1.

(i)
In the present matter, I shall attempt to comprehensive advice the Victoria Bank, and
highlight the relevant provisions of the Insolvency and Bankruptcy Code, 2016 (“IBC”),
which they can successfully invoke against the Corporate Debtor, i.e., Plassey Ltd.
I shall contend that the debt falls within the scope of “financial debt” under the
IBC, and Victoria Bank can file an application under Section 7 for initiation of the CIRP
against Plassey Ltd. In the course of my answer, I shall firstly, provide the legal backing,
especially the provisions and interpretation of the provisions of the IBC by adjudicatory
forums. Subsequently, I shall analyse the law with reference to the facts in the present matter.
In the Swiss Ribbons case,1 the Supreme Court held that a “financial debt” under the
IBC is a debt together with interest, if any, which is disbursed against the consideration for
time value of money.2 The Supreme Court in the case of Orator Marketing Pvt. Ltd. v.
Samtex Desinz Pvt. Ltd.,3 (‘Orator Marketing’) was of the opinion that the definition of
“financial debt” under Section 5(8) of the IBC, however, cannot be read in isolation. While
understanding “financial debt”, it is imperative to take into consideration other relevant
provisions, especially the definition of “claim” under Section 3(6), “corporate debtor”
under Section 3(8), “creditor” under Section 3(10), “debt” under Section 3(11),
“default” under Section 3(12), “financial creditor” under Section 5(7) as well as Sections
6 and 7 of the IBC.4
Section 7 of the IBC enables a Financial Creditor to file an application for
commencing CIRP against a Corporate Debtor when a default has occurred. CIRP gets
triggered when the Corporate Debtor commits a default. Under Section 3(8) of the IBC, a
“corporate debtor” refers to a corporate person who owes a debt to any person. “Debt”
defined under Section 3(11) of the IBC refers to a liability in respect of a claim due from
any person and includes a financial and operational debt. Moreover, “default” is defined in
Section 3(12) of the IBC to mean “non-payment of a debt when the whole or any part or
instalment of the amount of debt has become due and payable and is not paid by the debtor or
the Corporate Debtor, as the case may be”.
Further, it is important to take note of the definitions of “financial creditor” and
“financial debt” under the IBC. Section 5(7) defines “financial creditor” as any person to
whom a financial debt is owed and includes a person to whom the debt is legally assigned.
1
Swiss Ribbons Pvt. Ltd. and another v. Union of India, (2019) 4 SCC 17.
2
Id., ¶23.
3
Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd., 2021 SCC Online SC 513.
4
Id., ¶15.
Section 5(8) defines “financial debt” as a debt along with interest if any which is disbursed
against the consideration of time value of money, and includes the components of sub-clauses
(a) to (i) of the said section.
In the Orator Marketing judgement, the Supreme Court held that “Financial debt”
means outstanding principal which is due in respect of a loan and also includes interest if any
interest is payable.5 Moreover, if no interest is payable on the loan, only the outstanding
principal would qualify as a “financial debt”. The Court also referred to Clause (f) of Section
5(8) of the IBC, which provides that “financial debt” includes any amount raised under any
other transaction, having the commercial effect of borrowing. Thus, the Supreme Court came
to the conclusion that a term loan provided by a creditor to a company would
undoubtedly qualify as a “financial debt” notwithstanding that no interest is payable on
the loan.6

Coming to the present matter, I shall submit that Victoria Bank is a “financial
creditor”, and the long-term loan and overdraft facility provided by Victoria Bank to Plassey
Ltd., qualifies as a “financial debt” within the scope of the definition provided in the IBC.
The term loan and overdraft facility is a debt, which is disbursed by the Financial Creditor,
i.e., Victoria Bank to the Corporate Debtor, i.e., Plassey Ltd. Irrespective of whether the
term-loan has an interest element, the principal amount and the overdraft facility for Rs.
50 lakhs fall within the purview of “financial debt” in light of the aforementioned
provisions of the IBC on this vital legal point.
In the instant case, despite the fact that the bank has issued a demand, the Corporate
Debtor has failed to clear the debt and uphold its financial commitments. As a result, there
has been a “default” on the part of the Corporate Debtor. Owing to a default, Victoria
Bank can file an application under Section 7 of the IBC in Form 1 of the Insolvency and
Bankruptcy (Application to Adjudicating Authority) Rules, 2016 accompanied by relevant
documents and records.

5
Id., ¶22.
6
Id., ¶29.
(ii)
In the course of this answer, I shall advise Rai Dullabh, whose salary is due to the
tune of Rs. 10 lakhs, with respect to how he can claim the outstanding salary under the IBC. I
shall contend that the outstanding salary of Rs. 10 lakhs falls within the purview of an
“operational debt” under the IBC, and Rai Dullabh can claim it.
It is firstly, imperative to take note of the definitions of “operational creditor” and
“operational debt” under the IBC. Section 5(20) of the IBC defines “operational creditor”
as a “person to whom an operational debt is owed and includes any person to whom such
debt has been legally assigned or transferred”. Further, Section 5(21) of the IBC defines
“operational debt” as “a claim in respect of the provision of goods or services including
employment or a debt in respect of the repayment of dues arising under any law for the time
being in force and payable to the Central Government, any State Government or any local
authority”.
In Swiss Ribbons7 as well as Mobilox Innovations,8 the Supreme Court interpreted
the definition of “operational debt” under the IBC and held that “operational debt” would
include claims with respect to provision of goods or services, including employment, or debt
concerning the payment of dues under any law payable to the government or any local
authority.9
Similarly, the NCLAT in the case of M. Ravindranath Reddy V/s G. Kishan &
Others,10 held that an operational debt is essentially a claim in respect of the following:
(a)  provision of goods;

(b)  provision of services, including employment;

(c)  a debt arising under any statute and payable to the Government or a local authority.

The NCLAT in this matter was of the opinion that a claim cannot be categorised as an
“operational debt” under the IBC if the claim by way of debt does not fall under any of
the three categories as mentioned above.11

7
Swiss Ribbons Pvt. Ltd. and another v. Union of India, (2019) 4 SCC 17.
8
Mobilox Innovations (P) Ltd. V/s Kirusa Software (P) Ltd., (2018) 1 SCC 353.
9
Swiss Ribbons Pvt. Ltd. and another v. Union of India, (2019) 4 SCC 17, ¶23; Mobilox Innovations (P)
Ltd. V/s Kirusa Software (P) Ltd., (2018) 1 SCC 353, ¶28.
M. Ravindranath Reddy v. G. Kishan & Others, Company Appeal (AT) (Insolvency) No.
10

331/ 2019.
11
Id.
 Moreover, the NCLAT in Pr. Director General of Income Tax v. Synergies Dooray
Automotive Ltd held that “Operational debt” essentially refers to a debt arising during the
operation of the corporate debtor.12

With respect to the instant matter, I shall contend that the outstanding salary of Rs.
10 lakhs due from the Corporate Debtor arises during the operation of the Company. Further,
the debt in question is clearly a claim of the employee in respect of non-payment of salary
for the provision of services during the period of his employment in the company.
Hence, in light of the aforementioned provisions of the IBC as well as judicial
pronouncements on this point, Rai Dullabh’s outstanding salary to the tune of Rs. 10
lakhs clearly falls within the purview of an “operational debt” under the IBC.
Owing to a default on the part on the Corporate Debtor in paying the outstanding
salary, he can act in accordance with Section 8(1) of the IBC, and deliver a demand notice of
the operational debt in the form set out in Rule 5 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016. If, after the expiry of 10 days, the
operational creditor does not either receive payment from the corporate debtor or notice of
dispute, the operational creditor may trigger the insolvency process by filing an
application before the adjudicating authority under Sections 9(1) and 9(2) of the IBC.

12
Pr. Director General of Income Tax v. Synergies Dooray Automotive Ltd.,
Company Appeal (AT) (Insolvency) No. 205/ 2017.