether or not in fact it were so; and whether or not it were intended or anticipated to be soObviously, if the transactions in question are to fall squarely within the mischief of Section 43, they must satisfy all the specifications and ingredients of sub-sections (2) and (4) of Section 43 and ought not to be within the exclusion provided in sub- section (3) thereof22.2.1. As noticed, 09.08.2017 is the insolvency commencement date in this case. The transactions in question, even if of putting the concerned properties under mortgage with the lenders, carry the ultimate effect of working towards the benefit and advantage of the borrower i.e., JAL who obtained loans and finances by virtue of such transactions. It is true that there had not been any creditor-debtor relationship between the lender banks and corporate debtor JIL but that will not be decisive of the question of the ultimate beneficiary of these transactions. The mortgage deeds in question, entered by the corporate debtor JIL to secure the debts of JAL, obviously, amount to creation of security interest to the benefit of JAL22.2.2. Now, the capacity of JAL is admittedly that of the holding company of JIL as its largest equity shareholder ( with approximately 71.64 % shareholding). Moreover, JAL had admittedly been the operational creditor of JIL, for an amount of approximately Rs. 261.77 crores. JAL itself maintains that it had been providing financial, technical and strategic support to JIL in various ways. It is the assertion that apart from making investment in terms of equity shareholding to the tune of Rs. 995 crores, JAL had pledged its 70,83,56,087 equity shares held in JIL in favour of the lenders of JIL; had also entered into Promoter Support Agreement to the lenders of JIL to meet the DSRA obligation of JIL towards its lenders; and had further extended Bank Guarantees of Rs. 212 crores to meet the DSRA obligation of JIL. These assertions, in our view, put JAL in such capacity that it is a related party to JIL and is a creditor as also surety of JIL. In other words, the corporate debtor JIL owed antecedent financial debts as also operational debts and other liabilities towards JAL22.3. In the scenario taken into comprehension hereinabove, there is nothing to doubt that the corporate debtor JIL has given a preference by way of the mortgage transactions in question for the benefit of its related person JAL (who has been the creditor as also surety for JIL) for and on account of antecedent financial debts, operational debts and other liabilities owed to such related person. In the given fact situation, it is plain and clear that the transactions in question meet with all the requirements of clause (a) of sub-section (2) of Section 4322.4. It is also not far to seek that in the given scenario, the requirements of clause (b) of sub-section (2) of Section 43 are also met fair and square. On behalf of the respondents, emphasis is laid on the fact that in the distribution waterfall in case of liquidation (per Section 53 of the Code), JAL, as an operational creditor, stands much lower in priority than the other creditors and stakeholders. Such submissions, in our view, only strengthen the position that by way of the impugned transfers, JAL is put in a much beneficial position than it would have been in the absence of such transfers. It has rightly been contended on behalf of the appellants that with the transactions in question, JAL has been put in an advantageous position vis-à-vis other creditors on the counts that: a) JAL received a huge working capital (approx. Rupees 30000 crores), by way of loans and facilities extended to it by the respondent-lenders; and b) by way of the transactions in question, JALs liability towards its own creditors shall be reduced, in so far as the value of the mortgaged properties is concerned, which is said to be approximately Rs. 6000 crores. As a necessary corollary of the beneficial and advantageous position of the related party JAL with creation of such security interest over the properties of JIL, in the eventuality of distribution of assets under Section 53, the other creditors and stakeholders of JIL shall have to bear the brunt of the corresponding disadvantage because such heavily encumbered assets will not form the part of available estate of the corporate debtor. Obviously, JAL stands dearly benefited and has derived such benefits at the cost, and in exclusion, of the other creditors and stakeholders of the corporate debtor JIL. The applicability of clauses (a) and (b) of sub-section (2) of Section 43 of the Code is clear and complete in relation to the impugned six transactions22.5. Therefore, in relation to the present case, the answers to questions (i), (ii) and (iii) as referred in paragraph 20 are that: the impugned transactions had been of transfers for the benefit of JAL, who is a related party of the corporate debtor JIL and is its creditor and surety by virtue of antecedent operational debts as also other facilities extended by it; and the impugned transactions have the effect of putting JAL in a beneficial position than it would have been in the event of distribution of assets being made in accordance with Section 53 of the Code. Thus, the corporate debtor JIL has given a preference in the manner laid down in sub-section (2) of Section 43 of the CodeThe submissions, in our view, remain bereft of substance23.1.1. The scheme of IBC is to disapprove and disregard such preferential transaction which falls within the ambit of Section 43 and to ensure that any property likely to have been lost due to such transaction is brought back to the corporate debtor; and if any encumbrance is created, to remove such encumbrance so as to bring the corporate debtor back on its wheels or in other event (of liquidation), to ensure pro rata, equitable and just distribution of its assets. Such provisions as contained in Sections 43 and 44 came into operation as the comprehensive scheme of corporate insolvency resolution and liquidation from the date of being made effective; and merely because look-back period is envisaged, for the purpose of finding relevant time, it cannot be said that the provision itself is retrospective in operation. Reference to the decision of this Court in the case of Purbanchal Cables (supra) is entirely inaptThe provisions contained in Section 43, however, indicate the intention of legislature that when a preference is given at a relevant time and thereby, the beneficiary of preference acquires unwarranted better position in the event of distribution of assets, the same may not be countenanced. Looking to the scheme of IBC and the principles applicable for the conduct of the affairs of a corporate person, it cannot be said that anything of a new liability has been imposed or a new right has been created. Maximisation of value of assets of corporate persons and balancing the interests of all the stakeholders being the objectives of the Code, the provisions therein need to be given fuller effect in conformity with the intention of the legislature23.1.2. We may also observe that if the contentions urged on behalf of the respondents were to be accepted, the result would be of postponing the effective date of operation of sub-section (4) of Section 43 by two years in the case of related party and to one year in the case of unrelated party, and thereby, effectively postponing the application of entire Section 43 for a period of two years! That cannot be and had never been the intention of legislature. It is also noteworthy that by virtue of proviso to sub-section (3) of Section 1 of the Code, different dates can be provided for enforcement of different provisions of the Code; and in fact, different provisions have been brought into effect on different dates. However, after coming into force of the provisions, if a look-back period is provided for the purpose of any particular enquiry, it cannot be said that the operation of the provision itself would remain in hibernation until such look-back period from the date of commencement of the provision comes to an end. There is nothing in the Code to indicate that any provision in Chapter II or Chapter III be taken out and put in operation at a later date than the date notified. Such contentions being totally devoid of substance, deserve to be, and are, rejected24. We may now take up the question as to which of the transactions in question would entail in giving preference at a relevant time or otherwise. As noticed, the preference is given to JAL who is a related party of JIL. Hence, the look-back period is two years preceding insolvency commencement date i.e., 09.08.2017 per clause (a) of sub-section (4) of Section 43; and accordingly, the point of enquiry would be as to whether the preference had been given during the period of two years preceding 09.08.2017. Therefore, the transactions commencing from 10.08.2015 until the date of insolvency commencement shall fall under the scanner. As noticed, it has been one of the major contentions of the respondents that most of the impugned transactions were not of creation of any new encumbrance by JIL and in fact, most of the properties in question had already been under mortgage with the respective lenders much before the period under consideration i.e., much before 10.08.201524.1. It may at once be noticed that the transaction that was clearly falling beyond the period under consideration was, in fact, kept out of the purview of Section 43 of the Code by NCLT itself, being that relating to Property No. 7 (as mentioned in paragraph 4.5 hereinbefore)24.2. So far as the transaction relating to Property No. 6 is concerned, being the mortgage deed dated 04.03.2016, towards Short-Term Loan Facility to JAL of Rs. 1000 crores by State Bank of India, the same obviously falls within the look-back period. Even if JAL had allegedly entered into the facility agreement with this lender bank on 26.03.2015, this date is hardly of any bearing so far as transaction by the corporate debtor JIL is concerned, which was made only on 04.03.201624.3.1. It has been one of the major contentions of the respondents that most of the impugned transactions were not of creation of any new encumbrance by JIL and in fact, most of the properties in question had already been under mortgage with the respective lenders. The submissions of respondents in relation to the aforesaid five transactions, that they had been of so-called re- mortgage/s, carry their own shortcomings and cannot be accepted. In the first place, we are clearly of the view that on release by the mortgagee, the mortgage ceases to exist and it is difficult to countenance the concept of a so- called re-mortgage. The so-called re-mortgage, on all its legal effects and connotations, could only be regarded as a fresh mortgage; and it obviously befalls on the mortgagor to consider at the time of creating any fresh mortgage as whether such a transaction is expedient and whether it should be entered into at all. Noticeable it is that in relation to Property No. 1 and 2, even if the initial mortgage had been dated 24.02.2015 falling beyond the look-back period, it was released on 15.09.2015 and this date (15.09.2015) falls within the look-back period. Even if the same property has been again mortgaged with the same lender/s on the same day of release, the same cannot be countenanced for the transaction operates towards extending unwarranted preference to JAL by the corporate debtor JIL. Significant it is to notice that while making this mortgage dated 15.09.2015, the facility amount being obtained by JAL got swelled from Rs. 3250 crores to a whopping Rs. 24109 crores and the number of creditors went up from 2 to 24. Such a transaction, in our view, had only been of a fresh mortgage to secure extra facilities obtained by JAL and thereby, extending unwarranted advantage to JAL at the cost of the estate of JIL. In the other transaction dated 29.12.2016, by which the properties in question were again put under mortgage with the lender/s, the facility amount was shown as Rs. 23491 crores. The transactions on 15.09.2015 and 29.12.2016 cannot be given credence with reference to the previous mortgage deed dated 24.02.2015. Similar is the case in relation to Property No. 3. Even when the previous mortgage was given on 12.05.2014 i.e., beyond the look-back period, there had been release deeds on 30.12.2015 and 26.06.2016 as regards certain parcels of land. So far the release of land to JIL is concerned, the same causes no problem and only works to the benefit of JIL and its stakeholders. However, when the remaining land was also released on 07.03.2017, its fresh mortgage, even if on the same date, cannot be countenanced and is hit by Section 43, being a deemed preference. The very same considerations apply in relation to the Property No. 4 too. As regards Property No. 5, even if there had been certain previous mortgage transactions falling beyond the look-back period, the property got released on 04.11.2015; and thereafter, the fresh mortgage on 24.05.2016, with increased facility amount from Rs. 1470 crores to Rs. 1767 crores, suffers from the same vice, of being a deemed preference to a related party during the period of two years preceding the insolvency commencement date24.4. For what has been discussed hereinabove, the conclusion is inevitable that the impugned preference was given to a related party during a relevant time. However, before concluding on this part of discussion, we may also observe that reference to the decisions of Madras and Bombay High Courts in the case of IDBI Bank Ltd and Monarch Enterprises respectively, is neither apposite nor advances the cause of the respondents for the reason that the said decisions had essentially been on the question/s as to whether the impugned transactions were of fraudulent preference per Section 531 or lacking in good faith per Section 531A of the Companies Act, 1956. In fact, in the case of IDBI Bank (supra) the corporate debtor attempted to transfer one of its property to the appellant bank, who was one of its creditors and in that regard, certain transactions like agreement for sale and handing over possession were suggested and it was alleged that the contract for sale was partly performed about one year and four months prior to the winding-up proceedings; and such being beyond the look-back period of six months as envisaged by Section 531 of the Companies Act, 1956, it was argued that it had not been a fraudulent transfer. The contentions were not accepted by the Single Judge and by the Division Bench of the High Court for the reason that mere handing over of possession or documents did not complete the sale; rather the Court was of the view that such documents were created only in order to avoid the transaction being called a fraudulent preference. Apart that the element of fraud is not the essential ingredient of Section 43 of the Code, the said decision in IDBI Bank, on the approach of the Courts towards corporate transactions makes it clear that any transaction favouring one stakeholder at the cost of the other is viewed with disfavour and is disapproved, particularly if it takes place during the prescribed look-back period24.5. For what has been discussed hereinabove, the answer to question (iv) as referred in paragraph 20 is that the transactions in question had been of deemed preference to related party JAL by the corporate debtor JIL during the look-back period of two years and have rightly been held covered within the period envisaged by sub-section (4) of Section 43 of the Code.Ordinary course of business or financial affairs25.1. Having taken into comprehension the scheme of the Code and the purpose and purport of the provisions contained in Section 43, we find force and substance in the submissions made on behalf of the appellants25.2. As noticed, in the scheme of such provisions in the Code, the underlying concept is to disregard and practically annul such transactions which appear, in the course of insolvency resolution or liquidation, to be preferential so as to minimise the potential loss to other stakeholders in the affairs of the corporate debtor, particularly its creditors. What is to be examined for the purpose of Section 43 is the conduct and affairs of the corporate debtor. If the beneficiary of the transaction in question is a related party of the corporate debtor, the period of enquiry is enlarged to two years whereas this period is one year in other cases. During such scanning, by virtue of sub-section (3) of Section 43, two types of transfers are kept out of the purview of sub-section (2), which would not be treated as preference. Though in the present case, we are concerned only with the phraseology occurring in clause (a) of sub-section (3) but, we may usefully refer to clause (b) thereof, for an insight into the underlying concept for providing exception in regard to certain transfers and keeping them out of the purview of preference25.2.1. By virtue of clause (b) of sub-section (3) [read with Explanation thereto], any transfer creating a security interest in the property acquired by the corporate debtor is not to be treated as preference to the extent that such security interest secures new value in monetary terms or in terms of goods, services or new credit or in release of a previously transferred property. Any micro dissection of clause (b) of sub-section (3) of Section 43 is not required in the present case. Suffice it to notice that even a bare look at the provision brings forth the concept that value enhancement or strengthening of the corporate debtor ought to be the result of a transfer, if it is to remain out of the ambit of sub-section (2) and not to fall within the mischief of being preferential25.2.2. Another feature of vital importance is that the matter is examined with reference to the dealing and conduct of the corporate debtor; and qua the health and prospects of the corporate debtor. Applying the well-known principles of noscitur a sociis, whereunder the questionable meaning of a doubtful word could be derived and understood from its associates and context; and usefully recapping that the scheme of Section 43 of the Code is essentially of scanning through the affairs of the corporate debtor and to discredit and disregard such transaction by the corporate debtor which tends to give unwarranted benefit to one of its creditor/surety/guarantor over others, in our view, the purport of clause (a) of sub-section (3) of Section 43 is also principally directed towards the corporate debtors dealings. In other words, the whole of conspectus of sub-section (3) is that only if any transfer is found to have been made by the corporate debtor, either in the ordinary course of its business or financial affairs or in the process of acquiring any enhancement in its value or worth, that might be considered as having been done without any tinge of favour to any person in preference to others and thus, might stand excluded from the purview of being preferential, subject to fulfilment of other requirements of sub-section (3) of Section 4325.3. Needless to reiterate that if the transfer is examined with reference to the ordinary course of business or financial affairs of the transferee alone, it may conveniently get excluded from the rigour of sub-section (2) of Section 43, even if not standing within the scope of ordinary course of business or financial affairs of the corporate debtor. Such had never been the scheme of the Code nor the intent of Section 43 thereof. It has rightly been contended on behalf of the appellants that for the purpose of exception under clause (a) of sub-section (3) of Section 43, the intent of legislature is required to be kept in view. If the ordinary course of business or financial affairs of the transferee (lenders of JAL in the present case) would itself be decisive for exclusion, almost every transfer made to the transferees like the lender-banks/financial institutions would be taken out of the net, which would practically result in frustrating the provision itself25.4. It remains trite that an interpretation that defeats the scheme, intent and object of the statutory provision is to be eschewed and for that matter, if necessary, by applying the principles of purposive interpretation rather than literal25.5. Looking to the scheme and intent of the provisions in question and applying the principles aforesaid, we have no hesitation in accepting the submissions made on behalf of the appellants that the said contents of clause (a) of sub-section (3) of Section 43 call for purposive interpretation so as to ensure that the provision operates in sync with the intention of legislature and achieves the avowed objectives. Therefore, the expression or, appearing as disjunctive between the expressions corporate debtor and transferee, ought to be read as and; so as to be conjunctive of the two expressions i.e., corporate debtor and transferee. Thus read, clause (a) of sub-section (3) of Section 43 shall mean that, for the purposes of sub-section (2), a preference shall not include the transfer made in the ordinary course of the business or financial affairs of the corporate debtor and the transferee. Only by way of such reading of or as and, it could be ensured that the principal focus of the enquiry on dealings and affairs of the corporate debtor is not distracted and remains on its trajectory, so as to reach to the final answer of the core question as to whether corporate debtor has done anything which falls foul of its corporate responsibilities25.6. The result of discussion in the foregoing paragraphs is that the transfers in question could be considered outside the purview of sub-section (2) of Section 43 of the Code only if it could be shown that same were made in the ordinary course of business or financial affairs of the corporate debtor JIL and the transferees. Even if transferees submit that such transfers had been in the ordinary course of their business, the question would still remain if the transfers were made in the ordinary course of business or financial affairs of the corporate debtor JIL so as to fall within the exception provided by clause (a) of sub-section (3) of Section 43 of the Code25.6.2. Taking up the transactions in question, we are clearly of the view that even when furnishing a security may be one of normal business practices, it would become a part of ordinary course of business of a particular corporate entity only if it falls in place as part of the undistinguished common flow of business done; and is not arising out of any special or particular situation, as rightly expressed in Downs Distributing Co (supra). Though we may assumethat the transactions in question were entered in the ordinary course of business of bankers and financial institutions like the present respondents but on the given set of facts, we have not an iota of doubt that the impugned transactions do not fall within the ordinary course of business of the corporate debtor JIL. As noticed, the corporate debtor has been promoted as a special purpose vehicle by JAL for construction and operation of Yamuna Expressway and for development of the parcels of land along with the expressway for residential, commercial and other use. It is difficult to even surmise that the business of JIL, of ensuring execution of the works assigned to its holding company and for execution of housing/building projects, in its ordinary course, had inflated itself to the extent of routinely mortgaging its assets and/or inventories to secure the debts of its holding company. It had also not been the ordinary course of financial affairs of JIL that it would create encumbrances over its properties to secure the debts of its holding company. In other words, we are clearly of the view that the ordinary course of business or financial affairs of the corporate debtor JIL cannot be taken to be that of providing mortgages to secure the loans and facilities obtained by its holding company; and that too at the cost of its own financial health. As noticed, JIL was already reeling under debts with its accounts with some of the lenders having been declared NPA; and it was also under heavy pressure to honour its commitment to the home buyers. In the given circumstances, we have no hesitation in concluding that the transfers in questions were not made in ordinary course of business or financial affairs of the corporate debtor JIL25.7. The submissions that security was disclosed in the Annual Reports or that none of the creditors expressed dissent are of no effect because such disclosure or want of objection by creditors, by themselves, do not operate as estoppel against anybody nor would take the transaction out of the purview of the legal fiction predicated in Section 43, if it is otherwise of a preference at a relevant time. Similarly, the distinction between NPA and wilful default; the submission that NPA could be regularised; and further the submission that the mortgages were created before JIL was declared NPA, are hardly of any bearing on the question as to whether the impugned transactions had been in the ordinary course of business or financial affairs of JIL. Thus, reference to the decisions like that in Keshavlal Khemchand and Jah Developers (supra) is not of any consequence and need not be dilated upon. The answer to this question, in our view, could only be in the negative. That is to say that the impugned transactions had not been in the ordinary course of business or financial affairs of JIL25.8. Therefore, the answer to question (v) as referred in paragraph 20 is that the impugned transactions are not of excepted transfers in terms of sub- section (3) of Section 43 of the Code.The concern expressed by lenders of JAL is legally untenable26. The argument of lenders, that holding the transactions in question as preferential would result in impacting large number of transactions undertaken by the bankers/financial institutions, of financing in the ordinary course of their business; and the consequences may be devastating and irreversible on the economy, has only been noted to be rejected26.1. It needs hardly any emphasis that in the ordinary course of their business, when the bankers or financial institutions examine any proposal for loan or advance or akin facility, they are supposed to, and they indeed, take up the exercise commonly termed as due diligence so as to study the viability of the proposed enterprise as also to ensure, inter alia, that the security against such loan/advance/facility is genuine and adequate; and would be available for enforcement at any point of time. Given the nature of transaction, the lenders must prefer a clean security to justify the transaction as being in the ordinary course of their business. In the same exercise, in the ordinary course of their business, if they are at all entering into a transaction whereby a third party security, including that of a subsidiary company, is to be taken as collateral, they are obliged to undertake further due diligence so as to ensure that such third party security is a prudent and viable one and is not likely to be hit by any law. In that sequence, they remain under obligation to assure themselves that such third party whose security is being taken, is not already indebted or in red and is not likely to fail in dealing with its own indebtedness. In the context of IBC, such requirement is moreover imperative on a bare look at the provisions contained in Part II thereof. Interesting it is to notice on the facts of the present case that in fact, several of the respondent lenders are shown to be the direct creditors of JIL too, to the extent of the advances made to JIL. They and the co-respondents cannot plead ignorance about the actual state of affairs and financial position of JIL. Despite such knowledge, if they chose to take the business risk of accepting security from JIL and that too, for securing the loans/advances/facilities made over to JAL, who was a directly related party of JIL for being its holding company, they themselves remain responsible for present legal consequences. Summation: The transactions in question are hit by Section 43 IBC27. For what has been discussed hereinabove, we are clearly of the view that the transactions in question are hit by Section 43 of the Code and the Adjudicating Authority, having rightly held so, had been justified in issuing necessary directions in terms of Section 44 of the Code in relation to the transactions concerning Property Nos. 1 to 6. NCLAT, in our view, had not been right in interfering with the well-considered and justified order passed by NCLT in this regard.Search and commandeering of preference at a relevant time28. Although we have analysed the transactions in question on the anvil of Section 43 with reference to the submissions made and the facts of the present case but, before moving on to other aspects, we deem it appropriate to point out the manner in which the provisions concerning preference at a relevant time are expected to be applied, particularly by the resolution professional, in a given case. It could be readily recapitulated that as per the charging parts of Section 43 i.e., sub-sections (4) and (2) thereof, a corporate debtor shall be deemed to have given preference at a relevant time if the twin requirements of clauses (a) and (b) of sub-section (2) coupled with the applicable requirements of either clause (a) or clause (b) of sub-section (4), as the case may be, are satisfied. However, even if the requirements of sub- sections (4) and (2) are satisfied, a transaction may not be regarded as an offending preference if it falls in either or both of the exceptions provided by sub-section (3) of Section 4328.1. Looking to the legal fictions created by Section 43 and looking to the duties and responsibilities per Section 25, in our view, for the purpose of application of Section 43 of the Code in any insolvency resolution process, what a resolution professional is ordinarily required to do could be illustrated as follows:1. In the first place, the resolution professional shall have to take two major but distinct steps. One shall be of sifting through the entire cargo of transactions relating to the property or an interest thereof of the corporate debtor backwards from the date of commencement of insolvency and up to the preceding two years. The other distinct step shall be of identifying the persons involved in such transactions and of putting them in two categories; one being of the persons who fall within the definition of related party in terms of Section 5(24) of the Code and another of the remaining persons2. In the next step, the resolution professional ought to identify as to in which of the said transactions of preceding two years, the beneficiary is a related party of the corporate debtor and in which the beneficiary is not a related party. It would lead to bifurcation of the identified transactions into two sub-sets: One concerning related party/parties and other concerning unrelated party/parties with each sub-set requiring different analysis. The sub-set concerning unrelated party/parties shall further be trimmed to include only the transactions of preceding one year from the date of commencement of insolvency3. Having thus obtained two sub-sets of transactions to scan, the steps thereafter would be to examine every transaction in each of these sub-sets to find: (i) as to whether the transaction is of transfer of property or an interest thereof of the corporate debtor; and (ii) as to whether the beneficiary involved in the transaction stands in the capacity of creditor or surety or guarantor qua the corporate debtor. These steps shall lead to shortlisting of such transactions which carry the potential of being preferential4. In the next step, the said shortlisted transactions would be scrutinised to find if the transfer in question is made for or on account of an antecedent financial debt or operational debt or other liability owed by the corporate debtor. The transactions which are so found would be answering to clause (a) of sub-section (2) of Section 435. In yet further step, such of the scanned and scrutinised transactions that are found covered by clause (a) of sub-section (2) of Section 43 shall have to be examined on another touchstone as to whether the transfer in question has the effect of putting such creditor or surety or guarantor in a beneficial position than it would have been in the event of distribution of assets per Section 53 of the Code. If answer to this question is in the affirmative, the transaction under examination shall be deemed to be of preference within a relevant time, provided it does not fall within the exclusion provided by sub-section (3) of Section 436. In the next and equally necessary step, the transaction which otherwise is to be of deemed preference, will have to pass through another filtration to find if it does not answer to either of the clauses (a) and (b) of sub-section (3) of Section 43.7. After the resolution professional has carried out the aforesaid volumetric as also gravimetric analysis of the transactions on the defined coordinates, he shall be required to apply to the Adjudicating Authority for necessary order/s in relation to the transaction/s that had passed through all the positive tests of sub-section (4) and sub-section (2) as also negative test of sub-section (3)28.3. In our view, looking to the legal fictions created by Section 43 and looking to the duties and responsibilities of the resolution professional and the Adjudicating Authority, ordinarily an adherence to the process illustrated hereinabove shall ensure reasonable clarity and less confusion; and would aid in optimum utilization of time in any insolvency resolution processOther aspects of the application made by IRP – allegations of transactions being undervalued and fraudulent29. Having found that the transactions in question cannot be countenanced, for being of preference during a relevant time to a related party; and having approved the order passed by NCLT in that regard, we do not consider it necessary to deal with the other length of arguments advanced by the learned counsel for parties on the questions as to whether the transactions are undervalued and/or fraudulent too. In the totality of circumstances, we would prefer leaving the said questions at that only, while also leaving all the related questions of law open; to be examined in an appropriate case29.1. However, we are impelled to make one comment as regards the application made by IRP. It is noticed that in the present case, the IRP moved one composite application purportedly under Sections 43, 45 and 66 of the Code while alleging that the transactions in question were preferential as also undervalued and fraudulent. In our view, in the scheme of the Code, the parameters and the requisite enquiries as also the consequences in relation to these aspects are different and such difference is explicit in the related provisions. As noticed, the question of intent is not involved in Section 43 and by virtue of legal fiction, upon existence of the given ingredients, a transaction is deemed to be of giving preference at a relevant time. However, whether a transaction is undervalued requires a different enquiry as per Sections 45 and 46 of the Code and significantly, such application can also be made by the creditor under Section 47 of the Code. The consequences of undervaluation are contained in Sections 48 and 49. Per Section 49, if the undervalued transaction is referable to sub-section (2) of Section 45, the Adjudicating Authority may look at the intent to examine if such undervaluation was to defraud the creditors. On the other hand, the provisions of Section 66 related to fraudulent trading and wrongful trading entail the liabilities on the persons responsible therefor. We are not elaborating on all these aspects for being not necessary as the transactions in question are already help preferential and hence, the order for their avoidance is required to be approved; but it appears expedient to observe that the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different. Specific material facts are required to be pleaded if a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relevant time, is entirely different. Hence, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority29.2. In the present case, it is noticed that NCLT in its detailed and considered order essentially dealt with the features of the transaction in question being preferential at a relevant time but recorded combined findings on all these three aspects that the impugned transactions were preferential, undervalued and fraudulent. Appropriate it would have been to deal with all these aspects separately and distinctively29.3. We are conscious of the fact that IBC is comparatively a new legislation and various aspects expected therein are in the progression of taking proper shape, particularly in the adjudicatory processes envisaged. Having said so, we would leave this aspect at that only, while expecting all the concerned to be more attentive to the scheme, object and requirements of the provisions contained in the CodeSECOND ISSUE: WHETHER LENDERS OF JAL COULD BE CATEGORISED AS FINANCIAL CREDITORS OF JIL30. The discussion and summation in the foregoing paragraphs and conclusion on the first issue itself would have been the end of the matter because the transactions in question stand disapproved as being preferential. However, there remains another significant issue to be adjudicated herein, which, though not adverted to by NCLAT, is indeed involved in these matters30.1. The issue is as to whether the lenders of JAL could be categorised as financial creditors of JIL for the purpose of IBC?31. The issue aforesaid was raised before NCLT by two of the respondent banks namely, ICICI Bank Limited and Axis Bank Limited by way of separate applications under Section 60(5) of the Code, seeking to question the decision of IRP rejecting their claims to be recognized as financial creditors of the corporate debtor JIL on account of the securities provided by JIL for the facilities granted to JAL. The NCLT rejected the applications so filed, by way of its orders dated 09.05.2018 and 15.05.2018 respectively, while concluding that on the strength of the mortgages created by the corporate debtor JIL, as collateral security of the debts of its holding company JAL, the applicants cannot be treated as financial creditors of the corporate debtor JIL31.1. The aforesaid orders dated 09.05.2018 and 15.05.2018 were questioned before NCLAT by the said lenders of JAL in Comp. App (AT) (Ins) No. 353 of 2018 and Comp. App (AT) (Ins) No. 301 of 2018 respectively. These appeals formed part of the bunch of appeals decided by NCLAT by way of the impugned common order dated 01.08.2019 and, as per the final result recorded therein, these two appeals also stand allowed. However, fact of the matter remains that nothing has been discussed by NCLAT in the impugned order dated 01.08.2019 as regards the subject-matter of these two appeals i.e., as to whether the said lenders of JAL could be categorised as financial creditors of JIL or not; and the entire discussion in the impugned order and the final conclusion therein had only been in relation to the order dated 16.05.2018 that was passed by NCLT on the application for avoidance filed by IRP31.2. The appellant of Civil Appeal D. No. 32881 of 2019, IIFCL, apart from raising other contentions, has also questioned this aspect of the order impugned that the aforesaid two appeals, involving the issue as to whether the mortgagees of the corporate debtor could be taken as financial creditors, have been allowed by NCLAT without recording any findings and without any discussion in that regard31.3. Though, ordinarily, such omission in the impugned order dated 01.08.2019 might have resulted in the matter being remitted to the Appellate Tribunal for appropriate consideration and finding but, as aforesaid, in the entire process, adherence to the time limit is also of significance; and in view of the fact that learned counsel for the respective parties have advanced elaborate submissions on the merits of the issue as to whether such lenders of JAL could be treated as financial creditors of the corporate debtor JIL and have invited the decision of this Court, we deem it just, proper and expedient to finally decide the relevant questions in this regard31.4. We may, of course, reiterate that in view of the conclusion that we have reached in relation to the principal issue, the transactions in question are denuded of their value and worth, per the force of the order by NCLT under Section 44 of the Code, which has been approved by us. To be more specific, the security interests created by the corporate debtor JIL over the properties in question stand discharged in whole. Therefore, the respondent-lenders cannot claim any status as creditors of the corporate debtor JIL and there could arise no question of their making any claim to be treated as financial creditors as such34. As noticed, the aforesaid orders dated 09.05.2018 and 15.05.2018 were questioned in two appeals before NCLAT by the said lenders of JAL; and the said appeals stand allowed in the impugned order dated 01.08.2019 without any discussion as regards the issue involved therein. We have heard learned counsel for the parties at length in relation to this issue too, and, in the circumstances of the case, as noticed, we had indicated prima facie view in the order dated 10.12.2019 , that such lenders of JAL cannot be categorised as financial creditors of JIL and had stayed the operation of impugned order to that extent39. As indicated hereinbefore, the law declared by this Court in the case of Swiss Ribbons, while rejecting the contentions that classification between financial creditor and operational creditor was discriminatory and violative of Article 14, shall have some bearing on the claim of the respondent-lenders for being treated as financial creditors of JIL39.3. The enunciation aforementioned illuminates the reasons as to why at all a financial creditor is conferred with a major, rather pivotal, role in the processes contemplated by Part II of the Code. It is the financial creditor who lends finance on a term loan or for working capital that enables the corporate debtor to set up and/or operate its business; and who has specified repayment schedules with default consequences. The most important feature, as this Court has said, is that a financial creditor is, from the very beginning, involved in assessing the viability of the corporate debtor who can, and indeed, engage in restructuring of the loan as well as reorganisation of the corporate debtors business when there is financial stress. Hence, a financial creditor is not only about in terrorem clauses for repayment of dues; it has the unique parental and nursing roles too. In short, the financial creditor is the one whose stakes are intrinsically inter-woven with the well-being of the corporate debtor41.1.6. Read as a whole and with reference to its context, it is but clear that in Pioneer Urban this Court has not enunciated that the scope of the expression financial debt be read as if to encompass any debt of whatsoever nature. Rather, a submission made therein, with reference to the decision in Krishi Utapadan Mandi Samiti, that and includes part in a definition may lead to it being extensive, was rejected by this Court while holding that the said decision was not a good law. However, the other extreme of submissions, seeking restrictive interpretation with reference to means part of the definition, was also not accepted and, in that context, the Court observed that the expression and includes speaks of subject-matters which may not necessarily be reflected in the main part of the definition. Obviously, there could be several subject-matters which may not, as such, be found squarely manifested in the expressions employed in the means part of a definition and could be reasonably found in the includes part. However, it has not been laid down as a rule of statutory interpretation that the includes part could stand alone, disjunct from and totally alien to the means partThe expressions means and includes in the definition clauses - effect42. Looking to the frame of the Code, where the significant expressions financial creditor and financial debt have been defined with the words means and includes, we may further refer to the principles of construction of such a definition clause in a statute. Tersely put, the law remains settled that where a word is defined to mean something, the definition is prime facie restrictive and exhaustive. On the other hand, where the word defined is declared to include something more, the definition is prima facie extensive. However, a little difficulty arises when the definition contains both the words means and includes42.1. As noticed, in the case of Pioneer Urban, a suggestion made on behalf of the respondents with reference to the decision in Krishi Utapadan Mandi Samiti, that when the words means and includes are used in a definition, they are to be given a wider meaning and are not exhaustive or restricted to the items contained therein, was not accepted by this Court; and the statement of law in Krishi Utapadan Mandi Samiti was held to be not that of good law for it ignored the earlier precedents of larger and coordinate Benches and was also out of sync with the later decisions on the same point. However, the other extreme of interpretation, as canvassed by the petitioners, that a financial debt could only be a debt which is disbursed against the consideration for the time value of money, and such requirement pervades all sub-clauses (a) to (i), was also not accepted as a matter of statutory interpretation by this Court while observing that the expression and includes speaks of subject matters which may not necessarily be reflected in the main part of the definition. Thus, it is evident that this Court did not accept either of the extremities suggested by the parties in Pioneer Urban for interpretation and implication of the expressions means and includes in a definition clause of the statute. Significantly, in Pioneer Urban, none of the extremities had any bearing on the conclusion because, eventually, the amendment in question was held to be only clarificatory in nature; and this Court held that the Explanation added to Section 5(8)(f) of the Code by the Amendment Act did not enlarge the scope of the original SectionThe essentials for financial debt and financial creditor43. Applying the aforementioned fundamental principles to the definition occurring in Section 5(8) of the Code, we have not an iota of doubt that for a debt to become financial debt for the purpose of Part II of the Code, the basic elements are that it ought to be a disbursal against the consideration for time value of money. It may include any of the methods for raising money or incurring liability by the modes prescribed in sub-clauses (a) to (f) of Section 5(8); it may also include any derivative transaction or counter-indemnity obligation as per sub-clauses (g) and (h) of Section 5(8); and it may also be the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h). The requirement of existence of a debt, which is disbursed against the consideration for the time value of money, in our view, remains an essential part even in respect of any of the transactions/dealings stated in sub-clauses (a) to (i) of Section 5(8), even if it is not necessarily stated therein. In any case, the definition, by its very frame, cannot be read so expansive, rather infinitely wide, that the root requirements of disbursement against the consideration for the time value of money could be forsaken in the manner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said sub- clauses (a) to (i) of Section 5(8) would be falling within the ambit of financial debt only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as financial debt within the meaning of Section 5(8) of the Code. This debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money44. As noticed, the root requirement for a creditor to become financial creditor for the purpose of Part II of the Code, there must be a financial debt which is owed to that person. He may be the principal creditor to whom the financial debt is owed or he may be an assignee in terms of extended meaning of this definition but, and nevertheless, the requirement of existence of a debt being owed is not forsaken45. It is also evident that what is being dealt with and described in Section 5(7) and in Section 5(8) is the transaction vis-à-vis the corporate debtor. Therefore, for a person to be designated as a financial creditor of the corporate debtor, it has to be shown that the corporate debtor owes a financial debt to such person. Understood this way, it becomes clear that a third party to whom the corporate debtor does not owe a financial debt cannot become its financial creditor for the purpose of Part II of the Code46. Expounding yet further, in our view, the peculiar elements of these expressions financial creditor andfinancial debt, as occurring in Sections 5(7) and 5(8), when visualised and compared with the generic expressions creditor and debt respectively, as occurring in Sections 3(10) and 3(11) of the Code, the scheme of things envisaged by the Code becomes clearer. The generic term creditor is defined to mean any person to whom the debt is owed and then, it has also been made clear that it includes a financial creditor, a secured creditor, an unsecured creditor, an operational creditor, and a decree-holder. Similarly, a debt means a liability or obligation in respect of a claim which is due from any person and this expression has also been given an extended meaning to include a financial debt and an operational debt46.1. The use of the expression means and includes in these clauses, on the very same principles of interpretation as indicated above, makes it clear that for a person to become a creditor, there has to be a debt i.e., a liability or obligation in respect of a claim which may be due from any person. A secured creditor in terms of Section 3(30) means a creditor in whose favour a security interest is created; and security interest, in terms of Section 3(31), means a right, title or interest or claim of property created in favour of or provided for a secured creditor by a transaction which secures payment for the purpose of an obligation and it includes, amongst others, a mortgage. Thus, any mortgage created in favour of a creditor leads to a security interest being created and thereby, the creditor becomes a secured creditor. However, when all the defining clauses are read together and harmoniously, it is clear that the legislature has maintained a distinction amongst the expressions financial creditor, operational creditor, secured creditor and unsecured creditor. Every secured creditor would be a creditor; and every financial creditor would also be a creditor but every secured creditor may not be a financial creditor. As noticed, the expressions financial debt and financial creditor, having their specific and distinct connotations and roles in insolvency and liquidation process of corporate persons, have only been defined in Part II whereas the expressions secured creditor and security interest are defined in Part I47. A conjoint reading of the statutory provisions with the enunciation of this Court in Swiss Ribbons (supra), leaves nothing to doubt that in the scheme of the IBC, what is intended by the expression financial creditor is a person who has direct engagement in the functioning of the corporate debtor; who is involved right from the beginning while assessing the viability of the corporate debtor; who would engage in restructuring of the loan as well as in reorganisation of the corporate debtors business when there is financial stress. In other words, the financial creditor, by its own direct involvement in a functional existence of corporate debtor, acquires unique position, who could be entrusted with the task of ensuring the sustenance and growth of the corporate debtor, akin to that of a guardian. In the context of insolvency resolution process, this class of stakeholders namely, financial creditors, is entrusted by the legislature with such a role that it would look forward to ensure that the corporate debtor is rejuvenated and gets back to its wheels with reasonable capacity of repaying its debts and to attend on its other obligations. Protection of the rights of all other stakeholders, including other creditors, would obviously be concomitant of such resurgence of the corporate debtor47.1. Keeping the objectives of the Code in view, the position and role of a person having only security interest over the assets of the corporate debtor could easily be contrasted with the role of a financial creditor because the former shall have only the interest of realising the value of its security (there being no other stakes involved and least any stake in the corporate debtors growth or equitable liquidation) while the latter would, apart from looking at safeguards of its own interests, would also and simultaneously be interested in rejuvenation, revival and growth of the corporate debtor. Thus understood, it is clear that if the former i.e., a person having only security interest over the assets of the corporate debtor is also included as a financial creditor and thereby allowed to have its say in the processes contemplated by Part II of the Code, the growth and revival of the corporate debtor may be the casualty. Such result would defeat the very objective and purpose of the Code, particularly of the provisions aimed at corporate insolvency resolution47.2. Therefore, we have no hesitation in saying that a person having only security interest over the assets of corporate debtor (like the instant third party securities), even if falling within the description of secured creditor by virtue of collateral security extended by the corporate debtor, would nevertheless stand outside the sect of financial creditors as per the definitions contained in sub- sections (7) and (8) of Section 5 of the Code. Differently put, if a corporate debtor has given its property in mortgage to secure the debts of a third party, it may lead to a mortgage debt and, therefore, it may fall within the definition of debt under Section 3(10) of the Code. However, it would remain a debt alone and cannot partake the character of a financial debt within the meaning of Section 5(8) of the CodeThe respondent mortgagees are not the financial creditors of corporate debtor JIL48. Indisputably, the debts in question are in the form of third party security; said to have been given by the corporate debtor JIL so as to secure the loans/advances/facilities obtained by JAL from the respondent-lenders. Such a debt is not and cannot be a financial debt within the meaning of Section 5(8) of the Code; and hence, the respondent-lenders, the mortgagees, are not the financial creditors of the corporate debtor JILFirst, the submission itself proceeds on the same shortcoming as was existing in the NCLATs decision that was disapproved by this Court in Essar Steel i.e., reading of a line in a judgment disjunct from the context. Secondly, in the decisions above-referred, this Court has never expanded the scope of financial debt as envisaged by Section 5(8) of the Code. Thirdly, the case of an indirect secured creditor i.e., the person having in its hand only the security interest over the property of the corporate debtor but with no corresponding involvement in the finances and growth of the corporate debtor, was never under consideration in the said decisions50.4. We may usefully elaborate a little. On a contextual reading of the expositions in Essar Steel and Swiss Ribbons, it is but clear that the Court had examined the status of direct secured creditor of the corporate debtor and there had not been any occasion to examine the features related with an indirect secured creditor, who is neither involved in assessing the viability of the corporate debtor nor in lending finances to the corporate debtor for setting up the business. As noticed, the prime, rather only, area of interest of such indirect secured creditor is in recovery of its debt and not in reorganization of the corporate debtors business. Thus understood, it is absolutely clear that the class of secured creditors indicated by this Court in Essar Steel and Swiss Ribbons, as being subsumed in financial creditors, is only that of such secured creditors who are directly engaged in advancing credit to the corporate debtor and not the indirect creditors who had extended any loan or facility to a third party but had taken a security from the corporate debtor, whose resolution is under consideration50.5. Hence, we are undoubtedly of the view that the decisions in Swiss Ribbons and Essar Steel do not enure to the benefit of the respondents; rather on the principles enunciated therein, they only operate against the respondents52.3. The proposition aforesaid, being related with the definition of debt as occurring in the said enactment (Act 70 of 1951), cannot have a direct application in the present case. In any event, the said decision cannot be taken as an authority governing the transaction where there is no direct debt of the mortgagor himself53. The other citations, on various terminologies related with mercantile law and mortgage transactions, do not advance the cause of the respondents because of distinct and rather peculiar requirements of Section 5(8) of the Code. Of course, the decision of NCLAT in SREI Infrastructure Finance Limited (supra) stands disapproved for what we have held hereinabove. Equally, the other submissions about the contents of the documents in question as also the entitlement of respondent-lenders to invoke the security or to take up the proceedings under SARFAESI Act etc. do not, in any event, make the transactions in question financial debts within the meaning of Section 5(8) of the Code. Such submissions have only been noted to be rejected54. For what has been discussed hereinabove, on the issue as to whether lenders of JAL could be treated as financial creditors, we hold that such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any financial debt within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the financial creditors of the corporate debtor JIL.