Definitions

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

1. Spaze Towers Private Limited vs Union of India

   Supreme Court of India 09 Aug 2019 Binding - Supreme Court Constitution Bench Judgment Reportable (2019) 9 SCC 698

   Court's Decision & Legal Precedent

   Amendments to the Insolvency and Bankruptcy Code 2016 classifying allottees of real estate projects as financial creditors and allowing them to trigger insolvency proceedings against developers are constitutionally valid. These amendments do not violate Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution. Allottees constitute a distinct class of financial creditors with intelligible differentia from operational creditors due to their role in financing real estate projects through installment payments, their vital interest in the company's well-being, and their similarity to other individual financial creditors like deposit and debenture holders. The amendments have rational nexus with the Code's objects of maximizing asset value and rehabilitating corporate debtors. Section 5(8)(f) as originally enacted already subsumed allottees within the definition of financial debt as a residuary provision covering transactions having the commercial effect of borrowing. The explanation added by the Amendment Act is merely clarificatory. The Code and RERA provide concurrent remedies and must be read harmoniously with the Code prevailing in case of conflict. Representation of allottees through authorized representatives under Section 21(6A) and 25A is constitutionally valid. The legislature has free play in the joints when enacting economic legislation and courts must accord deference to such experimentation.

   On this section: Expands definition of claim to include right to payment whether or not reduced to judgment and right to remedy for breach of contract, establishing foundation for financial debt concept

   Read the full order on eCourts India

2. Raman Prakash Mangla vs Anuj Jain

   Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The Adjudicating Authority has limited jurisdiction in approving a resolution plan, circumscribed by Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016. The Authority cannot interfere with the commercial aspects of the decision taken by the Committee of Creditors. If the Adjudicating Authority finds shortcomings in the resolution plan vis-à-vis the specified parameters of keeping the corporate debtor as a going concern, maximizing the value of its assets, and taking care of interests of all stakeholders, it must send the plan back to the Committee of Creditors for reconsideration, not modify the plan itself. Payment to dissenting financial creditors must be in monetary terms, not in kind or through transfer of equity or land. Once homebuyers as a class vote in favor of a resolution plan through their authorized representative, individual homebuyers cannot challenge the plan as dissenting creditors or aggrieved persons. The INR 750 crores deposited by the holding company pursuant to Supreme Court orders in Chitra Sharma is the property of the holding company, not the corporate debtor, and cannot be appropriated by the corporate debtor or the resolution applicant.

   On this section: Definitions of corporate debtor, creditor, debt, default, secured creditor, and security interest

   Read the full order on eCourts India

3. Naresh Kumar Gupta vs Sood Resins and Polymers

   Supreme Court of India 01 Mar 2021 Binding (Supreme Court) Reportable (2021) 2 SCC 1 (Reported Citation)

   Court's Decision & Legal Precedent

   Section 138/141 proceedings under the Negotiable Instruments Act against a corporate debtor are covered by the moratorium provision in Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, as such proceedings are 'proceedings' within the meaning of that section. The moratorium applies only to the corporate debtor and not to natural persons (Directors and officers) who can continue to be prosecuted under Section 141 of the Negotiable Instruments Act. The rules of statutory construction (noscitur a sociis and ejusdem generis) cannot be applied to restrict the meaning of 'proceedings' in Section 14(1)(a) when the expression is designedly wide and the object of the statute is clear - which is to preserve the corporate debtor's assets during the insolvency resolution process.

   On this section: Used to understand the scope of exceptions to moratorium under Section 14(3)(a)

   Read the full order on eCourts India

4. Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited

   Supreme Court of India 26 Feb 2020 Binding (Supreme Court) Reportable

   Court's Decision & Legal Precedent

   Mortgage transactions executed by a subsidiary to secure loans of its holding company constitute preferential transactions under Section 43 of the Insolvency and Bankruptcy Code 2016 when: (1) the transactions transfer the subsidiary's property for benefit of the holding company (a related party and creditor of the subsidiary) for antecedent debts owed by the subsidiary to the holding company; (2) the transactions put the holding company in a beneficial position compared to other creditors in liquidation distribution; (3) the transactions fall within the two-year look-back period for related party transactions; and (4) the transactions are not made in the ordinary course of business or financial affairs of the subsidiary, which requires reading the word 'or' in Section 43(3)(a) as 'and' to ensure both the subsidiary's and transferee's ordinary course of business are considered. Furthermore, lenders of a holding company cannot be categorized as financial creditors of a subsidiary merely by holding mortgages on the subsidiary's assets because financial debt requires disbursal against consideration for time value of money to the corporate debtor, and mortgage debt does not satisfy this essential requirement. The distinction between secured creditor and financial creditor must be maintained, with financial creditors being those with direct engagement in the corporate debtor's functioning from inception, involvement in assessing viability, and role in restructuring.

   On this section: Charge includes mortgage; security interest created by mortgage

   Read the full order on eCourts India

5. Sare Shelters Project Private Limited vs Union of India

   Supreme Court of India 09 Aug 2019 Binding (SC) Reportable (2019) 8 SCC 1

   Court's Decision & Legal Precedent

   Real estate allottees are financial creditors within the meaning of Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 because amounts advanced by allottees are disbursed against consideration for time value of money and have the commercial effect of a borrowing. The amendments to the Code effected through the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, which explicitly clarify that allottees are financial creditors through an explanation to Section 5(8)(f) and provide representation mechanisms through Sections 21(6A) and 25A, do not violate Articles 14, 19(1)(g) read with 19(6), or 300-A of the Constitution of India. These amendments are constitutional as they satisfy the test of reasonable classification, are based on intelligible differentia having rational nexus with legislative object, do not constitute manifest arbitrariness, and represent a legitimate economic experiment to which legislature must be given play in the joints.

   On this section: Core provisions defining debt, claim, default, financial creditor, operational creditor, and the mechanism for triggering insolvency proceedings; Section 5(8)(f) specifically addresses amounts raised under transactions having commercial effect of borrowing; Section 21(6A) and 25A address representation of financial creditors when they exceed specified numbers; the non-obstante clause in Section 238 was analyzed in relation to RERA's Section 88

   Read the full order on eCourts India

6. Landmark Apartments Pvt. LTD vs Union of India

   Supreme Court of India 09 Aug 2019 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, which deems allottees of real estate projects as financial creditors under Section 5(8)(f) and provides for their representation on Committee of Creditors through authorized representatives under Sections 21(6A) and 25A, is constitutionally valid under Articles 14, 19(1)(g), and 300-A of the Constitution of India. The amendment does not violate Article 14 as allottees, who finance their own apartment projects and provide consideration for time value of money through installment-based advance payments, constitute a rationally distinct class of financial creditors similar to debenture holders and fixed deposit holders, with intelligible differentia bearing nexus to the Code's object of maximizing creditor recovery and protecting stakeholders in corporate rehabilitation. The amendment does not infringe Article 19(1)(g) as it is a reasonable restriction in public interest for protecting millions of home buyers with substantial invested amounts. The amendment does not deprive developers of property without constitutional authority as it operates through valid legal process respecting due process and defenses. The explanation to Section 5(8)(f) merely clarifies that allottees already fell within the definition's ambit and is not substantively enlarging the scope. The classification does not offend the UNCITRAL Legislative Guide as allottees are recognized as financial creditors based on genuine financing characteristics. The Code and RERA can harmoniously coexist as parallel remedies serving different purposes, with Code taking primacy due to its later non-obstante clause. Parliament's legislative judgment in treating allottees as financial creditors is entitled to judicial deference as an economic experiment within free play in joints doctrine.

   On this section: Definition of 'claim' as right to payment whether or not reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; includes right to remedy for breach of contract

   Read the full order on eCourts India

7. Uppal Chadha Hi Tech Developers Pvt. LTD vs Union of India

   Supreme Court of India 09 Aug 2019 Binding (Supreme Court) - Landmark precedent Reportable

   Court's Decision & Legal Precedent

   Real estate allottees are 'financial creditors' within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016, as they advance money against consideration for the time value of money to finance real estate construction projects. The Explanation to Section 5(8)(f) inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, is constitutionally valid as it is clarificatory of the original provision's language and does not infringe Articles 14, 19(1)(g), or 300-A of the Constitution. Allottees are entitled to trigger insolvency proceedings under Section 7 of the Code against real estate developers, and their inclusion as financial creditors does not violate principles of reasonable classification or legislative objects. The Code and RERA operate harmoniously in different spheres providing concurrent remedies to home buyers.

   On this section: Claim includes a right to payment whether or not reduced to judgment, including rights arising from breach of contract. This definition is key to establishing that home buyers have 'claims' that can constitute 'financial debt'.

   Read the full order on eCourts India

8. Sds Infracon PVT LTD vs Union of India

   Supreme Court of India 09 Aug 2019 Binding - Supreme Court Three Judge Bench Reportable (2019) 9 SCC 1

   Court's Decision & Legal Precedent

   Amendments to the Insolvency and Bankruptcy Code 2016 treating real estate project allottees as financial creditors are constitutionally valid under Articles 14 19 1 g and 300 A of the Constitution. Real estate allottees genuinely finance projects by advancing payments for future delivery of apartments and constitute financial creditors under Section 5 8 f as amounts raised have commercial effect of borrowing considering time value of money. The explanation to Section 5 8 f is clarificatory in nature and allottees would fall within this provision even without it. Allottees have right to trigger insolvency proceedings under Section 7 by filing applications before NCLT. Code and RERA provide concurrent and complementary remedies not conflicting jurisdictions. There is no violation of Article 14 as legitimate intelligible differentia exists between allottees and other operational creditors. There is no violation of Article 19 1 g as restriction on right to business is reasonable being in public interest of protecting allottee investments.

   On this section: Claim includes right to payment even if disputed and right to remedy for breach of contract even if not reduced to judgment

   Read the full order on eCourts India

9. Landmark Apartments Pvt. LTD vs Union of India

   Supreme Court of India 09 Aug 2019 Binding (Supreme Court) Reportable Pioneer Urban Land And Infrastructure Limited & Anr. v. Union Of India & Ors., (2019) 9 SCC 1

   Court's Decision & Legal Precedent

   Allottees of real estate projects are financial creditors under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016, as they finance projects through advance payments having the commercial effect of borrowing. The amendments to the Code treating allottees as financial creditors do not violate Articles 14, 19(1)(g), or 300-A of the Constitution. The explanation to Section 5(8)(f) is clarificatory in nature and does not enlarge the scope of the original provision. Allottees have the right to trigger insolvency proceedings under Section 7 and to be represented on the Committee of Creditors through authorized representatives. The Code and RERA operate in complementary spheres with concurrent remedies available to allottees.

   On this section: Comprehensive analysis of definitions of financial debt, financial creditor, operational creditor, claim, debt, and default. Interpretation of Section 5(8)(f) as residuary provision covering transactions with commercial effect of borrowing. Analysis of triggering mechanism under Section 7 and Committee of Creditors composition under Section 21.

   Read the full order on eCourts India

10. Richmond Investments PVT LTD vs Union of India

    Supreme Court of India 25 Jan 2019 Binding (SC) - Constitutional Bench decision principles Reportable (2019) 8 SCC 1

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code, 2016, in its entirety, is constitutionally valid. The Code does not violate Article 14 (equality) of the Constitution. The classification between financial and operational creditors is based on clear intelligible differentia having direct relation to the Code's objects; operational creditors' exclusion from voting rights in the committee of creditors is justified because financial creditors are better equipped to assess business viability, and operational creditors' interests are protected through guaranteed minimum liquidation value payment and priority in resolution plans. Section 29A's eligibility restrictions do not violate vested rights because resolution applicants have no pre-existing right to be considered, and the provisions are designed to prevent unscrupulous and unfit persons from regaining control of stressed corporate debtors. Economic legislation deserves judicial deference and should be judged by the generality of its provisions rather than alleged crudities; trial-and-error experimentation in economic matters is proper legislative function which courts cannot strike down unless the legislation is manifestly arbitrary or palpably unreasonable. The Code's success in reviving assets, increasing credit flow, and resolving disputes within time-bound manner demonstrates it is a valid, justified, and beneficial legislative intervention addressing prior failures of insolvency law.

    On this section: Entire framework of insolvency resolution, classification of creditors, triggers for corporate insolvency resolution process, committee composition and voting, resolution applicant eligibility, distribution waterfall in liquidation, and exemptions for micro, small and medium enterprises

    Read the full order on eCourts India

11. Shivam Water Treaters Pvt. Ltd. Thr. Authorised Signatory Gaurav Hargovindbhai Dave vs Union of India Thr. Secretary to Govt. Ministry of Corporate Affairs

    Supreme Court of India 25 Jan 2019 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code 2016 and all its challenged provisions are constitutionally valid as they represent legitimate legislative experimentation to address the complex economic problem of insolvency resolution. The classification between financial and operational creditors has intelligible differentia directly related to the objective of maximizing asset value through time-bound resolution. Restrictions on promoter participation, operational creditor voting, and information utility evidence are not arbitrary but rationally related to preventing abuse of the resolution process and ensuring efficient management by qualified stakeholders. Economic legislation deserves greater judicial deference than legislation affecting fundamental rights, and courts should not substitute their views for legislative policy in complex economic matters absent manifest arbitrariness, defined as unfair, unreasonable, irrational, capricious, or excessively disproportionate action. The evidence demonstrates that the Code is achieving its objective of recovering significantly higher amounts than liquidation value, increasing credit flow to the commercial sector, and reducing the time for insolvency resolution in India toward international standards.

    On this section: Comprehensive analysis of the Code's scheme distinguishing between financial and operational creditors, the trigger mechanisms for insolvency resolution, the role of information utilities, committee of creditors composition and voting, eligibility criteria for resolution applicants, distribution of assets in liquidation, and the resolution professional's powers. The Court upheld all challenged provisions as constitutionally valid and rationally related to the Code's objective of maximization of asset value through time-bound resolution.

    Read the full order on eCourts India

12. Swiss Ribbons Pvt. Ltd. Thr. Authorised Signatory Dinesh Bhagwandas Jariwala vs Union of India Ministry of Corporate Affairs

    Supreme Court of India 25 Jan 2019 Binding (Supreme Court of India) Reportable

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code, 2016 and its major provisions including the classification between financial and operational creditors, exclusion of operational creditors from committee voting, Section 12A withdrawal threshold, Section 29A eligibility restrictions, information utility procedures, and resolution professional functions do not violate Article 14 or any fundamental constitutional right. The Code represents a legitimate legislative experiment in economic policy aimed at timely resolution of corporate insolvency through asset maximization and creditor restructuring. While procedural defects exist in tribunal administration and circuit bench establishment, these do not invalidate the substantive provisions and can be remedied through compliance directions. Courts must accord significant deference to legislative choices in complex economic matters and cannot substitute their judgment for the legislature's policy determinations merely because alternative approaches might be preferred. The challenged provisions are justified by intelligible differentiae related to legislative objectives, serve rational policy purposes, and have demonstrated empirical success in implementation.

    On this section: Central Act being challenged; Court interpreted Preamble to identify legislative objectives (timely resolution, asset maximization, entrepreneurship promotion); Analyzed definitions and substantive provisions to determine whether they contravene constitutional guarantees; Distinguished between financial and operational creditors based on policy rationale; Upheld eligibility restrictions in Section 29A as serving legislative purpose of excluding undesirable persons; Validated committee of creditors structure as rational allocation based on creditor characteristics

    Read the full order on eCourts India

13. Sas Realtors Pvt. LTD vs Sri Maruti Electrical Enterprises

    Supreme Court of India 11 Oct 2018 Binding (SC) Reportable Reportable - Supreme Court Judgment dated 11-10-2018

    Court's Decision & Legal Precedent

    The Limitation Act, 1963 applies to applications filed under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 from the Code's commencement on 01.12.2016. Time-barred debts cannot trigger the Corporate Insolvency Resolution Process. The expression 'debt due' in the Code refers only to debts that are not time-barred and are legally recoverable. Article 137 of the Limitation Act prescribes a three-year limitation period for applications under Sections 7 and 9, and applications filed beyond this period are barred unless delay is condoned under Section 5 of the Limitation Act.

    On this section: Core provisions defining 'claim', 'debt', 'default', 'dispute', 'financial debt', 'operational debt', and the trigger mechanisms for Corporate Insolvency Resolution Process. Section 238A applies Limitation Act to proceedings before Adjudicating Authority and Appellate Tribunal. Section 60(6) excludes moratorium period from limitation computation.

    Read the full order on eCourts India

14. Rajesh Gupta vs Nbcc (india) LTD

    Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Adjudicating Authority's jurisdiction in approving a resolution plan is limited to verifying compliance with the mandatory requirements specified in Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Authority cannot modify the commercial terms of a resolution plan approved by the Committee of Creditors by the requisite majority (66% or more of voting share). If the Authority finds that the resolution plan does not meet the specified parameters (keeping corporate debtor as going concern, maximizing asset value, protecting stakeholder interests), it must remit the plan back to the Committee of Creditors for reconsideration rather than modifying it itself. The commercial wisdom of the Committee of Creditors is non-justiciable and cannot be interfered with by the Adjudicating Authority or Appellate Authority on equitable or quantitative grounds. Dissenting financial creditors must receive payment in monetary terms (cash) equivalent to their liquidation value, not in kind through equity or land transfers. The INR 750 crores deposited by the holding company JAL pursuant to Supreme Court orders in the Chitra Sharma case remains the property of JAL and cannot be treated as an asset of the corporate debtor JIL for purposes of the resolution plan. Homebuyers as a class are bound by the decision of their authorized representative in the Committee of Creditors under Section 25A(3A), and individual homebuyers cannot maintain separate challenges to the resolution plan. The Insolvency and Bankruptcy Code prevails over the Real Estate (Regulation and Development) Act, 2016 in case of conflict, though both statutes must be interpreted harmoniously. Concession Agreements with statutory authorities are not statutory contracts and their material terms cannot be modified without the consent of the other contracting party. Security interests not avoided under Section 43 of the Code cannot be unilaterally extinguished through a resolution plan.

    On this section: Definitions of corporate debtor, creditor, debt, default, secured creditor, and security interest

    Read the full order on eCourts India

15. Innoventive Industries LTD Managing Director vs Icici Bank Managing Director

    Supreme Court of India 31 Aug 2017 Binding (Supreme Court) Reportable (2017) 8 SCC 1 (Innoventive Industries Ltd. v. ICICI Bank Ltd.)

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code, 2016 is an exhaustive central law that is repugnant to and overrides the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 to the extent that the state law seeks to suspend corporate debts or prevent the application of the central insolvency resolution process. A corporate debtor cannot avoid insolvency proceedings by claiming debt suspension under state law, as the non-obstante clause in Section 238 of the Code ensures that the Code's provisions prevail over all other laws. The concept of 'default' under the Code includes debts that are temporarily suspended under other laws, and the moment a debt becomes due and is not paid, the insolvency resolution process is triggered regardless of any state-level protective measures.

    On this section: The entire scheme of the Code was analyzed to establish that it is an exhaustive code for corporate insolvency resolution with mandatory timelines, automatic moratorium, professional management, and creditor-driven decision-making. Section 238 was emphasized as a non-obstante clause that overrides all other laws.

    Read the full order on eCourts India

16. Vodafone Idea LTD vs Union of India Department of Telecommunications through Its Secretary

    Supreme Court of India 01 Sep 2020 Binding (Supreme Court) - Landmark Decision with Substantial Judicial Impact Reportable

    Court's Decision & Legal Precedent

    The primary ratio decidendi are: (1) Spectrum constitutes a natural resource held by the government in sovereign trust and cannot be treated as property owned by corporate debtors subject to insolvency proceedings merely due to right to use granted under license; the question requires NCLT examination within two months as it is a substantial jurisdictional issue affecting the validity of insolvency proceedings initiated by telecom companies; (2) In spectrum sharing arrangements, the sharing operator has no liability for the original licensee's predecessor AGR dues as the sharing operator merely obtains right to use additional spectrum alongside its own spectrum - each operator remains liable only for AGR dues arising from spectrum it holds; (3) In spectrum trading arrangements, the buyer's liability for seller's predecessor AGR dues is determined by the Trading Guidelines - if entire spectrum is traded, buyer assumes seller's known past dues; if only partial spectrum is traded, buyer has no predecessor dues liability; any dues discovered after trade date are recoverable from buyer or seller jointly or severally at government discretion; (4) AGR dues determined by the Supreme Court judgment dated October 24, 2019 are final, binding and not subject to reassessment or fresh disputes; telecom operators must pay the determined amount through installment schedule without room for contesting the calculation; (5) The government as licensor retains sovereign privilege over spectrum allocation under Telegraph Act Section 4 and can enforce contractual conditions precedent (particularly payment of dues) before permitting license transfers or spectrum trading, notwithstanding IBC moratorium provisions, as these are conditions precedent to the right itself rather than post-right enforcement.

    On this section: Defines who can be creditors in insolvency proceedings; relevant to determining if government is operational creditor

    Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.