A debt arising from an advance payment given to a corporate debtor for the supply of goods or services would be deemed an operational debt.

Directing the Appellate Tribunal to reconsider the matter, the apex court said that the NCLAT must have notified the bank (Financial Creditor) before closing the CIRP initiated by the NCLT.

Claim of the rental lease will be treated as operational debt under Section 5(21) of the code as per the decision given by the Hon’ble NCLAT.

‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body.

A perfect decision by the SC where the parties perform activities to avoid any commercial transactions which are collusive in nature or where financial creditor escape the bar under Section 21(2) first proviso of the IBC.

The matter is that in a situation where the Applicant is unable to prove the amount advanced as loan without proper documentations, such loan amount would not meet the requirements of a “Financial Debt”. 

The insolvency and bankruptcy code, 2016 has seen many ups and downs since the enactment but out of all the most long and debatable topic or issue concerning law was pertaining to the rights of Home buyers/Allottee under the code.