WHETHER A FLAT PURCHASER CAN BE REGARDED AS AN OPERATIONAL CREDITOR UNDER IBC 2016,CODE?

WHETHER A FLAT PURCHASER CAN BE REGARDED AS AN OPERATIONAL CREDITOR UNDER IBC 2016,CODE?

WHO IS A FINANCIAL CREDITOR UNDER IBC 2016?

Section 5 (7) of the IBC Code defines who is a “financial creditor” under IBC Code 2016.

Thus, a financial creditor is

"A person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred".

In order to ascertain whether a person is a financial creditor, the debt owed to such a person must fall within the ambit a 'Financial Debt' as under Section 5(8) of the IBC.

WHAT IS A FINANCIAL DEBT UNDER THE IBC 2016?

"A debt along with interest, if any, which is disbursed against the consideration for time value of money and includes-

a	Money borrowed against payment of interest
b	Any amount raised by acceptance under any acceptance credit facility or its de-materialized equivalent;
c	Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
d	The amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;
e	Receivable sold or discounted other than any receivable sold on non-recourse basis;
f	Any amount raised under any other transaction, including, any forward sale or purchase agreement, having the commercial effect of borrowing;
g	Any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;
h	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) of this clause"

WHO IS AN OPERATIONAL CREDITOR UNDER IBC CODE?

An operational creditor is defined under Section 5(20) of the IBC to mean

"Any person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred".

In order to ascertain whether a person would fall within the definition of an operational creditor, the debt owed to such a person must fall within the definition of an operational debt as defined under Section 5(21) of the IBC.

An operational debt is defined under section 5(21) of the IBC to mean:

"a claim in respect of the provisions of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority".

Differentiation between Operational Creditor and Financial Creditor

Opeatational Creditor	Financial Creditor
Operational creditors are those whose liabilities from the entity comes from a transaction on operations	Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or debt security.

The Code also provides for cases where a creditor has both a solely financial transaction as well as an operational transaction with the entity. In such a case, the creditor can be considered a financial creditor to the extent of the financial debt and an operational creditor to the extent of the operational debt."

In Col. Vinod Awasthy v. AMR Infrastructure Limited, dealt with the question of   whether a flat purchaser would fall within the definition of an 'Operational Creditor' as defined under Section 5(20) of the IBC.

NCLT dealt who is an operational creditor under IBC and explained that

"Operational Creditors are those whose liability from the entity comes from a transaction on operations.

Any supply of goods or services, employment or dues which were payable under any statute to the Centre / State Government or local bodies.

In the above case, NCLT observed that it is sine qua non to prove that the creditor falls within the ambit and scope of the definition of either 'Financial Creditor' under Section 5(7) or 'Operational Creditor' under Section 5(20) of the IBC.

National Company Law Tribunal, Principal Bench, New Delhi observed in the above case held that a flat purchaser cannot be considered as an operational debtor under IBC Code.

Petitioner can avail other remedies available to him such as under the law of the contract, the General Law of the land or Consumer Protection Act and now RERA the Real Estate (Regulation and Development) Act 2016.

It is to be noted that in earlier cases such as Pawan Dubey and another v. J.B.K. Developers Private Limited and Mukesh Kumar v. AMR Infrastructure Limited held the same view that flat purchasers cannot be considered as operational creditor under IBC Code.