Statutory Dues Are ‘Operational Debt' Under Insolvency And Bankruptcy Code

The Insolvency and Bankruptcy Code, 2016 ("Code") is one of the most dynamic legislations in the recent times and is being interpreted by the courts to expand the ambit of the Code and also possibly provide maximum benefit to both financial and operational creditors whose dues are long outstanding. One of the recent changes was to include home buyers within the definition of 'financial creditors'. The National Company Law Appellate Tribunal ("NCLAT") has now upheld the view that statutory dues are included within the definition of 'operational debts' (though much to the despair of statutory authorities).

In a recent judgement passed on March 20, 2019 in the case of Pr. Director General of Income Tax (Admn. & TPS) vs M/s. Synergies Dooray Automotive Ltd. & Ors. (clubbed with certain other company appeals), NCLAT held that statutory dues such as income tax, sales tax, value added tax and various other taxes fall within the definition of 'operational debt'