Debt Under the Insolvency and Bankruptcy Code, 2016

 Under the Insolvency and Bankruptcy Code, 2016 (IBC), "debt" is a foundational concept, defined broadly to include various forms of legal obligations to pay money.

📘 Statutory Definition:

Section 3(11) of the IBC defines "debt" as:

“a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.”

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🔍 Key Components of "Debt" under IBC:

1. Liability or obligation:

   • Must be a legal responsibility to pay.

2. In respect of a claim:

   • The claim can arise from contractual, statutory, or legal provisions.

3. Due:

   • The amount must be due and payable, not merely a future or contingent liability.

4. Includes:

   • Financial debt (Section 5(8))

   • Operational debt (Section 5(21))

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📂 Types of Debt under IBC:

Type	Definition	Examples
Financial Debt	A debt disbursed against the consideration for the time value of money (Section 5(8))	Loans, debentures, external commercial borrowings, lease liabilities
Operational Debt	A claim in respect of goods, services, employment, or statutory dues (Section 5(21))	Unpaid invoices for goods/services, employee dues, taxes
Secured Debt	Backed by collateral	Loan against property, mortgage
Unsecured Debt	No specific security or collateral	Credit card dues, unsecured personal loans

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💡 Important Related Terms:

• Claim (Section 3(6)): A right to payment, whether disputed or undisputed, legal or equitable.

• Creditor (Section 3(10)): Includes financial and operational creditors.

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✅ Relevance in IBC Proceedings:

• The existence of debt and default are mandatory conditions for initiating insolvency resolution under Section 7 (financial creditors), Section 9 (operational creditors), or Section 10 (corporate applicant).

• Limitation period of 3 years applies, but can be extended if there’s acknowledgment or part-payment.