Status as on- 25/05/2022


A corporate bankruptcy resolution procedure will only begin by the Hon’ble Tribunal by asserting whether the “Petitioner” is a “Financial Creditor” or an “Operational Creditor”. These are the two important concepts under the Insolvency and Bankruptcy Code 2016. A financial creditor is any person who owns a financial debt and there is a strict involvement of a finance contract. According to Section 5(7) of the act “a financial creditor is a person whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred ” and according to Section 5(8) of the Code “the financial debt means a debt which involves interest which is brought against the consideration of the time value of money” an operational creditor is someone who owns an operational debt which means any claim related with the delivery of goods or services as well as employment as mentioned under Section 5(20) of the Code and operational debt is defined under Section 5(21) of the Code.

In the recent judgment of “New Okhla Industrial Development Authority versus Anand Sonbhadra,” the Hon’ble Supreme Court analyzed and discussed in-depth the distinction between a financial creditor and an operational creditor.


  • The present case is an appeal filed by the NOIDA against the interim order passed by the National Company Law Appellate Tribunal (NCLAT) and where NCLAT held NOIDA as an operational creditor of the corporate debtor under IBC.
  • There is a lease deed executed between NOIDA and the Corporate Debtor and the appellant is considered as the lessor as described as the Authority under Section 3 of the Uttar Pradesh Industrial Area Development Act, 1976 (UPIAD Act).
  • And the leasehold property forms part of the land acquired under the Land Acquisition Act and it is for the purpose of the construction of the residential flats under ‘Urban and Industrial Township’.
  • The lessee earned its right as a lessee under the process of two bid tender systems in favor of a consortium in which it is a member.
  • The appellant has a binding stake in the interest of the land. The land which is the subject- matter of the lease, came to vest with the appellant of the acquisition and the appellant is not included in the Committee of Creditors.
  • The aggrieved party approached the NCLT then appealed to NCLAT and finally went to the Supreme Court of India where the appeal of NOIDA got dismissed.


The Supreme Court held that the New Okhla Industrial Development Authority (NOIDA) is not a financial creditor but an operational creditor under the Insolvency and Bankruptcy Code. A common question arose before the Hon’ble tribunal is that whether the authority is considered a financial creditor or an operational creditor. “We would think that having regard to the fact that both the NCLT and NCLAT have proceeded on the basis that the appellant (NOIDA) is an operational creditor, we need not stretch the exploration further and pronounce on the questions, which may otherwise arise,” and Court concluded on the basis that while the appellant is not a financial creditor, it would constitute as an operational creditor and dismissed the appeal. NOIDA had also filed an appeal against the order of the National Company Appellate Law Tribunal which was similar to the order given by the National Company Law Tribunal (NCLT) which held that there is no financial lease in terms of the Indian Accounting Standards and there is no Financial Debt. The bench noted that “We are of the view that, in the lease in question, there has been no disbursement of any debt (loan) or any sums by the appellant to the lessee. The appellant would, therefore, not be a financial creditor within the ambit of section 5(8)” and hence rejected the appeal.


A financial creditor is a person to whom a financial debt is due besides the assignee or transferee from such person and an Operational Creditor is a person to whom an operational debt is owed. Both operational creditors and financial creditors own certain advantages over each other. But Financial creditors are given some priorities over other creditors such as they are members of the creditor’s committee and have voting power etc and operational is not a member of the creditor’s committee. Hence the underlying statute protects more the interest of the financial creditor than the operational creditor.

Disclaimer:  The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at


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