Liability arising out of an arbitral award or a court decree would be categorised as either financial or operational debt depending on the nature of the underlying claim which stands crystallised through the arbitral or court proceedings- Cholamandalam Investment and Finance Company Ltd. Vs. Navrang Roadlines Pvt. Ltd. Through its Liquidator Mr. Sachin Dinkar Bhattbhatt – Madras High Court

The appellant, as per Section 9 of Insolvency and Bankruptcy Code, 2016, is a Non Banking Finance Company and admittedly an unsecured financial creditor. As per the decisions laid down by the Hon’ble Supreme Court cited supra and Section 53 of Insolvency and Bankruptcy Code, 2016, the financial debts owed to unsecured creditors have to be distributed by the liquidator as per the preference set out under Section 53(1) of Insolvency and Bankruptcy Code, 2016 i.e after distributing the workmen dues, wages and unpaid dues to the employees. Learned Single Judge in our view, has carefully considered the statutory priorities of distribution of assets as prescribed under Section 53(1) of Insolvency and Bankruptcy Code, 2016 and the proposition laid down by the Hon’ble Supreme Court and finally has held that monies withdrawn would have to be made available for distribution amongst the creditors qua M/s Navarang Road lines Private Limited/respondent herein in accordance with Section 53 of Insolvency and Bankruptcy Code, 2016 in the pending CIRP before the National Company Law Tribunal, Ahmedabad Bench.

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