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In the Insolvency Resolution Process for Corporate Persons, an issue is generally discussed as to the status of statutory dues payable by the Corporate Person – whether the same will qualify as a financial debt or operational debt. To understand the issue, it would be useful to first know the definitions of certain terms defined under The Insolvency and Bankruptcy Code, 2016 (“IBC).
Some of the relevant definitions are discussed below:
If we analyse the above definitions closely, statutory dues shall not fall either under the definition of “financial creditor” or “operational creditor” since the same cannot be said to have become due on account of disbursement of debt or supply of goods or services, etc..
The treatment of statutory dues shall be as per resolution plan approved by the Committee of Creditors. Once, the resolution plan, as approved by the Committee of Creditors, is approved by the Adjudicating Authority the same shall be binding on all stakeholders involved in the resolution plan including government authorities to whom statutory dues are payable. Therefore, the fate of statutory dues payable to government authorities will be initially decided by the Committee of Creditors and thereafter by the Adjudicating Authority when it considers the resolution plan.
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