NCLAT Holds That Operational Creditors Cannot Claim Priority Over Unsecured Financial Creditors In Liquidation

On September 19, 2024, the National Company Law Appellate Tribunal in the case of Times Innovative Media Limited v. Pawan Kumar Aggarwal (Liquidator) held that operational creditors cannot claim priority over unsecured financial creditors in liquidation.

Brief Facts:

1. Vide Order dated March 27, 2018, the Corporate Insolvency Resolution Process ("CIRP") was initiated against the Corporate Debtor, Messrs. Brand Connect Communications (India) Private Limited.
2. On January 28, 2019, the Adjudicating Authority directed liquidation of the Corporate Debtor.
3. The Respondent No. 2/ ex-director of the Corporate Debtor, who was the financial creditor of the Corporate Debtor and the Appellant/ operational creditor had filed their respective claims during the CIRP and before the liquidator. The claim of the Appellant/ operational creditor was admitted during CIRP, however, in the liquidation process, the Appellant/ operational creditor raised an objection in relation to