The Insolvency and Bankruptcy Code, 2016 (“IBC”) was enacted with an objective to provide a streamlined and time-bound process for resolving corporate distress while balancing the interests of all the involved stakeholders, including creditors, debtors, and the broader ecosystem. The IBC classified creditors into financial creditors (“FCs”),[1] who lend or invest money in the debtor, expecting repayment along with interest or return, such as banks, financial institutions, etc. and operational creditors (“OCs”),[2] who transact with the debtor for goods or services necessary for business operations, such as vendors, employees, government authorities, etc., and prescribed different treatment for each category.
Unlike FCs, the…