Financial creditors under IBC and operation creditors differ in that their liabilities stem from various sources. Where a financial creditor under IBC is obligated according to a contract, such as a loan or debt, and an operational creditor is obligated due to operational activities.
The new insolvency and bankruptcy law in India, the Insolvency and Bankruptcy Code, 2016, caused a significant deal of doubt over a complainant's eligibility to commence a corporate insolvency resolution procedure. It is primarily determined by the law's requirement that a complaint is a “financial creditor under IBC” or “operational creditor.”
Homebuyers are currently caught in a Catch-22 position due to interpreting many new terminologies employed in the legislation. As a result, the applicability of financial and operational creditors to a homebuyer and a commercial real estate purchaser has been addressed in this article.
Financial creditors under IBC are defined as follows under Section 5(7) of the Insolvency and Bankruptcy Code of 2016, ‘A person who owes a financial obligation, including a person to whom such debt has been lawfully assigned or transferred.' A financial creditor under IBC has a ‘financial debt' owing to him under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.
The following is how the Code defines financial debt: ‘A debt, including with any interest, which is disbursed in exchange for the time worth of money and includes:
- Money borrowed in exchange for interest
- Any sum raised by acceptance under any acceptance credit arrangement or its de-materialized equivalent
- Any funds raised by the use of a note purchase facility or the issuance of bonds, notes, debentures, loan stock, or other similar instruments
- The amount of any liability arising from any lease or hire purchase contract that is classified as a finance or capital lease under Indian Accounting Standards or other accounting standards as required.
- Receivable sold or reduced other than a non-recourse receivable
- Any sum raised by any other transaction, including any forward sale or buy agreement, that has the commercial impact of borrowing
