Operational Creditor under Insolvency and Bankruptcy Code 2016

 Under the Insolvency and Bankruptcy Code, 2016 (IBC), an Operational Creditor is defined in Section 5(20) as:

“a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.”

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✅ Breakdown of the Definition:

An Operational Creditor is:

1. A person (natural or legal):

   • Includes individuals, companies, firms, LLPs, government entities, etc.

2. Owed an Operational Debt:

   • The creditor must be owed a debt arising from:

     • Provision of goods or services,

     • Employment dues, or

     • Statutory dues (e.g., tax liabilities).

3. Includes assignees or transferees:

   • A third party who has taken over the operational debt (e.g., via assignment) can also qualify.

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📂 Examples of Operational Creditors:

Creditor	Nature of Debt
Vendor/supplier	Unpaid invoice for goods/services
Employee	Unpaid salary or dues
Contractor	Unpaid for services rendered
Government	Unpaid taxes, GST, EPF dues
Utility provider	Outstanding electricity, water, or internet bills

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📌 Rights under IBC:

• Can file an application under Section 9 for initiation of Corporate Insolvency Resolution Process (CIRP).

• Must send a demand notice (Form 3 or 4) and wait 10 days for payment or response.

• Can participate in CIRP, but no voting rights in the Committee of Creditors (CoC) unless certain thresholds are met (e.g., 10% of total debt).

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🔍 Important Distinctions:

Operational Creditor	Financial Creditor
Debt from goods/services or statutory dues	Debt from loans or financial contracts
Files under Section 9	Files under Section 7
Limited role in CoC	Full voting rights in CoC
Need to issue demand notice	No notice required