A debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt and limitation does not commence when the debt becomes due but only when a default occurs – Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions Pvt. Ltd. – Supreme Court

Hon’ble Supreme Court holds that Section 5(21) defines ‘operational debt’ as a “claim in respect of the provision of goods or services”. The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver. In the present case, the phrase “in respect of” in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. The respondent urged that the application under Section 9 is barred by limitation. as noted in B.K. Educational Services (supra), limitation does not commence when the debt becomes due but only when a default occurs. As noted earlier in the judgment, default is defined under Section 3(12) of the IBC as the non-payment of the debt by the corporate debtor when it has become due.

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