Amended IBC gives priority to Operational Creditors

Banking National News

The Centre has amendedanInsolvency and Bankruptcy Code and gives priority to payment of the amount due to operational creditors over a financial creditor. This move has been taken to protect the interest of small &unsecured operational creditors who do not form a part of Committee of Creditors (COC) and presently have no say in the resolution process which once approved by the COC, hold a binding effect on the Operational Creditors.  The amendment in CIRP Regulations provides that amount due to operational creditors under the Resolution Plan shall be paid in priority basis over financial creditors. Last year in October, IBBI had also inserted an amendment which made mandatory for the resolution applicant to furnish a statement showing how the resolution plan is considering the interest of all the creditors including Operational Creditors.

But there is still an ambiguity in the implementation of the amended resolution as the payment for operational creditors is linked to the resolution plan, which needs to get approved by the Committee of Creditors.

This amendment is significant as it protects the interest of small operational creditors and their interest cannot be brushed out.

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